When posting employees to Belgium, foreign employers as well as Belgian host companies must be aware of the employee lending restrictions. Especially in an intra-group context, the risk that a posted employee becomes fully integrated in the host company’s structure is not a mere theoretical possibility. Such a situation could cause non-compliance issues with the stringent Belgian employee lending legislation triggering criminal liability, both with the foreign employer and the Belgian host company. But, even more importantly, there is the possibility that the posted employee could claim the existence of a direct employment relationship with the Belgian host company. Therefore, it should at all times be avoided that the Belgian host company exercises (part of the) employer’s authority. Earlier this year, the Brussels Labour Court of Appeal[1] has set out some practical criteria for distinguishing regular postings from unlawful employee lending set-ups in an interesting court ruling.
1. Recap: The general employee lending prohibition
Under the Belgian Employee Lending Act,[2] employee lending is defined as the situation in which an employer allows a third-party user to use the services of one or more of its employees in which the authority normally vested in the employer is (partly) exercised by such a user.
The Employee Lending Act prohibits a user from giving any instructions that qualify as “exercising part of the authority vested in the employer”. The general employee lending prohibition in Belgium is in contrast to the situation in several other European countries. Consequently, when employees are posted to Belgium, there is often a risk of unlawful employee lending set-ups without the foreign employer being aware of this situation. The risk of unlawful employee lending set-ups is even more substantial in the case of intra-group posting as this type of posting set-up is often characterised by the posted employee being fully-integrated in the host company’s structure. Indeed, the posted employee then risks to receive instruction going beyond operational instructions.
Whether or not the employer’s authority is being (partly) exercised by the host company will in practice appear from a number of factual elements, such as the fact that the posted employee must obtain approval from the host company to take holidays, the obligation for the posted employee to report any absences to the host company, the fact that the host company has the opportunity to impose disciplinary penalties upon the posted employee, the host company’s decision-making power to decide on salary increases, etc.
Therefore, the way in which the legal prohibition on employee lending is often dealt with is by entering into a service agreement between the foreign employer as the service provider and the host company, which is in need of such services, as the service user. The scope of such a service agreement is not to lend out employees but to provide certain services to the host company in which the service provider will do so with (some of) its posted employees.
Such a service agreement must be in writing and must clearly list in detail the exact instructions that the host company can give to the posted employees. Such instructions can only be of a functional and operational nature and are thus related to the way the services need to be supplied. The host company’s Instructions regarding its legal obligations related to well-being at work (health and safety) are always allowed.
The actual implementation of the written service agreement between both companies must be fully consistent with the express written provisions of the services agreement.
Even then, the essential employer’s authority should at all times remain with the foreign employer. Entering into a services agreement with an instruction clause is thus not a “solution” for circumventing the Belgian employee lending prohibition.
2. Exception: intra-group employee lending
Employee lending is allowed in an intra-group context if the following requirements are met:
- A permanent employee is temporarily and exceptionally being put at the disposal in the framework of a cooperation between companies that are part of the same economic and financial entity (i.e. group companies);
- The employer, the host company and the employee enter into a tri-partite agreement;
- The social inspection services are notified at least 24 hours in advance.
Provided these conditions are met, a Belgian host company may thus exercise (part of) the authority that is vested with the foreign employer over the posted employee. In practice, however, this exception is not frequently relied on because of the administrative burden and visibility towards the social inspection services.
3. Consequences of an illegal employee lending set-up
A situation of unlawful employee lending may trigger substantial risks and liabilities:
- If a posted employee is hired with the exclusive purpose of being made available for a Belgian host company, the employment contract entered into between the foreign employer and the posted employee is null and void;
- The posted employee could claim an indefinite term employment relationship with the Belgian host company;
- The foreign employer and the Belgian host company will be jointly and severally liable for the payment of social security contributions, wages, notice pay etc. relating to the indefinite term employment relationship that came into effect between the posted employee and the Belgian host company;
- A situation of unlawful employee lending can trigger a substantial criminal liability with the foreign employer and the host company.
4. The Brussels Labour Court of Appeal ruling dated 26 January 2021
This court ruling is interesting because it captures the typical company-matrix structures used today that are characterised by employees having reporting lines outside the company acting as their legal employer and that often occur in a posting set-up. The risk of unlawful employee lending set-ups is inherent in this type of structure.
In the case at hand, an employee formally employed by a pharmaceutical company in the United Kingdom was posted to a sister company in Belgium to take up the function of “Area Vice President Europe 1”. Once the employment contract came to an end, the employee introduced legal proceedings and claimed significant amounts from both the UK entity, in its capacity as legal employer, and the Belgian sister company. The employee argued that the Belgian sister company should be considered as his employer as well, based on a violation of the Belgian employee lending legislation.
The Brussels Labour Court of Appeal ruled that the claims initiated by the employee against the Belgian sister company were not founded as it could not be demonstrated that the Belgian company had acquired the capacity of employer. The Brussels Labour Court of Appeal came to this conclusion based on the following considerations:
- An analysis of the secondment letter did not reveal any possibility for the Belgian sister company to exercise employer’s authority over the posted employee;
- During the posting, there were no factual elements demonstrating that the Belgian sister company gave instructions relating to the posted employee’s work;
- The observation that the salary was paid by the Belgian sister company was considered as irrelevant as the salary cost was fully recharged to the UK company. It was not demonstrated that the Belgian sister company had any right to change or to influence the employee’s salary level;
- Although the employee’s performance review was printed on the Belgian sister company’s letterhead, the Court ruled that this did not automatically imply that the Belgian sister company participated in such a performance review;
- The employee was referred to in a document concerning the “BELUX” organisation. The Court ruled that such a simple reference did not provide evidence of the Belgian sister company having exercised employer’s authority over the employee;
- The fact that the dismissal letter was signed in the name of both the UK company and the Belgian sister company was considered as irrelevant as it appeared from the content of the dismissal letter that one was aiming to terminate the employment contract entered into between the UK company and the employee with, as a result, the termination of the secondment;
- Vacation requests and sickness notes were submitted to the UK employer and not to the Belgian sister company;
The following elements were considered as irrelevant:
- The observation that the Belgian sister company was referred to as the “employer” on the A1-form;
- The reference to the Belgian sister company on the pay slips;
- The fact that the employee had a dedicated office space at the premises of the Belgian sister company;
- The fact that the company car, the mobile phone etc. were made available by the Belgian sister company.
5. Take aways
When posting employees to Belgium, a foreign employer and the Belgian host company must be aware of the Belgian employee lending restrictions. Non-compliance issues can be avoided by drafting appropriate paper work such as a duly written services agreement and secondment letter. From these documents it must remain clear that the employer’s authority should at all times remain with the foreign employer. The factual and day-to-day execution must be fully in line with what has been agreed upon. The Belgian host company merely giving a posted employee operational instructions, health and safety-related instructions or taking up certain administrative tasks (such as the payroll process) do not trigger an unlawful employee lending set-up.
Altius’ employment team is available to assist foreign employers considering posting employees to Belgium and to guide them and their Belgian sister companies through the stringent Belgian employee lending legislation, including providing assistance with the relevant contractual documentation.
[1] Brussels Labour Court of Appeal of 26 January 2021, AR 2017/AB/997.
[2] Employee Lending Act of 24 July 1987.
