Current: Minister’s Plans for On-Call Contracts

Minister Van Gennip plans to significantly amend employment legislation. On June 1, she held a debate on this matter with the House of Representatives. All plans can be found in a letter from the minister dated April 3, 2023, to the House of Representatives. This letter is not yet legislation, but the plans already have the support of social partners. One of the components of the cabinet’s plans is the abolition of on-call contracts. What will this mean in practice?

What are on-call contracts?

On-call contracts are flexible contracts where the number of hours to be worked is not fixed, such as zero-hour contracts and min/max contracts. With zero-hour contracts, the employee only works the hours for which they are called upon, while with a min/max contract, the employee has a fixed number of minimum hours for which they are paid, whether called upon or not. On top of this, they can be called upon to work up to an agreed maximum number of hours. Under Minister Van Gennip’s plans, these contracts will no longer be permitted at all.

Introduction of basic contract

However, there is something in return, as a new type of contract is being introduced: the ‘basic contract’. This basic contract must include a minimum number of hours for employees, and there is always an entitlement to wages for these hours, even if no work is performed. Employees can then be required to work additional hours on top of this, but no more than 130% of the hours agreed in the contract. The employee may refuse any hours beyond this. For example: a basic contract for 12 hours per week means the employee is always paid for 12 hours and can be called upon to work up to a maximum of 16 hours. This basic contract is reminiscent of a min/max contract, where the maximum hours may not exceed 130% of the minimum hours.

Furthermore, the basic contract also provides schedule certainty. This will make it easier for employees to have a second job or better plan childcare around their work.

Less flexibility

The biggest consequence of Minister Van Gennip’s plans is the elimination of zero-hour contracts. Additionally, on-call contracts with a small number of minimum hours will no longer be able to offer the flexibility that is currently possible due to the 130% standard. Replacing on-call contracts with basic contracts will therefore have a major impact on employer flexibility and thus on business organization.

Read the full letter here.

What Does the Court Rule?

Including a non-compete clause in an employment contract can protect a company against competition. The usefulness of agreeing to such a clause is confirmed in a recently published ruling by the district court of Rotterdam.

The district court in Rotterdam ruled on whether an employee could be held to the non-compete clause he entered into with his (former) employer. This case involved a Commercial Field Representative at a company specializing in measuring and control equipment for businesses, Precision Parts Supply B.V. (PPS). This employee had not only a non-compete clause in his employment contract, but also a client relationship clause and a penalty clause.

On July 20, 2022, the employee terminated his employment with PPS because he wanted to start working for a Belgian company that partially competes with his employer, company X, as of September 1, 2022. In a letter, PPS subsequently informed the employee that this was not permitted due to the non-compete clause. Furthermore, PPS indicated that the employee must pay a penalty if he nevertheless enters employment, referring to the penalty clause. PPS also sent a letter to company X, stating that company X was acting unlawfully by hiring the employee. In response, company X indicated that it had immediately terminated the employment contract with the employee.

The employee then went to court to request (provisional) suspension of the non-compete clause. The employee argued to the court that PPS and X are not direct competitors and that his new position as Sales Engineer differs from his old position as Commercial Field Representative at PPS. He also indicated that he has no knowledge of trade secrets and commercial, competition-sensitive information and that the employee could improve his position and financial situation by moving to X.

PPS defended itself by stating that PPS and X partially serve the same market, with it also being important that company X plans to further grow its customer base in the Netherlands with a focus on certain regions where PPS is also active. According to PPS, the employee, by virtue of his position as Commercial Field Representative, does indeed possess knowledge regarding PPS that could lead to an unlawful competitive advantage.

The court ultimately ruled that the non-compete clause remains in effect for now. There is no situation in which, in relation to PPS’s interest to be protected, the employee is unfairly disadvantaged by the clause. It is relevant that the non-compete clause relates to competing activities in the Netherlands, not in Belgium, while the employee lives in Belgium and company X is established there. The employee is also free to perform non-competing activities in the Netherlands, which is not considered impossible, as there is a shortage in the labor market and with his commercial background, he does not appear to be bound to the industry in which PPS operates. In short, the employee has sufficient other opportunities, according to the court.

This ruling confirms that including a non-compete clause makes sense. Despite the fact that enforcing this clause significantly disadvantages the employee – he has lost his current job and is also not allowed to enter employment with company X – the court finds in this summary judgment that the employer’s interest outweighs this.

The Future of the Freelancer

In March of this year, the Supreme Court ruled that Deliveroo couriers in the Netherlands have an employment contract, despite having concluded an agreement as a self-employed person/freelancer. It is now becoming clear that this ruling will have consequences for companies that use independent contractors. We discuss the most important ones.

Self-employed person/Freelancer still an employee

We expect that judges will now more often rule that a service agreement/freelance agreement is actually an employment contract. This is because the Supreme Court provides a list of ‘aspects’ that judges can review to determine whether someone works as a self-employed person/freelancer or as an employee. The idea is that this list will make it easier for judges to rule that there is indeed an employment contract. One of the notable aspects is whether certain activities belong to the core activity of the company. If work is indeed part of the “core business” of the company, then that is an indication that this involves an employment contract. Of course, the other aspects must still be considered to reach a final judgment. One element is not decisive; it involves weighing the various aspects.

If a court rules that a self-employed person/freelancer is actually an employee, this has major consequences for the client/employer. They may then still be required to pay certain entitlements, such as wages for periods when the employee was sick or on vacation. Additionally, a client/employer may in that case be required retroactively to pay social security contributions or have this employee participate (retroactively) in the pension scheme. The Tax Authority may also come forward and claim unpaid payroll taxes.

Stricter legislation regarding freelancers

Furthermore, it is notable that the Supreme Court in the Deliveroo ruling explicitly mentions that Dutch and European legislation is being developed to regulate the use of independent contractors. The cabinet plans to amend the law so that it will become easier to determine whether there is an employment contract or not. However, this legislative change will likely also lead to an employment contract being established more quickly. Additionally, the cabinet’s plans announce that the Tax Authority will at some point resume enforcement and thus more strictly check whether there is an employment contract or not. The cabinet’s plans also announce that the tax advantages that apply to self-employed persons/freelancers will be further reduced, so that the differences in tax treatment between an employee and a self-employed person/freelancer become smaller. This will then likely lead to higher hourly rates for independent contractors.

The future of the freelancer?

Working with self-employed persons/freelancers will be further restricted by stricter case law and legislation. Particularly when freelancers are used to perform the core activity of the company and they also have few other characteristics of entrepreneurship. Healthcare and education are often mentioned in this context as sectors where this occurs, but the creative industry and media have also traditionally worked extensively with freelancers to realize their core activities.

If self-employed persons/freelancers are routinely used in the company for part of the core activities, it may be worthwhile to think about the future now. For example, by mapping which self-employed persons/freelancers are active and how and why they are deployed on this basis. From there, you can explore the alternatives. This way you prevent being surprised by new legislation and stay ahead of developments.