Senior Employment Lawyers from LEI Member Firms met in Hamburg, Germany, in November 2018 to discuss and share experiences of the challenges thrown up by the ever increasing use of “freelancers” or “workers”. What is clear is that the new challenger employment models created by the likes of Uber, Deliveroo, and others is a global issue, both politically and legally. Here we share the views from some of our European members.
Belgium: Pierre Nilles of Buyle Legal
Pierre Nilles, from Buyle Legal in Brussels, explains that, aside from the precarious forms of employment (“freelancers”), certain types of role are seeing a greater use of selfemployed – for example, some managerial or sales positions The problem for these groups is that they have little protection in law, and can have their relationship terminated on short notice (sometimes just a few weeks), unless provided otherwise in a written agreement.
Belgian social security authorities tend to try to disqualify the self-employed status in certain instances as the social security contributions are much lower than they would get if someone was employed. Whilst the employer’s social security contributions amount to 35% of the employee’s gross salary, on which 13% will already be withheld for the same purpose, the social security contributions for the self-employed are, depending of their income level, between €720 and €4,100 per quarter.
The risks of getting it wrong are high – if the Tribunal decides that there is sufficient control (in terms of organisation of time, organisation of the work and the exercise of authority) over the freelancer/self-employed person to actually make them an employee, then the employer will be liable for the arrears of social security contributions (in the employee regime) up to 7 years backdated, with additional penalties which can be very high.
France: Angela Stokes of Daniel & Stokes
As more individuals in France opt to be “freelancers” the simplest option is to become a micro-enterprise, or “autoentrepreneur”, which is what digital platforms such as Uber and Deliveroo require their people to be.
The stakes are particularly high in France, as companies that wrongly categorise people as freelancers when in fact they are employees, face harsh sanctions – fines of between €45,000 and €225,000; prison sentences of up to 3 years; liability for arrears of salary and holiday pay; social security contributions and unpaid taxes from the start of the relationship.
France’s highest court, the Court of Cassation, issued a judgment on 28 November 2018 determining that a Take Eat Easy delivery rider was an employee. The Court made it clear that similar digital platforms should also re-classify their drivers/riders as employees. Separately, Deliveroo is currently under investigation in France by the social security administrators – if the investigators determine that social security contributions should have been paid, Deliveroo faces a huge bill of over €6.4 million just for 2015 and 2016 alone.
Slovakia: Gabriel Havrilla of Havrilla & Co
In Slovakia, as with most Central European countries, they distinguish between two main employment models:
1. A highly regulated employment relationship;
2. A much more unregulated environment for the self-employed and freelancers. This includes those providing services such as taxi drivers, cleaning services, accommodation services.
Since January 2018 new rules have been introduced such that “freelancers” do not pay social security contributions in their first year, but instead they pay a minimum of €63 per month as a contribution to health insurance.
Uber has faced similar challenges over its licence as they have faced in other parts of Europe. In Slovakia Uber is currently managing to successfully keep its licence, although the regulated taxi drivers are not happy.
LEI member Gabriel Havrilla is also a licensed agent for football players. He reports that professional sportspeople (including football and ice hockey players) will be deemed to be employees from 1 January 2019, and their relationships will be regulated under the Slovak Labour Code.
Germany: Dr Judith Gessner of ALP Rechtsanwälte
In Germany, the authorities go through a checking process of employers every 4 years to ensure employers are correctly identifying who their employees are. Dr Gessner explains that the authorities follow a checklist of 8-10 issues based on factors including: whether the individual is incorporated into the Company’s business structure; whether they take and are paid for holiday; whether they provide their own equipment; whether there is a right of substitution; and whether they work for a number of different companies.
The financial risks for employers are substantial if they have incorrectly classed someone as a freelancer. If the authorities determine that any freelancer is in fact an employee then the employer can be ordered to pay all social security contribution and taxes for at least the last 4 years. This can be up to €120,000 per year per employee.
The freelancer model is common in the service sector in Germany – for example, those providing cleaning or IT services.
What is increasingly common is for those who have been categorised as self-employed or freelancers, who are then dismissed, for them to then argue in the Courts that they were in fact employees.
The challenge in Germany is that the working population is diminishing, and so there is greater demand for older people to continue working for longer.
Netherlands: Robert Jan Stoop of Teekenskarstens
About 1.8 million Dutch people are “self-employed” out of a working population of 10 million. The Dutch government recently tried to introduce new legislation to clarify the position of the “self-employed”. This legislation sought to address bogus self employment and a regulation for insurance and pensions, but that legislation did not get through the Dutch Parliament.
In 2020, the Dutch will be introducing a whole new framework for employment law, so it is possible that they will use that process to provide greater certainty and protection for employees and the self-employed.
Currently the Dutch tax authorities appear to be going after consultants and those working in the construction industry in an attempt to correctly assess whether an individual is self-employed, or in fact an employee.
The self-employed are quite happy because they pay less taxes, a situation that works for them personally whilst they have enough work. However, change is inevitable as the European Commission has said that The Netherlands needs to reduce the incentives
given to both employers and employees to work via temporary and self-employment contracts. This, the Commission said, should go hand in hand with promoting adequate social protection for the self-employed and tackle bogus self-employment.
UK: Greg Burgess of DMH Stallard
The UK is slightly different from European counterparts in that three employment models are recognised – that of the self-employed, the employed, and a middle category of “worker”. Workers enjoy some of the protection employees enjoy, but not all.
The last two years in particular has seen a steady flow of cases in the Courts where Uber drivers, cycle and van couriers, “self-employed plumbers”, have all successfully argued that, despite having written contracts saying they are “self-employed”, they have been deemed to be workers and therefore entitled to the national minimum wage, holiday pay, and possibly protection from discrimination. We currently have an ex-Olympic cyclist arguing she was a worker and so protected from bullying and harassment when she was winning medals for Team GB.
Tax risks for companies that get it wrong are significant. It is not unusual for the UK tax authorities to look closely at companies’ use of “consultants” and “self-employed” and in fact deem them to be employees, resulting in large financial claims for unpaid taxes and national insurance contributions.
On 17 December 2018 the UK government announced it would be introducing new legislation to offer greater protection to workers. The legislation will seek to make it easier for companies to decide whether an individual should be deemed an employee, a worker, or self-employed. The detail behind the Government’s proposals is awaited.