On 15 March 2024, the sub-dis­trict court  of Cent­ral Neth­er­lands ruled that the man­age­ment agree­ment of a stat­utory director/general man­ager who also (indir­ectly) had an equity interest in the prin­cip­al was an assign­ment agree­ment, and thus not an employ­ment con­tract.

 

What was the issue?

Three dir­ect­ors set up two com­pan­ies through their per­son­al hold­ing com­pany. Besides hav­ing an (indir­ect)  equity interest, they also entered into a man­age­ment agree­ment between their hold­ing com­pany and one of the two com­pan­ies. One of the dir­ect­ors became CEO, anoth­er CCSO, and the dir­ect­or con­cerned in this case held the pos­i­tion of CCO (Chief Com­mer­cial Officer).

 

Less than three years later (in Septem­ber 2023), the CCO became (par­tially) ill. On 12 Octo­ber 2023, she was repor­ted to have recovered. Less than a month later (on 9 Novem­ber 2023), she was informed that there were plans for restruc­tur­ing and her role as CCO would lapse. A day later, this was also com­mu­nic­ated on the intranet. Anoth­er day later, access to her account was also blocked. On 15 Novem­ber 2023, a mes­sage appeared on Share­Point stat­ing: “Due to a dif­fer­ence of opin­ion on the strategy for the next phase of [the com­pany], we unfor­tu­nately had to end our cooper­a­tion with [CCO].” The CCO received this mes­sage via a col­league. On 17 Novem­ber 2023, the director’s law­yer deman­ded that the resig­na­tion be with­drawn, but this did not hap­pen.

 

Sub­sequently, on 4 and 18 Decem­ber 2023, both com­pan­ies held a gen­er­al meet­ing of share­hold­ers. Dur­ing these gen­er­al meet­ings, the CCO was dis­missed as a stat­utory dir­ect­or and gen­er­al man­ager at both com­pan­ies. The CCO was not present at these share­hold­er meet­ings. The CCO also received a let­ter on 22 Decem­ber 2023, con­firm­ing the ter­min­a­tion of the man­age­ment agree­ment. The CCO dis­agrees and take the pos­i­tion that the man­age­ment agree­ment is actu­ally an employ­ment con­tract and that she was thus sum­mar­ily dis­missed and that this dis­missal was not leg­ally val­id.

 

What did the sub-dis­trict court rule?

The sub-dis­trict court  used the frame­work of the Supreme Court from the Deliv­eroo rul­ing (see our pre­vi­ous blog about this) to assess wheth­er there was an employ­ment con­tract or an assign­ment agree­ment, with the cent­ral ques­tion being wheth­er the cri­terion of author­ity was met.

 

Below is an over­view of the sub-dis­trict court’s rul­ing with the key points:

 

