Legislation proposed to tackle 'bogus' self-employment

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During 2004, the Belgian government has been drawing up new legislation aimed at tackling 'bogus' self-employment, whereby workers are registered as self-employed - either from their own choice or at the request of an employer - but in practice have a subordinate employment status. The plan is to lay down general criteria for identifying the nature of a work relationship, with scope for specific criteria for individual sectors and occupations.

The distinction between employees and self-employed people is increasingly becoming blurred (TN0205101S), with the self-employed often having to give up part of their economic independence. However, the distinction between the two statuses remains crucial. Whether a person has employee or self-employed status determines both social security and employment protection. In both respects, self-employed workers are 'cheaper' for the client/employer than subordinate employees. This cost differential appears to be an important incentive for both parties to prefer self-employed status. The client/employer saves on labour costs because it is not required to pay the relatively expensive social security contributions due for employees, while the self-employed worker may find the higher net remuneration attractive. However, this benefit is accompanied by a less favourable social security status, which generates the need for supplementary insurance.

In this context, there is thought to be an increasing number of 'bogus' self-employed workers. These are workers who are registered as self-employed - either from their own choice or at the request of an employer - but have only a theoretical self-employed status, because in practice they work in a subordinate employment status.

Case law

A lack of clarity as to whether a person is a dependent employee or self-employed can have important implications later. If someone is subsequently found to be a bogus self-employed worker, he or she may be reclassified as an employee. This has major consequences for the employer, which will be forced to pay backdated social security contributions and wages to the person who is now retroactively regarded as an employee.

The Organisation of the Self-Employed (Unie van Zelfstandige Ondernemers, UNIZO) has drawn up a formula aimed at helping the parties involved make the correct choice as to the nature of their relationship. This is based on a set of criteria to which weighted values are allocated, and aims to help the parties identify the actual status of their work relationship. Case law, however, is not keen on this 'mechanical' approach and has given more importance in assessing the nature of a relationship to what the parties themselves formally state. In this way, the parties themselves have control of the matter. If a person has formally stated that he or she is self-employed, this makes it very difficult for the National Office for Social Security (Rijksdienst voor Sociale Zekerheid/Office National de Sécurité Sociale, RSZ/ONSS) to prove that the person in question is actually a bogus self-employed worker.

In order to counter bogus self-employment, the federal government wants to take a different approach to that followed so far. It announced a new legislative initiative in this area at a special cabinet meeting held in mid-January 2004. The planned approach is twofold: an amendment to the general law on employment contracts; and the creation of specific systems for particular sectors or occupational groups. In essence, the government aims to limit the scope of self-employment and to restrict the capacity of the parties to decide themselves what the status of their work relationship is.

General law on employment contracts

A number of 'neutral criteria' will be identified in the law. These will be criteria that will play no role in defining a work relationship in one direction (employee) or the other (self-employed). It seems that these neutral criteria will relate to a set of formal and legal aspects such as the name the parties have given to their work agreement or their respective positions with regard to the social security and tax administration (such as VAT, application for social insurance as self-employed, or inscription in the trade register).

The law is likely to determine that subordination and a contract of employment will be assumed as soon as a majority of 'relevant criteria' is present, to be established by a Royal Decree. Only a combination of these criteria (ie when a majority of criteria are met jointly) will give rise to the assumption that subordination characterises the work relationship. Defining these 'relevant criteria' is a difficult exercise and those involved do not yet seem close to reaching a consensus. However, it is unlikely that the legislator will do away with well established case law on bogus self-employment. Therefore, one can expect to find references to often used criteria such as:

• type of remuneration;

• organisation of working time, holidays, sick leave and similar issues;

• ownership of the tools and work equipment, infrastructure etc;

• the possibility or otherwise of the worker hiring his or her own employees; and

• the level of economic dependence/independence.

A perceived drawback of such a general list of indicative criteria is that all occupational groups and sectors are treated the same way, thus failing to account for possible specific features. The government thus proposes giving the different sectors and/or occupations the opportunity to draw up their own lists of criteria.

Criteria for specific sectors and occupations

At sectoral level, the various joint committees (made up of the sector's social partners) would be allowed, within a given timetable, to deliver an opinion setting out a list of criteria by which the concept of subordinate employment can be defined in their industry. This opinion, whether divided or unanimous, would in turn be referred for a formal opinion to the National Labour Council (Nationale Arbeidsraad/Conseil National du Travail, NAR/CNT) and/or the High Council for the Self-Employed and Small and Medium-sized Enterprises (Hoge Raad voor de Zelfstandigen en de KMO/Conseil Supérieur des Indépendants et des PME, HRZKMO/CSIPME). This complex procedure of 'cascading' opinions may eventually lead to Royal Decrees setting out specific criteria for individual sectors.

A similar procedure is envisaged for drawing up lists of criteria pertaining to employee categories or occupations. The initiative will be taken by the NAR/CNT or the HRZKMO/CSIPME. Their unanimous or divided advice can lead to specific Royal Decrees.

Commentary

Although the legislative course outlined above was announced in January 2004, no final bill has yet been drawn up as of August, partly because of regional elections and a subsequent reorganisation of the federal government.

The slow pace of the legislative process may, in a way, be a blessing. Legal reform of the concept of subordination in work relations affects a fundamental pillar of the Belgian socio-economic order. Reactions from various interest groups and professional organisations clearly show that this legislation will be a difficult endeavour on legal-technical and other grounds. The legislator will also need to take into account the actual situation in various key economic sectors. An 'ideological' law that adamantly tries to make subordinate employment the rule and self-employment the exception could have dramatic financial and economic consequences.

A difficult task awaits the legislator. The political agenda of reducing the number of bogus self-employed workers must be followed, but the implementation of such a policy must combine conviction with balance and legal security for the business community. A thorough preparation and a constructive dialogue are instrumental in achieving this. (Marc de Vos, UGent, VUB and Lontings & Partners)