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Facilitating insurance does not make a platform an employer
Our general counsel, Jan Pieter Uittenbroek, explains it all.
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3 April 2023
Update 3 April 2023 – The High Court recently issued its judgment in the Amsterdam Court of Appeal. The section “An exceptional ruling” has been updated accordingly.
In a nutshell
Some see facilitating insurance for freelancers by clients or work platforms as a risk. They say it could create an employment relationship between a platform or client and a freelancer, which is undesirable for all of the involved parties. However, the facilitation of insurance by a client or platform is not a significant factor in this assessment. This article explains why, also reflecting the recent national and European developments to protect freelancers.
Introduction
In recent years, there has been a large growth in the number of self-employed people, or freelancers. Working as a freelancer has many advantages, including more freedom. But it also brings more responsibilities, such as having to arrange insurance yourself.
However, many freelancers are insufficiently or not insured. This creates a risk for the freelancer, their clients, and society. Should an uninsured freelancer become unable to work, for instance, society will ultimately have to pay for these costs. For several years, politicians have been striving for better (‘standard’) protection for freelancers. This goal is also included in the coalition agreement [1], but has not yet led to concrete steps.
Online platforms are frequently used by freelancers and clients to find each other, forming a bridge between the supply and demand of temporary assignments. These platforms are keen to further stimulate clients and freelancers to work together, and are looking to reduce the risks involved. For example by taking out collective insurance for all freelancers working via their platform (think of a group insurance where all freelancers are insured or an agreement which each freelancer can take out individually) [2].
However, there is a lack of clarity on insurance facilitation for freelancers. Clients or platforms shy away from it, since they fear being seen as employers. This obstructs the better protection for freelancers.
This article will discuss when an employment relationship exists and to what extent insurance affects it. Following this legal framework, we will look at the state of case law in this area. Political developments, at national and European level, will also be considered. This article will conclude with some recommendations for practice.
Karien van Gennip, current Dutch Minister of Social Affairs and Employment. Image: ANP
Legal framework
Whether someone is an employee or a freelancer must be determined whether there is a relationship of authority. Whereas in the past it was mainly about authority to instruct, nowadays more attention is paid to the formal side of the relationship of authority, or the extent to which the worker or work is embedded into the organisation. Among other things, it focuses on the:
withholding of wage tax;
registration of holidays;
coordination of working hours;
extent to which the work is the client’s core business [3]; and
structural nature of work.
Here, no single element is decisive, but the factual circumstances are looked at. Case law is not entirely unanimous and clear about this.
Factors for authority and freelancers
When specifically looking at freelancers, other factors can be distinguished, such as
the degree of freedom to negotiate the price of their services;
de facto control over working hours;
the possibility of growing their own clientele; or
the freelancer’s entrepreneurial risks.
Contractual conditions may also play a role here, such as a competition clause or a payment continuation obligation in case of illness. Ultimately, all relevant circumstances are important to determine whether there is a relationship of authority (as well as the other elements of the contract).
National case law
The next step is to see whether facilitating insurance can also ensure that an assignment agreement can be construed as an employment contract. There have recently been some relevant rulings in case law on insurance facilitation.
The Court of Appeal of The Hague ruled that taking out disability insurance does not automatically lead to an obligation to pay wages, other than paying social security contributions. According to the Court, a client can also take out disability insurance for the benefit of a contractor under an assignment contract [4].
An exceptional ruling and the verdict of the High Court
The only ruling that came to a different conclusion is a judgement of the Amsterdam Court of Appeal. The Court of Appeal ruled that taking out disability and liability insurance was important for the qualification of the agreement [5]. Accident insurance had been taken out for the freelancers, and was paid for by the platform. It made sure freelancers could be compensated for damages in case of an accident and, if they became incapacitated due to the accident, their lost income. The Amsterdam Court of Appeal ruled that continuing to pay the freelancers during illness was (to a limited extent) in line with the rights and obligations of an employment contract [6]. The platform had also taken out liability insurance for the freelancers. On this, the Court of Appeal ruled that such an insurance fits an employment contract rather than an assignment contract [7].
This judgement was appealed in cassation, the Advocate General ruled otherwise. She stated that taking out accident and liability insurance is not relevant to the question of whether there is an employment contract [8]. She considered, “However, taking out these insurances is not a circumstance that affects the presence or absence of any of these elements”. The Supreme Court has recently ruled on this case [9].
The High Court has ruled that all the circumstances of the case must be considered to determine whether there is an employment contract. In doing so, the High Court also named a whole list of circumstances [10]. Such as the nature and duration of the work, the manner in which the work and the working hours are determined, the embedding of the work in the organisation, the manner in which the contract is concluded, the manner in which the remuneration is determined and paid and whether the person performing the work runs a commercial risk in doing so. It may also matter whether the person performing the work behaves as an entrepreneur in the course of business. The High Court does not mention offering insurance in this long list of circumstances. Thus, the High Court does not seem to find this a determining circumstance.
Other recent rulings in the area of assessing whether an employment contract exists have not addressed facilitation or taking out insurance for freelancers [10].
In any case, if a self-employed person bears the costs themselves, this does not affect the assessment. This was also confirmed in the aforementioned decision of the Court of Appeal of The Hague [12] and in the Attorney General’s opinion against the Amsterdam Court of Appeal’s decision [13].
The mere fact that insurance is facilitated is not a decisive factor.
National political developments
There has been a trend in politics which aims to reduce the differences between permanent and flexible workers and to better protect freelancers, as included in the coalition agreement [14]. This coalition agreement is in part based on the Borstlap Committee report [15] and the SER advisory report ‘Socio-economic policy 2021-2025’ [16]. The SER advisory report mentions the social agreement and the desire to achieve compulsory disability insurance for freelancers to prevent unfair competition and excessive income risks [17]. This advice is in line with the advice of the Labour Foundation [18]. The recommendation to launch compulsory disability insurance for all freelancers has also been adopted in the coalition agreement [19].
