Is a business obliged to join a mandatory Sectoral Pension Fund (Bedrijfstakpensioenfonds, “BPF”) or not? The order (or decision) for mandatory participation of a BPF determines whether an employer is obliged to join the pension scheme of a BPF.

When several legal entities work together in a single group, the question arises as to whether one has to check whether each legal entity falls within the operative scope in a decision for mandatory participation (or in a CLA) or whether one should instead look at the group of legal entities as a whole.

The Sub-District Court Judge at the District Court of the Central Netherlands recently issued a finding that it was the group as a whole that had to be considered.

What was this case about?

The case was about a parent foundation that managed two subsidiary foundations. These subsidiary foundations in turn ran homes and day centres for those with severe multiple and/or psychological handicaps. The subsidiary foundations were members of the sectoral pension fund for Care & Welfare (the “PFZW”). The PFZW considered that the parent foundation was also subject to its mandatory applicability, as the parent also provided care services in addition to its management role. The parent foundation argued that its activities amounted to the provision of commercial services since it only did administrative work, as the director of the two subsidiary foundations, and did not employ any carers.

The order for mandatory participation of the BPF specified that a legal entity providing intramural and/or extramural care was affected by the order. The Sub-District Court Judge held that the parties had correctly agreed on the fact that all employees of a legal entity providing intramural and/or extramural care or assistance were covered by the order for mandatory participation. This would therefore also include employees who did not actually provide the care, such as cleaners and porters. The fact that some of the support activities were outsourced to another legal entity within the same group did not in this case mean that those employees were not covered by the operational ambit, according to the Judge. In issuing the judgment, the Court took into account that:

  • the parent foundation did this work – which did not directly involve providing care – for its subsidiaries and the main reason for this was a practical one;
  • the parent foundation did not do any work for other employers in the care sector apart from its two subsidiaries, meaning in effect that it was not an autonomously operating legal entity;
  • the subsidiaries would be unable to provide the actual care without the work done by their parent; and
  • the entire group was presented as a single entity on the website.

Bearing all of this in mind, the Sub-District Court Judge reached the conclusion that the parent and the two subsidiaries must be regarded as a single unit, so that the parent was also affected by the mandatory participation. Any other finding would, in the view of the Judge, have the unacceptable consequence that an organisation providing care could itself decide which employees would build up a pension with the PFZW and which ones would not.

In line with previous case law?

We doubt whether this decision is correct. This is because established case law tells us that, for interpreting a provision in an order for mandatory participation, the wording of the provisions is decisive when read in the light of the entire text, what is called the ‘CLA standard’. Based on the text in the order for mandatory participation, the parent foundation would not fall within its scope. After all, the order for mandatory participation states that only a legal entity providing intramural and/or extramural care or assistance falls within its scope, and the parent foundation does not do that work. The Sub-District Court Judge mostly wanted to prevent the parent from taking control over the ‘pension right’.

Also, this judgment is at odds with a ruling by the Dutch Supreme Court on 23 September 2016, where the Supreme Court held that, when interpreting the expression ‘business’ in the CLA for the fast food industry, one should look at each legal entity individually to see whether the CLA was applicable. The Supreme Court held that this coincided with the definition of ’employer’ in that CLA: “a (legal or natural) person that employs one or more employees on the basis of an employment contract”.

This judgment by the District Court of the Central Netherlands once again illustrates how hard it can be to interpret provisions on operational ambit. We are happy to advise you on the application and interpretation of provisions on operational ambit in a decision for mandatory participation or a CLA.

The full judgment can be found here (in Dutch).