Current developments concerning foreign workers who temporarily perform work on Dutch territory

21 november 2019

In November 2017, the sub district court ‘settled’ a dispute about compulsory affiliation to a mandatory industry-wide pension fund regarding employees (temporary agency workers) who are temporarily posted to the Netherlands. This judicial decision was – at that time – controversial to the existing case law.

 According to the sub district court in November 2017, a compulsory affiliation to a mandatory industry-wide pension fund is considered to be an overriding mandatory provision (within the meaning of article 9, paragraph 1 of the Rome I Regulation), meaning that it is only possible to not participate by filing a request for exemption.

Because of this revolutionary point of view the sub district court had developed, and the resulting differences of opinion thereof, there has been a debate going on about whether a compulsory affiliation to a mandatory industry-wide pension fund can indeed be considered an overriding mandatory provision.

Last May, the sub district court settled two disputes once again, which endorses the position taken by the sub district court earlier. However, the court has also made some good additions to the earlier verdict, which most likely take away the ongoing debate about whether a compulsory affiliation to a mandatory industry-wide pension fund can indeed be considered an overriding mandatory provision.

Case

The court cases involved a Luxembourgian company called Presta Meat S.A. and a Slovakian company called Lema Slovakia S.R.O., which made employees temporarily available to Dutch companies in the fresh meat and meat-processing industry. Presta and Lema had several employment agreements with (foreign) employees and these employment agreements were governed by Luxembourgian and Slovak law. The purpose of declaring such law to be applicable is usually to ‘legally’ profit from all sorts of social advantages and to not have to apply any pension scheme.

However, the mandatory industry-wide pension fund for the meat-processing industry (VLEP) was of the opinion that Presta and Lema owed pension premiums for its employees which were made available to Dutch companies in the fresh meat and meat-processing industry.

Judgment

The sub district court came to the conclusion that a compulsory affiliation to a mandatory industry-wide pension fund indeed falls under the scope of article 9, paragraph 1 of the Rome I Regulation, meaning that it is an overriding mandatory provision. Reference is made to the collectivity and solidarity underlying the Dutch system, for which compulsory affiliation with supplementary pension schemes is indispensable, which system aims to ensure a certain level of pension for all employees in the industry and thus contributes directly to the improvement of one of the terms and conditions of employment of those employees, namely their remuneration. Further thereto, compulsory affiliation against payment of an average pension premium aims to prevent competition between employers on terms and conditions of employment, such as pension.

As such, the sub district court came to the conclusion that these core principles of collectivity and solidarity can be used to argue that the foreign employer of seconded foreign employees must participate in a mandatory industry-wide pension fund, but only when the employees concerned are not participating in a so-called supplementary pension fund in their home country. According to the sub district court, this is in keeping with the Directive on safeguarding the supplementary pension rights of employed and self-employed persons moving within the Community and the accompanying Coordination Directive.

Further thereto, the sub district court rejected the argument that seconded foreign employees should not be obliged to participate in a mandatory industry-wide pension fund, because of the fact that the Directive concerning the posting of workers in the framework of the provision of services (i.e. Posting of Workers Directive) excludes supplementary pension funds from the so-called ‘hard core terms and conditions of employment’, which means that Dutch supplementary pension funds should not be applicable to seconded foreign employees working temporarily in the Netherlands. However, the reasoning behind the exclusion of supplementary pension funds in the Posting of Workers Directive is that the European legislator sees supplementary pension funds as a part of the social security system of a member state, instead of as a part of the terms and conditions of employment.

Consequences for foreign companies (and seconded foreign employees)

There has been a debate going on for a while whether a compulsory affiliation to a mandatory industry-wide pension fund indeed can be seen as an overriding mandatory provision according to article 9 of the Rome I Regulation. However, two recent judgments confirmed that such pension fund qualifies as an overriding mandatory provision and also applies to (foreign) employees who are seconded to the Netherlands, if they do not already participate in a supplementary pension fund in their home country.

As such, foreign companies need to participate in a mandatory industry-wide pension fund whenever they let their (seconded) employees, who are not participating in a supplementary pension fund, perform (temporary) work activities in the Netherlands.

These judgments can have far-reaching consequences for the flex labour market, the construction industry, the transport and logistics market, the metal industry and basically every sector with a mandatory industry-wide pension fund. As it is a difficult subject, it is recommended to be advised by the advisors of Pellicaan and/or Mazars, if there appears to be a similar situation.