It is not always easy to answer the question as to whether an employment agreement exists. In the recent judgment X vs. the City of Amsterdam of 6 November 2020, the Supreme Court held that it is not relevant for the answer to this question whether the parties actually intended to enter into an employment agreement. It is the Court's task to assess, on the basis of the rights and obligations the parties have agreed on, whether an agreement meets the requirements for an employment agreement to exist.
This ruling is appreciated as an important change compared to the Supreme Court's judgment in the Groen/Schoevers case from 1997. That judgment and later judgments (including Stichting Thuiszorg Rotterdam/PGGM) of the Supreme Court did give rise to the conclusion that in order to determine whether an employment agreement existed, it was relevant what the intention of the parties had been. Therefore, many contracts for services contain a clause saying that the parties explicitly do not intend to enter into an employment agreement.
Facts of X/City of Amsterdam
The person concerned in the case of X versus the City of Amsterdam was receiving benefits under the Old and Partially Disabled Unemployed Workers Income Scheme Act (Wet inkomensvoorziening oudere en gedeeltelijk arbeidsongeschikte werknemers, “IAOW”). She was working for the council as a service desk employee while retaining her benefits in the scope of a reintegration process. After this work ended, the person concerned took the position that she was working for the council under an employment agreement, and was therefore entitled to the salary belonging to her position.
Court of Appeal of Amsterdam
The Court of Appeal of Amsterdam held that the person concerned was not doing her work under an employment agreement. In this context, the Court of Appeal considered it relevant that it could not be concluded that, at the time when the person concerned was placed in this position under the participation action plan, it was the intention of the parties to enter (also) into an employment agreement with each other. To substantiate this, the Court of Appeal referred to correspondence preceding the work, the circumstance that the person concerned remained registered with the UWV as a job-seeker, and that the work for the council would end if she would accept a regular job.
The Supreme Court
The Supreme Court held that for the assessment of the question as to whether an employment agreement exists, it is not relevant whether it was indeed the intention of the parties to make the agreement fall under the statutory regime for employment agreements. This conclusion seems to be contrary to the considerations of the Supreme Court in the Groen/Schoevers judgment and later judgments.
According to the Supreme Court, the qualification of an agreement must be distinguished from the question as to what rights and obligations the parties have agreed on. The latter question must be answered by means of interpretation (using the standard given in the Haviltex judgment). As a next step, it can be assessed whether the agreement between the parties meets the requirements for the existence of an employment agreement. The three elements required for this in any case are (i) labour, (ii) wages, and (iii) a relationship of authority.
Incidentally, the wrongful consideration of the parties’ intention by the Court of Appeal in its assessment of the agreement’s qualification does not lead to it that the eventual opinion of the Court of Appeal – that there was no employment agreement – was not upheld. The Supreme Court considered that on the basis of the mutual rights and obligations established, the Court of Appeal had rightly held that the agreement concluded between the parties did not meet the requirements for an employment agreement to exist. The Supreme Court held that the remuneration the person concerned was receiving for her work (a pay incentive) could not be designated as a salary. As a result, the requirements for an employment agreement to exist had not been met after all.
Conclusion
This ruling may have far-reaching consequences. Many contracts for services between a client and a self-employed individual contain a clause saying that it is not the intention of the parties to enter into an employment agreement. The parties do this in order to prevent that their contract will become an employment contract. Now, the Dutch Supreme Court has clearly considered that the intention of the parties is not (or no longer) relevant. Therefore, the emphasis will be shifted even more to the actual way in which the parties perform the contract for services. If the parties lean (too) much on the intention of the parties, the risk of an employment agreement arising will be bigger.
However, for an employment agreement to be assumed it will always be necessary that the requirements mentioned below are met. It has to be an agreement under which labour is performed for a certain time, wages are paid, and a relationship of authority exists. If these requirements are met, the agreement will be an employment agreement, regardless of what the parties intended.
Feel free to contact Ruud Schepers or Marieke Opdam if you have any questions.
