Does a payrolled employee have an employment contract with their hirer?

Up till now it is not possible to identify a unique line in the court orders of the lower courts which answers the question whether or not a payrolled employee has an employment contract with its hirer. Leeuwarden Appeals Court recently attempted to clarify this matter. In summary proceedings, the court ruled that a payrolled employee does not work on the basis of an employment contract with the hiring party. Read more...

Payrolling
Payroll constructions are increasingly gaining in popularity. There is no legal definition of the concept of payrolling. In general, the relationship between the payroll company and the employee is considered to be a special type of a secondment agreement. This consturction differs from a traditional employment agency because, in payrolling, recruitment and selection are conducted by the hirer itselve. The payroll company concludes an employment contract with the employee concerned. The employee is then made available to a third party, the hirer, under whose management and supervision working activities are conducted.

Facts
In June 2004, an employee and a payroll company concluded an agreement concerning an assignment. The employee commenced editorial tasks for hirer X on 24 June 2004. During the years  2005, 2006 and 2007, X held performance appraisal meetings with the employee. Each of these meetings resulted into salary increases. The salary increases have been put into effect by the payroll company. By letter of 4 August 2009, X confirmed to the employee that the working relationship would be continued until further notice "on the basis of the current payrolling agreements". On 28 August 2009, X informed the employee that the working relationship with him should not be extended as from 1 October 2009. The employee is of the opinion that he has an employment contract with X. Therefore the employee, calls for their release from service to be annulled on 1 October 2009 and, via summary proceedings, claims continued payment of salary. The subdistrict court ruled that the employee is working on the basis of an employment contract with X and upheld the employee's claim for salary to continue to be paid.  

Leeuwarden Appeals Court
On appeal, the verdict went in favour of the hirer. On the basis of the established facts it is, according to the provisional judgement of the court, unlikely that the legal relationship between the employee and the hirer would in a final judgement be regarded as qualifying as an employment contract. In connection with the working activities to be conducted for X, the employee only has a written contract with the payroll company. The employee should on the basis of the content of the assignment contract be aware of the role of the payroll company. That performance appraisal meetings were being held did not alter this, because assessment of performance is by no means uncommon in case of commissions or secondments/hiring in these days. Furthermore, the court ruled that it was neither stated nor apparent as to whether the original construction via the payroll company had been ended at any particular juncture. Nor was it either stated or apparent whether the employee, prior to the announcement of the ending of the editorial tasks for X had made it known to X that he considered himself to be an employee of X. Against this background, legal certainty argues against a smooth transition from the orginal construction involving the payroll company to an employment contract between the employee and X. The court overruled the verdict of the subdistrict court and rejected the employee's claims.

Conclusion
In the lower courts there have previously been rulings that an employee was indeed in the hirer's service despite there being a payroll construction. Leeuwarden Appeals Court has put an end to this, though via a summary judgement. In any case, it is important for you as possible hirer that the payrolling conditions are set down in writing and that there is no ambiguity concerning the employer of the payroll employee. 

Final comment
As a rule, the Payroll CAO (collective bargaining agreement) applies to the contract between the employee and the payroll company. This CAO in general means that the payroll employee has a slightly stronger legal position compared to a temp. Under the terms of the CAO, the payroll employee has greater claims to salary continuing to be paid in the event of sickness (100% during the first 26 weeks, thereafter this percentage declines by 10% during every subsequent 26-week period to 70% in the final 26 weeks).