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17 November 2020 / article

Supreme Court rules that the parties’ intention is irrelevant

On 6 November 2020, the Supreme Court confirmed that the parties’ intention (no longer) plays a role in determining whether or not a contract qualifies as an employment contract. Provided that the legal criteria (wage, labour, authority) are met, the contract qualifies as an employment contract. According to the Supreme Court whether or not the legal criteria have been met is a matter of interpretation.

Background

As part of a participation process aimed at increasing opportunities on the labour market, a benefit recipient worked for a total of twelve months as a service desk employee for the municipality of Amsterdam. Other than maintaining her benefit and receiving a minimum premium of approximately EUR 230 (twice), she received no compensation for her work. After the beneficiary had made a number of unsuccessful attempts to reach a new (temporary) paid contract with the municipality, she finally applied for a declaratory decision (verklaring voor recht) that she had actually been working on the basis of an employment contract from the beginning. In connection therewith she claims the wage including entitlements relevant to the position of service desk employee. Both the Subdistrict Court and the Court of Appeal reject her claim. The Court of Appeal considers, among other things, that it could not be concluded that when the beneficiary entered the participation process it was the intention of the parties to (also) enter into an employment contract. In this regard the Court of Appeal also takes into account what had been reflected in the relevant agreements relating to the participation process. Further to the decision of the Court of Appeal the beneficiary filed a complaint with the Supreme Court stating (among other things) that the Court of Appeal wrongly attached importance to the parties’ intention.

The Supreme Court

With reference to the legal definition of the employment contract in Article 7:610 of the Dutch Civil Code, the Supreme Court concludes that if the content of an agreement meets the legal definition, the agreement is an employment contract. It is irrelevant whether the parties actually intended the contract to fall under the legal definition of the employment contract. Decisive is whether the agreed rights and obligations meet the legal definition of the employment contract.

What rights and obligations have been agreed is a matter of interpretation. As such according to the Supreme Court the assessment whether a contract is an employment contract exists out of two phases: (1) first, using the Haviltex-criterion, it has to be determined what rights and obligations have been agreed between the parties (interpretation phase) and (2) then it needs to be determined whether the agreed rights and obligations (i.e. the contract) have the characteristics of an employment contract (the qualification phase).

Although the complaint of the beneficiary is successful, the verdict of the Court of Appeal is not set aside. The Supreme Court determines that the Court of Appeal has rightly ruled (in the interpretation phase) that no wage (i.e. one of the legal criteria for an employment contract) was agreed and thus the conclusion remains that no employment contract existed.

The right decision

The ‘Groen/Schoevers’-decision of the Supreme Court in 1997 is considered to be the judgment which for the first time focused on the importance of the parties’ intention in determining whether or not a contract qualifies as an employment contract. The decisions rendered by the division for civil matters of the Supreme Court after ‘Groen/Schoevers’ already seemed to put the decisive nature of the parties’ intention more and more into perspective. The division for tax matters of the Supreme Court was even more emphatic in identifying actual implementation by parties as the decisive factor in its decisions with respect to the qualification of the employment contract (e.g. the ‘Gouden Kooi’-decision). In so far as there was still doubt about the relevance of the parties’ intention in the qualification phase, the Supreme Court has now definitively put an end to this. In view of the case law rendered by the Court of Justice in this context, in which the parties’ intention is not relevant, the Supreme Court actually had no alternative than to rule as it did on 6 November 2020. In view of the differences in civil, tax and social security law consequences between an employment contract and a services contract, any form of autonomy of the parties in the qualification phase is not acceptable. To the extent that there was still a legal practice that identified room in the concept of parties’ intention to create a paper reality, this practice has come to a definitive end. The principle of substance over form also applies when it comes to the qualification of the employment contract.

Is everything clear now?

Unfortunately, the Supreme Court's decision does not mean that the definition of the employment contract in relation to (in particular) the services contract is now completely clear. For example, the question (which is in practice actually more relevant) whether or not authority (i.e. one of the legal criteria for an employment contract) is deemed to be present in a specific labour relationship, will under certain circumstances remain a difficult question to answer. Despite the clear invitation by advocate general De Bock in her very extensive opinion that she presented to the Supreme Court, the Supreme Court leaves it up to the legislator (whether or not by means of a drastically revised system) to take the lead in providing further direction. Minister Koolmees, in an initial reaction to the reports of the Borstlap Commission and the Scientific Council for Government Policy, has already indicated on 11 November 2020 that the way forward in this context will have to be determined following the elections by the next government. Until then (and of course also thereafter) we are of course happy to assist with any “interpretation and qualification” queries you may have.



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