After the Leterme government, which showed already an increased interest in the fight against
tax fraud, the Di Rupo government is adding another element by explicitly linking the fight against
social fraud to the fight against tax fraud.
Secretary of State Crombez made it immediately clear that he was very serious about it.
Although “social fraud” is linked in the first place to Eastern-European structures, also the phenomenon of the would-be independent workers is aimed at. In any event the amendments to the “work relations act” point in that direction.
A would-be independent worker is a person who is reported as performing his professional activities as an independent worker, but who is really working as an employee
A would-be independent worker is a person who is reported as performing his professional
activities as an independent worker, but who is really working as an employee.
In principle, the parties themselves decide on the way they want to work together, be it as employer / employee – the employer exercising in that case authority over the employee – or in the framework of an independent cooperation structure. Also in that context, the principle – the parties’ will is law – applies. That principle is laid down in the work relations act and corresponds to the decisions, the Supreme Court has issued in the course of the latest decennium.
So, the joint will of the parties is important, but not always decisive: in accordance with the decisions of the Supreme Court, the work relations act holds explicitly that, in the case of a contradiction between the qualification made by the parties, on the one hand, and the qualification, resulting from the way the parties work together in practice, on the other hand, the latter qualification prevails. In other words, it is not because the parties have explicitly provided that the performer of an assignment will be working as an independent, that the coast is clear. It is also required that the performer of the assignment effectively works as an independent. According to the work relations act, important elements in that context include the fact that the performer of the assignment is freely deciding on the working time; that he organizes the work as it pleases him; and that the customer does not have the possibility to exercise hierarchic control. This is a clear reference to the traditional distinction between an independent cooperation structure and an employment relationship: the right of one party (the employer) to exercise authority over the other party (the employee). Obviously, this does not prevent the customer from verifying whether the result of the work performed by the performer of the assignment effectively corresponds to the work as agreed upon between the parties. It does mean that the customer should not be involved in the way the performer of the assignment has achieved the result.
Needless to mention, the contractual stipulations of the parties can not undo statutory irrefutable assumptions. As an example reference can be made to the work performed by an employee for his employer in addition to the normal working hours. These supplemental activities are qualified, as a matter of law, as work performed within the framework of an employment relationship. The employee is assumed, as a matter of law, to perform this work as an employee regardless of the understandings between the parties and regardless of the way these activities are performed in practice.
When an independent cooperation structure is requalified as an employment relationship, the customer (employer) will have to bear the consequences, while the performer of the assignment (the employee) will not be affected: the newly qualified employer will have to pay the social security contributions for a period of maximum three years. These include the employer’s contributions as well as the employee’s contributions and the employer is not allowed to claim reimbursement of the employee’s contributions from the employee. Add the lump sum increase of 10% and the interest (7% per year) and the extent of a potential catastrophe is easily assessed. But that is not all, because the newly qualified employee may claim various amounts, such as severance pay (in the case of a termination of the cooperation structure), and amounts he is entitled to as an employee, such as vacation pay, the salary for bank holidays, benefits laid down in collective labour agreements, rendered compulsory by royal decree, including end of year bonus, salary adjustments on the basis of the system of linking the salaries to the cost of living index, etc. And payment of these amounts can be claimed for the entire duration of the working relationship, as from the beginning.
The possible financial consequences are clearly illustrated by the following fictitious example of an IT-consultant, 38 years old, who is performing services on a fulltime basis for a company in accordance with an agreement, charging, as laid down in the agreement, a monthly fee in the amount of EUR. 6,250 (EUR. 75,000 annually); the agreement provides for a notice period of 3 months and the company terminates the agreement after 7 years by notifying a notice of 3 months. The IT-consultant decides to bring his case before the employment tribunal arguing that he was an employee of the company and not an independent worker. The possible cost for the company can be summarized as follows:
Severance pay : 29.000 EUR
End of year bonus (7 years) : 43.750 EUR
Interest on end of year bonus : 5.250 EUR
Vacation pay (6 years) : 69.030 EUR
Interest on vacation pay : 21.600 EUR
SUBTOTAL : 168.630 EUR
2. SOCIAL SECURITY
EER's contributions on the compensation (3 years) :
EEE's contributions on the compensation (3 years) :
Lump sum increase : 10.590 EUR
Interest : 9.627 EUR
Contributions on severance pay : 9.860 EUR
Contributions on end of year bonus : 14.875 EUR
Contributions on simple vacation pay : 12.240 EUR
SUBTOTAL : 163.099 EUR
OVERALL TOTAL : 331.729 EUR
So, it is worthwhile to think first before starting an independent cooperation structure,
because the risk that an independent cooperation structure will be tested is not small: not only
the National Social Security Office may take such initiative, but also a visit of the social
inspection / labour inspection may result in a compromising investigation. In addition,
institutions, in charge of paying social security allowances, may interfere. And, last but not
least, also the would-be independent worker may go to court, despite the fact that he played the
game all along during all these years (the number of times this occurs following the termination of
the cooperation structure by the customer is not low).
Despite these risks, it appears that in practice a large number of (quasi exclusive, fulltime) service arrangements with accountants, IT-specialists, managers and the like are set up as independent cooperation structures, quite often by using the management company of the performer of the services as a buffer between both parties. But also the use of such a buffer does not constitute a water-proof guarantee: a renowned soccer club knows it very well since the agreement with the company of its coach was requalified as an employment contract with the coach himself. A careful drafting of such agreements remains the first condition for possible success.
In principle, the party who claims an independent structured cooperation to be in reality an employee-employer relationship, has the burden of proof. Things are different in the case of a refutable assumption created by law: as a typical example of such refutable assumption, reference can be made to the commercial representative: the person, who performs work as a commercial representative, is legally assumed to be an employee, unless the contrary has been established.
Cooperation arrangements must be very well structured
The possibility to use this technic of a refutable assumption is largely introduced by the work
relations act for the fight against would-be independents: criteria may be established by royal
decree for sectors, professions or professional categories; if the cooperation structure, set up as
a structure with an independent worker, does not meet (a number of) these criteria, it is assumed
to be an employment relationship, unless the parties submit sufficient evidence of the contrary:
this is a flexible system allowing the determination of specific criteria in consideration of the
sector, the professional category or the profession.
The work relations act has set the example in August 2012: for some (suspicious) sectors nine criteria have been established. If it appears after examination that a cooperation arrangement, set up as an independent structure, meets more than 50% of these criteria, the cooperation arrangement is assumed to be an employment contract, unless the parties submit sufficient evidence of the contrary. These criteria apply to the construction sector and related sectors, such as delivery and installation of central heating, electricity, wall hanging, floor covering, the cleaning sector, surveillance services and transportation of goods or persons for the account of a third person (except ambulance services and the transportation of handicapped persons). The sectors to which the criteria apply may be extended by royal decree.
Considering the risks and the flexible means of fighting the phenomenon of would-be independent workers, cooperation arrangements must be very well structured !