Legal definition employment agreement
Under Dutch law an employment agreement is defined as an agreement under which one of the parties (the employee) obliges him- or herself towards the other party (the employer) to perform work for a certain period of time. This work is performed in service of the other party and in exchange for payment (article 7:610 Dutch Civil Code). Especially the following conditions are relevant for the qualification of an employment agreement:
- Work
- Wages
- ‘Authority’ (in service).
Once it has been determined what parties agreed upon in terms of rights and obligations (the explanation phase), it must be assessed if these rights and obligations meet the definition of an employment agreement (the qualification phase).
Most qualification discussions relate to the question whether there is authority, as this element distinguishes the employment contract from other agreements pursuant to which work is performed.
Clarification of the element ‘authority’
The VBAR clarifies the element of authority and includes that authority exists if:
- The work is performed under work-related or organizational instructions of the work provider/client, and;
- The worker does not perform the work for his or her own account and risk or the work is performed to a lower extent for his or her own account and risk compared to said instructions.
In an earlier version of the legislative proposal, the element of the work or worker being ‘organizational embedding in the employer’s organization’ was explicitly mentioned. In the revised legislative proposal, this element is removed, and two main elements are introduced. The ‘work-related or organizational instructions’ (main element W) is initially compared to the element ‘own account and risk’ (main element Z). For assessing whether there is an authority relationship, it is relevant which element prevails.
Main Elements
The following indications apply for the interpretation of the mentioned main elements:
W. Work-related or organizational instructions
- The employer is authorized to give directions and instructions on how the worker should perform the tasks and the worker must follow these instructions.
- The employer can control the worker’s tasks and has the possibility to intervene on that basis.
- The work is performed within the organizational framework of the employer’s organization.
- The work has a structural character within the organization.
- The work is performed side by side with employees who perform similar tasks.
Z. Working for Own Account and Risk
- The financial risks and results of the tasks lie with the worker.
- The worker is responsible for tools, aids, and materials in carrying out the work.
- The worker possesses specific training, work experience, knowledge or skills that are not structurally present in the organization.
- The worker operates independently during the performance of the work.
- The assignment has a short duration and/or concerns a limited number of hours per week.
Assessment and Weighing
When determining if there is authority, one must first look at the main element W (work-related or organizational instructions). If there are no indications of substantive or organizational direction, there can be no ‘in service of’ and thus no employment contract. Further assessment will not be required.
If there are indications of the presence of substantive or organizational direction (main element W), these indications will be compared with the contra-indications of ‘working for own account and risk’ (main element Z). Both main elements can potentially weigh equally. If the emphasis is on main element W, there will be an employment contract. If this is the other way around, there will be no employment contract.
Only if the indications for main element W are present to a similar degree as the indications pointing to the presence of main element Z, the entrepreneurship of the concerned worker outside the employment relationship for similar tasks is considered (OP). Examples (non-exhaustive) include:
OP. Characteristics Indicative of Entrepreneurship of the Worker (Outside Employment Relationship) for Similar Tasks
- The worker has multiple clients per year.
- The worker spends time and/or money on building a reputation and finding new clients or assignments.
- The worker makes significant business investments (e.g. equipment, tools etc.).
- The worker administratively behaves like an independent entrepreneur: registered with the Chamber of Commerce, is a VAT entrepreneur, and/or is entitled to the tax benefits of entrepreneurship (such as entrepreneurial facilities).
Legal Presumption
This legislative proposal also includes the introduction of a legal presumption. Based on this presumption an employment agreement will be deemed to exist if the hourly remuneration for the work does not exceed € 33. In such case the employer/work provider must prove that there is no employment agreement.
Next steps
The legislative proposal has been submitted for advice to the Council of State. Subsequently, the legislative proposal will be further discussed in the Dutch parliament and possibly amended in some parts. It is expected that this legislation will enter into force as per 1 January 2026.
Questions?
Do you have questions about this legislative proposal? Get in touch with Jaouad Seghrouchni, Senior Associate, attorney at law, Employment Law & Employee Participation.