In the Labour Market Outline Letter of 5 July 2022 [20], the government indicates that it will come up with further details in the coming year. It also suggests that such compulsory insurance will not be a reality until 2027-2029.
Based on all of this information, it would be counterproductive if facilitating insurance as a client or platform would mean they will be considered an employer.
Minister Wouter Koolmees (Social Affairs), Hans Borstlap and Secretary of State Tamara van Ark (Social Affairs) during the presentation of the report in January 2020. Image: ANP
European perspective
The protection of freelancers is also receiving attention on a European level. On December 9th, 2021, the European Commission presented several measures to improve the position of freelancers, including a directive proposal to regulate platform work. The aim of this proposal is to improve their working conditions and social rights [21].
In Article 4, the proposed directive introduces a rebuttable legal presumption of an employment contract, where the burden of proof will fall on the employer/client. This legal presumption exists if there is a platform that controls the performance of work.
Criteria for control
According to paragraph 2, clients or platforms control the performance of work if at least two of the following five criteria are met:
the level of payment is set, or there are determined upper limits;
the person performing platform work is required to comply with specific rules regarding appearance, behaviour or the performance of the work;
the performance of the work is supervised or the quality of the work is verified, also by electronic means;
the freedom to organise the work is effectively restricted – also by sanctions -, in particular the freedom to choose working hours or periods of absence, to accept or refuse tasks, or to use subcontractors or use substitutes; and
the ability to grow a client base or carry out work for third parties is restricted.
A new directive
It is not necessary that all these five criteria are met; two of the five criteria are sufficient. None of the above criteria mention the provision or facilitation of insurance for freelancers. Thus, facilitating insurance for freelancers does not appear to increase the risk of controlling the performance of work.
Recital (23) of the proposed directive includes the following with regard to taking out insurance for a freelancer:
“Where a digital work platform decides – purely on a voluntary basis or with the consent of the persons concerned – to pay social protection, accident insurance or other forms of insurance, training measures or similar benefits to freelancers working through that platform, those benefits should not as such be considered as determining elements indicating the existence of an employment relationship.” [22]
Amendments to the proposal
Several consultative bodies have published their views on this proposed directive.
29 July 2022
The European Economic and Social Committee (EESC) [22] issued an opinion on the proposed directive [23]. The EESC considers that the proposed criteria do not do justice to the dynamic and rapid development of the digital market. Instead of assessment based on the five criteria, the EESC believes that the status of freelancers should be assessed at national level and in line with the case law of the European Court of Justice.
30 September 2022
The Committee of the Regions recommended a limited amendment to recital (23) (see section 4.4), clarifying that the provision of insurance is not “automatically” considered as determining elements for reclassification to an employment relationship [24].
5 October 2022
An opinion was published by the Committee on Transport and Tourism in which the Committee endorsed the importance of a European directive and proposed 67 amendments, including on the rebuttable presumption of law [25]. With regard to the legal presumption, they propose replacing the ‘two out of five criteria test’ with a ‘majority test’ for adopting the legal presumption of an employment contract and propose a number of changes to the five criteria proposed in the directive.
In addition, an Article 5a is drafted which states that taking out insurance is not an argument for assuming an employment relationship: “Where a digital labour platform decides, either on a purely voluntary basis or in agreement with the persons concerned, to pay for social protection, accident insurance or other forms of insurance, training measures or similar benefits to freelancers working through that platform, those benefits as such shall not be regarded as determining elements indicating the existence of an employment relationship.”
The European legislative process has not yet been finalised.
"Where a digital labour platform decides [...] to pay for insurance [...], those benefits shall not be regarded as determining elements indicating an employment relationship."
— Drafted article for the European Directive
Unanimous opinion
Within the European Parliament, the proposed directive will first be considered by the Committee on Employment and Social Affairs (EMPL). Its rapporteur is Elisabetta Gualmini. In her latest draft report, she included a number of proposals for amending the proposed directive. This report also included that taking out accident insurance or any other form of insurance is not an indication of the existence of an employment relationship [26]. This is in line with what is included in recital (23) of the proposed directive as mentioned above.
Both the European Parliament and the European Council need to agree to the proposed directive. The new rules are not likely to come into effect until 2025, given the time needed for consideration and implementation of the directive into member states’ national legislation.
Based on the current proposal for a directive and further publications and opinions on the subject, facilitating insurance for freelancers does not seem to be an indication of an employment contract in this area either.
Practical recommendations
The facilitation of insurance by a client or platform is not an element that would qualify a platform as an employer. Only in exceptional cases where an employment relationship is already detected, can the facilitation of insurance possibly be used as an additional argument. The Amsterdam Court of Appeal ruling is the only ruling in which insurance is mentioned as an additional argument, but the Supreme Court does not mention the offering of insurance in the list of circumstances that may indicate an employment contract.
In addition, the trend in society is in favour of facilitating insurance. Various bodies (parliament, on a European level, etc.) are actually calling for more protection for freelancers by prescribing (compulsory) insurance. If clients or platforms are seen as employers when facilitating insurance, this would be counterproductive to that mission. This risk is therefore very small. It is only present if the platform itself pays for the insurance, but even then there need to be other factors that point to an employment relationship.
It is always prudent for clients and platforms to assess whether an employment contract does not exist. The facilitation of insurance however, will not be a significant factor in this assessment.
About Jan Pieter Uittenbroek
Jan Pieter Uittenbroek is a lawyer and legal counsel at Alicia. His areas of expertise include claims law, and insurance and financial sector supervision.
