The danger of prohibited lease of personnel in case of secondment to Belgium
Also during a secondment to Belgium, attention should be paid to the rules around prohibited lease of personnel. Indeed, a violation of the principle of prohibited lease of personnel can have serious financial consequences. This was once again confirmed by the judgment of the Nivelles labour tribunal of 13 January 2022. These decisions highlight the importance of structuring your secondment in line with Belgian mandatory legislation regarding prohibited lease of personnel, either via a tripartite intra-group secondment agreement or a subcontracting arrangement.
On 13 January 2022, the Nivelles labour tribunal ruled on a case in which a US employee employed by a US company was seconded to its Belgian affiliated company for a period of 12 years. The court ruled that given the potential exercise of employer authority by the Belgian company, there was prohibited lease of personnel.
The consequences in the event of prohibited lease of personnel cannot be underestimated. The employment contract with the US company was declared null and void, a Belgian employment contract of indefinite duration was deemed to exist between the employee and the Belgian company, and the US employer and the Belgian company were declared jointly and severally liable for all compensation due, which amounted to more than EUR 1 million.
Facts of the case
In 1996, the US company hired the US employee under an “employment at will” contract. This effectively meant that either party could terminate the employment contract with no compensation being due.
From 2008, the employee was seconded to Belgium, to the Belgian affiliated company of the US company. The secondment letters provided that the US company remained the employer and that the Belgian company would provide support.
These secondment letters always received the employee’s agreement. However, in 2019, the employee refused to sign a new secondment letter that provided for the extension of his mission. As a result, the US company wanted to repatriate him, but the employee refused. This led to two letters from the US company, sent through the Belgian company, establishing the end of the employment based on the employee’s refusal to be repatriated.
Prohibited lease of personnel
As a result of the Posting Act of 5 March 2002, the Belgian rules regarding prohibited lease of personnel apply to any secondment to Belgium as of day one. This means that, in principle, it is prohibited to lease employees to third parties who use these employees and exercise over them any part of the employer’s authority. The potential exercise of employer authority is the determining criterion here.
In this case, the labour tribunal ruled that employer authority was potentially exercised by the Belgian company based on several elements. For instance, the employee’s hierarchical manager was part of the Belgian company and could give instructions to the employee. In addition, the Belgian company had taken receipt of all the employee’s equipment at the time of termination, the employee worked in a mixed team with employees of the Belgian company and the Belgian company had indicated that it wanted to hire the employee as its own employee.
Since there was no intra-group secondment agreement between the US employee, the Belgian company and the employee and the temporary element was clearly exceeded after 12 years, the labour tribunal ruled that there was prohibited lease of personnel.
The direct consequences of the prohibited lease of personnel were threefold. First, the “employment at will” contract was declared null and void. Second, an employment contract of indefinite duration was established between the employee and the Belgian company. Third, the US company and the Belgian company were held jointly and severally liable for all consequences of this employment contract of indefinite duration.
Furthermore, the establishment of the end of the employment contract because of the employee’s refusal to be repatriated was reclassified. Indeed, the labour tribunal ruled that the refusal to be repatriated did not constitute an implicit resignation and that consequently the unilateral termination was to be imputed to the employer. Therefore, the employee was entitled to all the usual termination indemnities due in case of a dismissal with immediate effect under Belgian law.
The most significant indemnity consisted in the indemnity in lieu of notice. As the US company and the Belgian company should be seen as one employer, the employee’s seniority within the two companies must be added together. In this case, this resulted in a high seniority and consequently a high indemnity in lieu of notice.
The rules around prohibited lease of personnel should always be observed when seconding employees to Belgium. Hence, secondments should be structured as either an allowed temporary intra-group lease of personnel (conditions apply) or a subcontracting arrangement. If the rules on prohibited lease of personnel are ignored, the risks are substantial. The initial employment contract may be declared null and void; consequently, a new Belgian employment contract of indefinite duration may be deemed to exist between the Belgian user company and the employee, and the Belgian user company and the foreign employer may be held jointly and severally liable for all indemnities arising from this new contract.
François Gavel, attorney – associate, Claeys & Engels
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