Working with external service providers: the pitfalls

1. False self-employment: the re-qualification to an employment contract

There are no specific rules for cooperation with self-employed persons. In principle, the parties themselves determine the way in which they will cooperate within the framework of self-employment. The principle that is applied is that the will of the parties is law. This principle is enshrined in the Labour Relations Law and is in line with the rulings of the Court of Cassation.

The joint will of the parties is important, but not always decisive.

The Labour Relations Law explicitly states that in case of contradiction between the qualification which the parties themselves have given to the cooperation, on the one hand, and the qualification as it appears from the actual way in which the parties cooperate, on the other hand, the latter "actual" qualification prevails.

Thus, case law gives precedence to the factual situation over the legal one. It is therefore not because the parties have explicitly stipulated that the contractor will be self-employed that the coast is clear.

It will not be the first time that a self-employed performer will claim afterwards (even after many years of loyal service) that he was not actually working as a self-employed person but as an employee, with all the (economic) consequences for the client. It is therefore important that the self-employed person is actually able to work independently.

According to the Labour Relations Law, the important elements that are taken into account are the following:

• the self-employed performer is free to organise his working time and work as he sees fit, and
• the employer does not have the possibility of exercising hierarchical control. In fact, this is the traditional distinction between a self-employed partnership and an employment relationship: the right of one party (the employer) to exercise authority over the other (the employee).

However, this does not exclude the right of the client to check whether the result of the assignment of the self-employed service provider corresponds to what the parties agreed. This does not mean that the client may interfere with the manner in which the self-employed person carries out his work. If the client does so, it runs the risk of reclassifying the cooperation as an employment relationship.

When a self-employed work relationship is reclassified as an employee-employer relationship, the client bears all the consequences, while the self-employed person bears no risk. The client then pays the social security contributions for a period of maximum three years. These are both the employer's and the employee's contributions (the latter cannot be claimed back from the employee), the fixed increases, the interests and, on top of that, a possible claim from the self-employed person himself - who can then officially call himself an employee - and this not only for a possible severance payment, but also for amounts to which he was entitled as an employee during the entire period of cooperation/employment (such as the pay for holidays, benefits from collective labour agreements, end-of-year premiums, salary adjustments, etc.).

It is not only the self-employed contractor who can pose a problem here. The National Social Security Office and the Social Inspectorate can also come to inspect the cooperation between the client and the self-employed person on their own initiative.

In some cases, cooperation via a management company cannot offer any solace either. Therefore, it is extremely important to pay attention to the way you deal with your self-employed client or service provider.

2. Prohibited posting of workers: like your own employees

The second scenario that deserves attention is the prohibited provision of employees.

In this scenario, there is a risk that the employees of your (external) service provider who provide the agreed services in your enterprise could be considered as your own employees.

The posting of employees is prohibited under Belgian labour law, except in very specific situations such as temporary work. This prohibition states that any activity that consists of putting workers at the disposal of users is prohibited.

The hiring out is the activity by which an employer lends permanent or contracted employees to users, who exercise partial or full authority over the employee who is made available to him. The crucial element in the assessment is therefore the employer's authority. There is a (prohibited) hiring out from the moment the user exercises even part of the authority of employer. The authority of the employer implies the possibility to give instructions and exercise control over the employee of the service provider.

Since only a partial delegation of the employer's authority suffices for this qualification, the situation in which the service provider-employer and the company-user (even sporadically) share the authority, may give rise to the existence of a (prohibited) posting of an employee. This happens, for example, when the company-user can give direct instructions, judge on promotion or wages, impose sanctions, determine working hours, is obliged to attend internal meetings and the like.

The sanctions involved are:

• the nullity of the original employment contract,
• the creation of a new employment contract with the company-user of indefinite duration, and
• the joint and several liability of the original employer and the company-user for payment of social security contributions, remuneration, allowances and other benefits under the new employment contract.

Moreover, prohibited posting is subject to criminal and administrative sanctions (sanction level 3).

It could happen to you as a company that you set up a cooperation with your external service provider, who is also partly your supplier, whereby the employees of the service provider provide services in your company within the framework of the cooperation and ... the latter goes bankrupt... The question then arises who is the employer. You or your service provider? In that case, the employees who have lost their jobs as a result of the bankruptcy may claim that you are the real employer because of the alleged (partial) employer status with all its consequences (such as social security contributions, indemnities in lieu of notice, remuneration, indemnities from the employment contract, etc.). The chances are that you would be held jointly and severally liable to compensate these employees.

3. A grey zone or hybrid cooperation: quid with "portage salarial"?

In some sectors and mainly in the cultural sector (for example, by artists, directors, designers, creatives, etc.), use is often made of a form of cooperation called the "portage salarial".

The "portage salarial" is a form of labour organisation that allows a qualified person (usually self-employed) to carry out an assignment with a company in complete independence, while enjoying the social security protection of an employee. It is a triangular employment relationship, in which three parties are linked by means of three contracts: the individual employee (or porté), the portage company and the user.

Since many people in this sector are usually self-employed, which often involves administrative obligations in combination with infrequent assignments, they often choose to join a "portage company". This is usually a cooperative, whereby the self-employed person participates in the company (becomes a shareholder of the cooperative) and at the same time receives an employment contract with the cooperative but continues to work "autonomously" as a self-employed person. So, in effect, this person is self-employed and legally an employee. In exchange, this self-employed person receives a salary through the cooperative, his client pays directly to the cooperative and his administration is taken care of by the cooperative (in return for payment, of course). Often, these people also continue to work for the same client (on a permanent basis), which means that they can create the impression of being an employee of that client. This is also advantageous for the latter, as the cost is considerably less than if this person were to become permanently employed by the client.

Is this also prohibited posting?

Yes, this is certainly a form of posting. One thing is certain: many questions can be asked about the qualification and legality of this form of cooperation. In addition to the question of qualification and legality, one can also wonder about the legal consequences of the mechanism of "portage salarial". The triangular relationship has consequences in the field of labour law, social security law, tax law and liability law. In France, this form of cooperation is very strictly regulated and even prohibited in certain sectors.

4. Conclusion

It is of great importance that the above-mentioned forms of cooperation are handled with care, so that the actual situation always corresponds to the agreed legal situation. If not, you risk getting embroiled in a game of 'yes, but no' and this can sometimes end up in a financial fiasco.

Fortunately, not everything is doom and gloom because the party alleging false self-employment or a prohibited posting must be able to prove it.

If you would like more advice or guidance on this, please do not hesitate to contact us at +32 (0)2 474 40 07 or via info@seeds.law.