Temporary Employment Contracts – New Dutch Supreme Court Ruling
On 4 November 2016, the Supreme Court gave judgment in the Care 4 Care case in respect of two issues that are of great importance to the employment agency industry. The law describes the temporary employment contract as an employment contract under which the employee, in the context of the employer’s profession or business, is made available to another person/organization in order to perform work under their supervision. This description does not include that it must concern the matching of supply and demand for temporary work – also referred to as allocation role – for example in the case of illness or to offset peak workloads.
In his advice to the Supreme Court, the Advocate General distinguished two variations on the allocation role: The allocation role in a broad sense and the allocation role in a narrow sense. In a broad sense, the allocation role means that the employer is involved in the posting of workers at clients in a professional or commercial capacity. In that case, payroll companies would also play an allocation role. In a narrow sense, also referred to as the “traditional” allocation role, it means the working method of the conventional temporary employment agency. This involves actively matching supply and demand on the labour market of work, in general, of a temporary nature. This is also referred to as offsetting “illness or peaks”. The key question in the Care 4 Care case was whether this “traditional” allocation role is required for a temporary employment contract within the meaning of the Dutch Civil Code.
The Supreme Court ruled that a traditional allocation role is not required. It stated that an allocation role means either the matching of supply and demand of permanent work, or the matching of supply and demand of temporary work such as replacing employees during illness or another form of absence, offsetting peak hours or similar sudden surge of work.
Consequences for payroll companies
The judgment of the Supreme Court means that payroll companies are also included in the definition of “allocation role” in the Dutch Civil Code. Even though payroll companies do not match the supply and demand of work, they do make workers available to third parties in a commercial capacity. Until now, case law and literature had different views on the question as to whether payroll companies were also included in the definition of a temporary employment agency.
Mitigated regime always applicable?
Being a temporary employment agency has benefits and drawbacks. As draw backs the temporary employment agencies are (nearly) always covered by the ABU collective bargaining agreement, the mandatory pension fund of STIPP and they are classified in the (expensive) sector 52 with respect to employer contributions. A benefit for temporary employment agencies is that they are covered by the “mitigated” regime of Section 691 of Book 7 of the Dutch Civil Code. As this section of the Dutch Civil Code applies to the temporary employment contract, the provisions on succession of fixed-term employment contracts do not immediately apply and dismissal is simpler in certain cases. However, what is remarkable now is that the Supreme Court has ruled in the Care 4 Care case that the court has the option to determine that a temporary employment agency may not apply the mitigated regime of Section 691 of Book 7 of the Dutch Civil Code after all. In other words: Some temporary employment agencies do have the burdens but not the benefits. Jurisprudence will have to show how this will work out in the future.
For further information or to discuss any of the issues raised, please contact Edith Franssen ( email@example.com) on +31 10 224 64 53.
Section 690 of Book 7 of the Dutch Civil Code
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