• The nature and dur­a­tion of the work: the CCO, through her per­son­al hold­ing com­pany, entered into the man­age­ment agree­ment. As CCO, she was ulti­mately respons­ible for the sales and man­age­ment team. The CCO, along with two oth­er dir­ect­ors, formed the man­age­ment team/board. These are all indic­a­tions of entre­pren­eur­ship and thus the exist­ence of an assign­ment agree­ment.
• The man­ner in which the work and work­ing hours are determ­ined: the CCO was allowed to determ­ine this her­self. It is not a dis­tin­guish­ing cri­terion wheth­er this free­dom of choice also applied to oth­er employ­ees in the com­pany. It is import­ant, how­ever, that no per­form­ance reviews were con­duc­ted with the CCO and she did not receive instruc­tions from the oth­er dir­ect­ors. It also appeared that the CCO com­mu­nic­ated with the oth­er dir­ect­ors on an equal foot­ing and inde­pend­ently man­aged her depart­ment. This indic­ated no sub­or­din­ate pos­i­tion to the oth­er dir­ect­ors. This cri­terion thus points more toward an assign­ment agree­ment rather than an employ­ment con­tract.
• The embed­ding of the work and the activ­it­ies: accord­ing to the sub-dis­trict court , this cri­terion is not dis­tin­guish­ing enough. The dir­ect­or was ulti­mately respons­ible for the sales and mar­ket­ing depart­ment. Her activ­it­ies were part of the core activ­it­ies of the com­pany. This could indic­ate either an assign­ment agree­ment or an employ­ment con­tract.
• Per­son­al labor: based on the man­age­ment agree­ment, the CCO was in prin­ciple required to per­form the work her­self. How­ever, replace­ment was pos­sible, but this did not occur in prac­tice. Accord­ing to the sub-dis­trict court , it is obvi­ous that a CCO per­forms her tasks per­son­ally, espe­cially since she (togeth­er with the oth­er dir­ect­ors) was respons­ible for the company’s oper­a­tions. So again, this is not a decis­ive cri­terion.
• The man­ner in which the con­trac­tu­al arrange­ment of the rela­tion­ship between the parties was estab­lished: the CCO con­sciously chose to act as an entre­pren­eur and presen­ted her­self as such both intern­ally and extern­ally. She estab­lished her own per­son­al hold­ing, with which she entered into the man­age­ment agree­ment. She also used a fin­an­cial advisor. All this indic­ated the exist­ence of an assign­ment agree­ment con­tract for ser­vices.
• The man­ner in which the remu­ner­a­tion is determ­ined and paid out: the CCO invoiced her man­age­ment fee through her per­son­al hold­ing and charged VAT. No premi­ums and taxes were with­held and paid. She was respons­ible for the con­tri­bu­tions and pen­sion accru­al her­self. This points in the dir­ec­tion of an assign­ment agree­ment.
• The amount of remu­ner­a­tion: the CCO received EUR 8,000 gross per month. The oth­er board mem­bers received EUR 12,500 and EUR 9,000 gross per month, respect­ively. There was also a bonus scheme that depended on turnover and profits. How­ever, no bonus was ever paid in prac­tice. The man­age­ment agree­ment stip­u­lated that the man­age­ment fee would con­tin­ue to be paid dur­ing the preg­nancy of a mem­ber of the man­age­ment team. Since the CCO was the only woman on the board,  in prac­tice this applied only to her. The sub-dis­trict court  con­sidered that the con­tinu­ation of the CCO’s pay­ment dur­ing preg­nancy in itself does not indic­ate that there was an employ­ment con­tract. The same applies to the fact that she received a lower man­age­ment fee than the oth­er board mem­bers. It was ruled that the amount of the remu­ner­a­tion was part of her entre­pren­eur­i­al risk. This also points in the dir­ec­tion of an assign­ment agree­ment.
• Pres­ence of com­mer­cial risk: the CCO was at com­mer­cial risk because she had taken out a loan through her per­son­al hold­ing com­pany. If the com­pany turned out not to be suc­cess­ful, she would lose the money she had inves­ted in and lent to the com­pany. This points in the dir­ec­tion of an assign­ment agree­ment and not an employ­ment con­tract.
• Pres­ence of real entre­pren­eur­ship: this cri­terion points in the dir­ec­tion of an assign­ment agree­ment. After all, as gen­er­al man­ager, the dir­ect­or had sole and inde­pend­ent author­ity and behaved as an entre­pren­eur both intern­ally and extern­ally. The fact that she may have been over­ruled on cer­tain points by anoth­er dir­ect­or dur­ing decision-mak­ing and was ulti­mately dis­missed, does not mean in ret­ro­spect that she can­not be con­sidered an entre­pren­eur.

 

Thus, accord­ing to the sub­dis­trict court, this was an assign­ment agree­ment and not an employ­ment con­tract. The CCO delib­er­ately became an entre­pren­eur and held a high pos­i­tion with­in the com­pany. There was there­fore no ques­tion of a sum­mary dis­missal under employ­ment law. And the assign­ment agree­ment could thus be ter­min­ated by the share­hold­ers (although the man­ner in which this was done did not deserve any beauty prize, accord­ing to  the sub-dis­trict court ..)

 

Con­clu­sion

At the (inter­im) dir­ect­or level, the choice is often made to agree on a man­age­ment agree­ment. This rul­ing clearly shows that the sub-dis­trict court  runs through all the cri­ter­ia of the Deliv­eroo rul­ing and weighs them to determ­ine wheth­er there is an employ­ment con­tract or an assign­ment agree­ment. What mat­ters is not what the  parties have agreed on paper, but how this turns out in prac­tice (i.e., fac­tu­ally). It is note­worthy, how­ever, that the embed­ding cri­terion newly intro­duced in the Deliv­eroo rul­ing (wheth­er the work and the work­er are an essen­tial part of the organ­iz­a­tion and the busi­ness oper­a­tions of the employ­er) was not a suf­fi­ciently dis­tinct­ive cri­terion in this rul­ing, while the activ­it­ies of the CCO did con­cern core activ­it­ies of the com­pany. All in all, it remains an assess­ment of all the cir­cum­stances of the case, where vigil­ance is required.

 

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