Reclassification of a contractor’s agreement into an employment relationship: Supreme Court overrules principal because the contract is not foolproof

The phenomenon of fake self-employment is as old as labour law itself, but nevertheless remains very relevant. This is again illustrated by a judgement of the Supreme Court of 10th October 2016, where the Court stated that the right to apply disciplinary sanctions is incompatible with the existence of an independent contractor’s agreement.

According to the Act of 27th December 2006 on the nature of employment relationships the will of the parties is decisive for the choice of the legal nature of the contractual relationship and can only be set aside if the execution of the agreement provides for sufficient elements incompatible with the given qualification.

From January 2007 to December 2008, a security guard performed activities for a security company by means of a service agreement. Faced with the termination of the contractual relationship, the security guard sued the principal before the labour court for the court to declare that he provided the services in the capacity of (blue-collar) worker and not in the capacity of independent contractor. In support of his claim, the security guard pointed out the contractual ability of the principal to apply disciplinary sanction as provided in the undertaking’s work regulations. According to the security guard, such contractual provision is incompatible with the existence of an independent relationship.

The Labour Court initially supported the claim of the security guard, while the Labour Court of Appeal did not. Although the fact that the security firm had the right to impose disciplinary sanctions in the execution of the service agreement could be an element that indicates a subordinate relationship, the Labour Court of Appeal in Antwerp ruled that this was not sufficient to overrule the classification chosen by the parties.

In its judgement of 10th October 2016, the Supreme Court overruled the Labour Court of Appeal. Firstly, the Court recalls that, according to article 333 § 1 of the Act of 27 December 2006 on the nature of employment relationships, (i) the possibility to exercise a hierarchical control is one of the general criteria enabling the assessment of the existence or absence of a subordinate relationship and (ii) the employer’s authority, which is inherent to an employment relationship, is the basis of the employer’s disciplinary powers.

The Supreme Court therefore holds that the right of one of the contracting parties to impose disciplinary sanction upon the other contracting party excludes the existence of an independent relationship. According to the Supreme Court, such disciplinary powers can only be reconciled with an independent relationship when said powers are inherent to the execution of the profession or imposed by law, which was not the case in the situation at hand.

Considering the extensive implications arising from the reclassification of an independent service agreement, in respect of labour, social security as well as tax law, the value of a thoroughly drafted contractor’s agreement cannot be underestimated. This is yet again illustrated by this judgement of the Supreme Court.

If you have any query in respect of the above subject or if you seek any further assistance regarding the drafting of contractor’s agreement, please do not hesitate to contact the experts of our Employment, Incentives and Pensions department (Damien Stas de Richelle / Ilheme Belkouche / Jorn Demey).

Published in: Legal insights