Penalties for prohibited lending of personnel: not just theoretical
27/05/2016

It is an integral part of our economy that companies provide services to other companies where workers are "placed" with the customer. This is sometimes done under the banner of "contracting", "outsourcing" or "secondment". Lending of personnel is strictly regulated. The penalties for violation of this legislation stem traditionally from employment law, but a recent judgment of the Court of Cassation confirms that the general principles of contract law also apply: a claim for payment of the price due for the rendered services shall not be successful if it is based on an activity that is contrary to the rules on lending of personnel.

Principle

Lending of personnel to a user who exercises (a part of) the employer’s authority over the workers is in principle prohibited. However, the law allows several possibilities for the lending of personnel, but they are always combined with strict conditions and procedures.

The prohibition has a very broad scope and also applies when the lending takes place within the same financial-economic group or in an international context (when foreign workers have been lent to a customer in Belgium).

With each contracting or outsourcing of activities, these rules must always be taken into account.

Traditional penalties

Prohibited lending of personnel gives rise to the following penalties.  

  • Both the undertaking that lends personnel and the user risk criminal (from 600 EUR to 6000 EUR x number of workers in use) and administrative (from 300 EUR tot 3000 EUR x number of workers in use) fines. The judge may, in certain situations, impose an operating ban, a business prohibition or a temporary (1 month to 3 years) closure of the undertaking.
  • Both the undertaking that lends personnel and the user are severally liable for payment of social security contributions, wages, allowances and other benefits resulting from the employment contract. Obviously, that generally constitutes a minor issue for intra-group transactions.
  • The user is deemed to have directly entered into an employment contract for an indefinite duration with the involved workers from the start of their work at the user’s organisation. This penalty may not be detrimental to the worker: the latter can terminate the contract without prior notice or compensation up to the date on which he or she would normally no longer be lent to the user.
  • The employment contract between the employer and the worker can be annulled for breach of the legislation of public order, but the employee cannot be disadvantaged by this. 

Sanction from an unexpected angle – judgment of the Supreme Court 15 February 2016 

In its judgment of 15 February 2016, the Belgian Supreme Court referred to another, lesser-known, sanction.

The service provider who wishes to invoice for rendered services (for example, equal to the salary costs of the unlawfully lent workers) cannot rely on the agreement between the service provider and user to claim the payment of its invoice if said agreement does not comply with the rules on lending of personnel.

According to the Supreme Court, the agreement is totally void, as the prohibition on the lending of personnel concerns public order. A void agreement (due to the illicit nature of its cause) can therefore have no legal effect. 

The Supreme Court ruled that in this case the service provider is not entitled to rely on the theory of "unjust enrichment". The user did indeed have the advantage of the "free" services performed by the unlawfully lent workers, but the Court ruled that the judge may reject the claim of the undertaking that lent out the personnel, the so-called "impoverished" party, if it appears that in the specific case the deterrent effect of the nullity sanction is compromised or if the social order requires that the "impoverished" party should be sanctioned more severely.

Action points

Ensure that any cooperation with lending of personnel happens in a way compliant with the law, and always have drafted agreements in place. This advice is not theoretical and the stakes are high: in addition to the known sanctions, you may risk not being able to claim the payment of your invoice.

Related : Lydian ( Mrs. Isabel Plets ,  Mr. Yves Lenders )

Mrs. Isabel Plets Mrs. Isabel Plets
Of Counsel
isabel.plets@lydian.be
Mr. Yves Lenders Mr. Yves Lenders
Partner
yves.lenders@lydian.be

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