Companies to be held liable for underpayment of temporary workers

The Ministry of Social Affairs and Employment has submitted a legislative proposal placing liability for the non-payment or underpayment of wages on companies that hire temporary workers through ‘mala fide’ or fraudulent temporary work agencies. Trade unions and employer organisations had called for the legislative amendment to combat such practices. ‘Bona fide’ or credited agencies have welcomed the legislation as they face unfair competition from mala fide agencies.

At the end of December 2008, the Ministry of Social Affairs and Employment (Ministerie van Sociale Zaken en Werkgelegenheid, SZW) submitted a legislative proposal to the Dutch House of Representatives (Tweede Kamer der Staten-Generaal) directed at holding companies that hire temporary workers through mala fide or fraudulent temporary work agencies liable for unpaid or partially paid wages. The legislative proposal would enable temporary workers to hold companies liable when they hire temporary staff through non-certified employment agencies that fail to pay or underpay any outstanding wages. The legislation would require these companies to pay the workers in question the statutory minimum wage and any holiday allowances. This proposal is the latest step in the country’s efforts to combat the practices of mala fide employment agencies (NL0810029I).

Reassigning liability

At present, temporary workers can only demand their wages from the employment agency that hires them; companies that do business with fraudulent temporary work agencies are currently not held liable for the payment of wages. However, if the proposed legislation comes into effect, it will be possible for temporary workers to choose whom they hold liable if they are underpaid or not paid by a non-certified temporary work agency. They can demand their wages from the employment agency itself or from the company that hired them through the agency.

It is hoped that, by assigning liability, companies will be encouraged to work with certified temporary work agencies. At the same time, employment agencies will have a greater interest in gaining certification, because it will become more attractive for companies to do business with them.

Registration of employment agencies

Like all companies in the Netherlands, employment agencies must be registered with the Chamber of Commerce (Kamer van Koophandel, KvK). Government bodies such as the Tax Administration (Belastingdienst) will be obliged to notify KvK if they notice that an employment agency is either not registered or incorrectly registered. In turn, KvK provides the Labour Standardisation Foundation (Stichting Normering Arbeid, SNA) with information about registered employment agencies on a weekly basis. The foundation can approach employment agencies within the context of applying for NEN 4400-1 certification from the National Standardisation Institute (Nederlands centrum van normalisatie, NEN). This standard specifies requirements in relation to compliance with essential regulations and legislation.

Obtaining such a certificate shows that the temporary work agency is subject to a system of periodic assessment. Certified employment agencies will be listed in the SNA register, which companies can access online. In cases of doubt, the companies can check whether they are dealing with a bona fide or certified employment agency. In conducting risk analyses, the Labour Inspectorate (Arbeidsinspectie) and tax authorities can use information about non-registered or non-certified employment agencies.

Social partners welcome proposal

The social partners had originally approached the government regarding this legislative proposal and are now pleased that it has been brought before the House of Representatives. Trade unions and employer organisations in the Netherlands hope to further combat the practices of fraudulent employment agencies that underpay foreign workers in particular. Certified employment agencies are particularly satisfied with the more stringent legislation, as fraudulent agencies are repeatedly undercutting them, thus increasing the level of unfair competition among temporary work agencies.

In an earlier initiative, the social partners had established an organisation to monitor compliance through the Foundation for Compliance with the Collective Agreement for Temporary Employees (Stichting Naleving CAO voor Uitzendkrachten, SNCU). Together, the organised temporary work industry and trade unions check whether the collective agreement is honoured. SNCU uncovered large-scale evasion of the collective agreement in 2007; a total of €1 million in fines were charged to mala fide employment agencies as a result (NL0711019I).

Further information

EIRO published a comparative study on the use of temporary agency work and the role of collective bargaining in January 2009 (TN0807019S).

Marianne Grünell, Hugo Sinzheimer Institute (HSI)

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