LEGAL UPDATE: EMPLOYERS WITH INDEPENDENT CONTRACTORS, WATCH OUT!

With the recent “IAOW judgment” of 6 November 2020, the Dutch Supreme Court has rendered a relevant judgement in a case against the Municipality of Amsterdam for employers who work with independent contractors. In short, the Supreme Court ruled that if the content of an agreement meets the definition of an employment contract according to the Dutch Civil Code, the agreement must be regarded as an employment contract. Even if the parties had not intended that beforehand.

The Supreme Court explains that in fact two questions must be distinguished from each other. First, it must be established based on the “Haviltex criterion” which rights and obligations the parties have entered on both sides (interpretation of the agreement). The party’s intention plays an important role in this. Once those rights and obligations have been established, the court must assess whether there is an agreement referred to by law in connection with the legal protection derived from it (qualification of the agreement). In practice, this qualification is often limited to the question: is there an employment contract (with a relatively high degree of protection for the “employee”) or an assignment agreement in place?

With this decision it has become clear that the party’s intention does not play a role when qualifying the (type of) agreement, but it does play a role in the preceding phase when the content of the agreed rights and obligations needs to be determined. This ruling therefore also led to a Pyrrhic victory against the Municipality, because although the complaint was legally successful, the complaint did not lead to cassation by the Supreme Court, because with “explanation” of the rights and obligations it already showed that parties did not agree to receiving/paying “wages” (being one of the statutory requirements for an employment contract).

Nonetheless, this ruling may mean that an agreement with an independent contractor, intended to be regarded as an assignment agreement because the parties have “chosen” to do so, can be regarded as an employment contract including all legal and tax consequences associated with such qualification.