Following the Labour Relations Act's introduction of a rebuttable presumption on the nature of the working relationships, the construction industry comes forward with specific criteria for self-employment presumption.
As mentioned in our Newsflash of 5 October 2012, the Act of 27 December 2006 on employment relations (The Labour Relations Act) introduced a rebuttable presumption on the nature of the working relationships. Within specific industries, workers are presumed to be employees if at least 5 out of 9 criteria are met. They are presumed to be self-employed if less than 5 out of 9 criteria are met.
Construction, transport, surveillance and cleaning are the industries concerned. They were given the opportunity to customise these criteria by either developing the existing criteria in the Labour Relations Act or by replacing them by new ones.
After the surveillance industry, construction is the second industry to come forward with specific criteria, laid down in the Royal Decree of 7 June 2013.
Scope of application
The presumption targets workers working for a construction company, either as a natural person or via a management company. Analysis of the socio-economic criteria below, will indicate the level of (in)dependence between the construction company and its workers.
Furthermore, the presumption only applies to construction-related services. Therefore, not only the type of industry matters, but also the type of services rendered by the self-employed subcontractors.
9 industry-specific criteria
If 5 of the following 9 criteria are met, a self-employed subcontractor active in the construction industry will be presumed to be bound by an employment contract with the construction company, unless the opposite can be established:
1. The subcontractor rendering services has no financial or economic risk because:
o He or she does not make any personal and substantial investment in the company with private means; or,
o He or she does not personally and substantially take part in the company’s profit and loss; or,
o He or she has no personal liability with respect to the estimate or any other obligation towards projects carried out, outside the liability for fraud, gross negligence or minor repeated error;
2. The subcontractor has no responsibility or decision-making power with respect to the company’s financial means as regards the expenses, earnings, or the allocation of the company’s (private) means;
3. The subcontractor has no decision-making power regarding the company’s purchasing policy or pricing, or is not at liberty to identify possible new clients or negotiate/conclude new contracts;
4. A fixed fee is guaranteed, regardless of the company’s financial results or the scope of work performed by the subcontractor. Fixed advances for the purchase of working tools and raw materials are not taken into account;
5. The subcontractor is not at liberty to hire personnel for the execution of agreed work or to have him- or herself replaced;
6. The subcontractor does not present him- or herself as a company towards third parties or the company. For instance, when the subcontractor does not use certain visible elements characteristic of his company, such as logos (on vehicles), banners or advertising slogans;
7. The subcontractor mainly works for the company;
8. The subcontractor operates in areas outside the construction site or uses working tools that are neither his property nor rented by him. For instance, when he works in areas used as storage or workplace, or when he is entrusted with vehicles, materials or equipment that are neither his property nor leased by him or financed or guaranteed by the company;
9. Not being able to work independently from the company’s work crew or the company in which the subcontractor is an active partner.
The presumption can be reversed by contradicting evidence, for example, based on the general criteria set forth by the Labour Relations Act determining the nature of a working relationship as mentioned in our Newsflash of 5 October 2012.
Meanwhile, the Administrative Commission on Employment Relations is in place. Parties seeking legal certainty with respect to their relationship can request a social ruling which is valid for a period of three years (as also explained in our Newsflash of 5 October 2012).
It is advisable, with the above criteria in mind, to assess the risk of recharacterisation of the existing working relationships with subcontractors.
In order to avoid recharacterisation, companies have to make sure at least 5 of the above criteria are avoided, for example by providing that the subcontractor:
1. Is personally liable with respect to the estimate or any other obligation towards projects carried out (criterion 1c);
2. Is compensated based on an hourly rate instead of a fixed fee (criterion 4);
3. Is at liberty to have himself replaced and/or to hire personnel (criterion 5);
4. Uses his own working tools (criterion 8);
5. Does not exclusively work for the construction company or is at least at liberty to work for several clients (criteria 5 and 7).
Of course, companies must also observe that the services agreement is executed accordingly.