Subdistrict Court of Leiden, 17 April 2013, LJN BZ7314

The Facts

In 2012 an employer, a wholesaler in flowers and plants, decided to outsource its production to a third party. Contrary to the employer, this third party was not subject to the Collective Labour Agreement of the Flowers and Plants Wholesale, and used flexible workers to do the work concerned. The employer applied for dismissal permits to the UWV WERKbedrijf (‘UWV’) in respect of the employees who had been doing the production work before. The UWV refused to grant the dismissal permits, among other reasons because it considered the trade-in of the permanent staff for temporary workers through the third party (a ‘sham self-employed’) to be a ‘sham construction’. The employer did not leave it at that and requested the Subdistrict Court to rescind the employees’ contracts.

The Subdistrict Court

Contrary to the UWV, the Subdistrict Court held that there was no sham construction but a normal outsourcing of work to a ‘real self-employed’. The Court considered it relevant that the third party is registered with the Chamber of Commerce and is a certified enterprise that bears its own entrepreneurial risk. Besides, the third party complies with Dutch law (for example the Minimum Wage and Minimum Holiday Allowance Act) and had already been doing the major part of production work for the employer and other companies for years. The third party is doing this production work using its own staff and its own machines. It has not become apparent that the employer is contracting with this third party for the sole purpose of evading employership. In addition, the Subdistrict Court considered it important that the employer was in very serious financial problems (and has meanwhile even been declared bankrupt) and that it had fulfilled the rules of protection applicable in collective redundancies, even though the trade unions were informed late and the notification of a collective redundancy was made late.

In the opinion of the Subdistrict Court, the fact that an employer acting properly may be obliged to ascertain whether the third party to whom the production work is outsourced complies with Dutch law does not imply that the employer should (also) form a substantial opinion on the degree of flexibility of the employees this third party will subsequently deploy.

Anyhow, the employer’s interest – especially considering the financial emergency situation that had arisen – outweighed the employees’ interest in this case. As a consequence, the employment contracts were rescinded as of 1 May 2013 without an award of compensation.

Conclusion

The UWV and the Subdistrict Court agree that sham constructions are unacceptable. However, in the present case the Subdistrict Court found, unlike the UWV, that there was no sham construction, but a normal outsourcing, also because the third party can be qualified as a ‘real self-employed’ and not a ‘sham self-employed’.

Tip

When an employer applies for dismissal permits on grounds of business circumstances, and the employees are being replaced by flexible workers, he should carefully check whether the strict conditions in Chapter 7 of the UWV’s Policy Rules are complied with. Finally, in this case the Subdistrict Court seems to impose a duty to investigate on the employer: he should examine whether the third party complies with the rules of law. Future case law will have to tell whether this view will be followed, and what it means exactly.