False self-employment from a legal perspective: how is the correct status determined?

Are you familiar with situations where you wonder whether a self-employed person is actually self-employed or appears to be an employee? When exactly is self-employment considered bogus and when not?

To do this, we first need to understand exactly what these two statuses entail.

A self-employed person is a natural person who practices their profession without the obligation of an employment contract or status, and therefore does not work under the authority of the client.

The main difference between an employee and a self-employed person is the existence or absence of a relationship of authority in the performance of their professional activities. If the work is performed under the authority of another person, then there is an employment contract.

Sometimes, there is a case of false self-employment. This is when someone has self-employed status but in reality performs their duties as an employee, or should fall under that status. If that person incorrectly has self-employment status, this is called false self-employment.

Why do people sometimes have an incorrect self-employed status and therefore false self-employment?

False self-employment can sometimes arise unintentionally, especially in situations where the collaboration between parties is not entirely clearly defined. It is therefore important for entrepreneurs to carefully consider the conditions under which a collaboration with a self-employed person is organized.

When the relationship between client and contractor bears too many characteristics of an employment contract, the collaboration can be considered false self-employment. This can lead to reclassification of the relationship and unexpected financial or legal consequences.

It is therefore essential to assess in advance whether there is a relationship of authority. This is the most important distinction between a self-employed person and an employee, and forms the basis for determining the correct status.

False self-employment is ultimately a form of social fraud. It undermines the solidarity on which our Belgian social security system is built.

This fraud reduces wage costs, because employers do not pay social contributions for self-employed workers that they normally would have to pay for employees. The rules that protect employees, such as working hours, maternity protection, and wage protection, are also overlooked.

How do you recognize authority? The 4 general assessment criteria

• The intention of the parties

The intention of the parties, as set out in the agreement, is important, provided that this intention corresponds to the actual execution of the employment relationship.

• The freedom to organize working hours

A self-employed person generally decides when they work and is not bound by a working time schedule imposed by a company.

Conversely, a mandatory working time schedule, the lack of freedom to choose leave and vacation days, the obligation to clock in and out, and the obligation to justify absences are typical for employees.

When assessing an employment relationship, the specific characteristics of the specific situation must always be taken into account. Certain restrictions on the freedom to organize working hours may arise from commercial or organizational requirements. For example, a trader working in a commercial center with fixed opening hours or completing timesheets for invoicing. Such circumstances do not, in themselves, indicate the existence of authority.

• Freedom to Organize Work

A detailed description of the tasks to be performed, the existence of clear instructions, and decisions from a hierarchical superior can indicate the existence of authority.
Note: Even within an independent partnership, general instructions, obligations, and guidelines may exist that arise from the nature of the activity or are necessary to achieve the intended result. Such elements do not, in themselves, indicate the presence of authority.

• The Ability to Exercise Hierarchical Control

Subjectivity to hierarchical control and the possibility of internal sanctions can indicate authority. This can be demonstrated, for example, by a reporting obligation on the performance of tasks, sanctions included in the agreement, or negative consequences (even if not explicitly stated as sanctions) if instructions regarding work organization are not followed.

• It is not required that this control actually be exercised; the possibility of it is sufficient.

A control based on ethical rules, such as the control exercised by the Dutch Bar Association on lawyers, does not exclude the possibility that the individual is an independent contractor.

Not every instruction or inspection indicates authority. Even within an independent partnership, practical agreements are necessary regarding the organization, nature, and scope of the work to be performed.

It's all about the whole picture

No single criterion is decisive in itself. The value and relevance of each element are assessed based on the specific employment relationship. For example, a self-employed person may have considerable freedom in organizing and performing their work, yet still be accountable to the client for their time spent. In that case, this last element does not preclude the existence of self-employment.

If the actual performance of the employment relationship reveals sufficient elements that do not correspond to the chosen qualification of employee or self-employed person, the employment relationship can be reviewed.

Sectors with a presumption of employee or self-employed person

In certain sectors and activities, the assessment of the employment relationship is based on the presumption of employee or self-employed person. This presumption can be adjusted based on four general criteria.

When a presumption is made, the employment relationship is assumed to be an employment contract, unless evidence to the contrary is provided and certain criteria are met.

The presumption applies to the following sectors and activities:

• Construction sector
• Security sector
• Transport sector
• Cleaning sector
• Agriculture sector
• Horticultural sector
• Activities carried out through a work platform

The presumption does not apply to family employment relationships, namely:

• Employment relationships between blood relatives or relatives by marriage up to the third degree, or between legally cohabiting persons.
• Employment relationships between a company and a natural person who is a blood relative or relative by marriage up to the third degree, or legally cohabiting with a person who, alone or jointly, owns more than 50% of the shares in that company.

The presumption does not affect the application of existing social security rules. Furthermore, the presumption does not apply when the law or regulations expressly provide or assume that a profession is performed as a self-employed person or as an employee.