Not Classifying Temporary Employment Agency in Occupational Sector is Contrary to the Principle of Equality

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Tax Division of the Arnhem-Leeuwarden Court of Appeal, 18 December 2018, ECLI:NL:GHARL:2018:10971


Following an amendment in the regulations as of 25 May 2017, the failure to classify a temporary employment agency in the "Occupational Sector" is contrary to the principle of equality, because, for the time being, companies that were already classified in a sector on 25 May 2017 will remain classified in this sector, even though there is no reasonable justification for this distinction.

A company, engaged in recruitment, selection and outplacement, posts staff for project work. The company was founded in 2009 and has been classified under the Sector Business Services II (sector 44). This was done on the basis of regulations that allow for classification under another sector than the Agency Sector (sector 52) if the employees of that company carry out work that for more than 50% of the total wage consists of activities for which they are liable to pay insurance contribution classify under one particular other sector (the so-called "Occupational Sector").
In May 2017, the company was split into two new companies. One of the two new companies was classified in the Agency Sector since, as the result of an amendment in the regulations as of 25 May 2017, classification into an Occupational Sector was no longer possible. The consequence of this different classification was that the company was forced to pay a significantly higher sector contribution over the wage bill of its employees for which they were liable to pay insurance contribution. The first six months of the unemployment benefit of former employees are covered by this sector premium and, owing to the nature of the temporary agency work, temporary employment agencies do have many former employees with unemployment benefits. Just to give an example: for 2017, the difference between the sector premiums is 2.85%: for Business services II it was 1.22% and for Agencies it was 4.07%.
The company disagreed with the classification in the Agency Sector because companies that were already classified in an Occupational Sector on 25 May 2017, or that had already submitted a request to be classified in it on 25 May 2017, would remain classified in that sector for the time being.
When an objection, invoking the principle of equality was rejected, the company lodged an appeal with the Court of Appeal.
Since the rules concerning the sector classification are laid down in a ministerial regulation and, therefore, subordinate legislation, the Court of Appeal had to check whether this ministerial regulation is contrary to the principle of equality of Article 1 of the Constitution. The Court of Appeal therefore investigated whether there is a reasonable justification for the unequal treatment of companies that had to be classified in a sector before, on, or after 25 May 2017.
The regulations were changed because of increasingly improper use. The tax authorities declared to the Court that it was the Minister’s intention to terminate the unequal treatment as of 1 January 2019 and that it will end once the bill on the Balanced Labour Market is adopted and will be implemented per 1 January 2020, being the date when the sector classification will expire. In the Court of Appeal’s view, however, this is insufficient justification for the unequal treatment because no expiry date has been set. Therefore, the Court of Appeal decided that the change in the regulations should not apply to the company and that, therefore, the company should be classified in the Sector Business Services II.


It is not surprising that the Minister would get in trouble with his decision to draw a distinction for temporary work agencies in the sector classification. Equal treatment is an important point of view in the sector classification because of the influence wage costs have, partly as a result of the sector classification, on the competitive position of companies. Nevertheless, a temporary unequal treatment, pending a change in the regulations that would eliminate the distinction, might provide sufficient justification, given the fact that the temporary unequal treatment aims at countering the increase of improper use.
It is obvious that the State Secretary for Finance will lodge an appeal in cassation with the Supreme Court. The question is whether the Court of Appeal’s argument that it cannot be verified because the end date is not fixed, will be upheld.
Anyway, for as long as the Supreme Court has not made a decision yet, new temporary work agencies are advised to object to the decision to be classified under the Agency Sector.

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