Relationships with intermediaries for the purpose of a company’s commercial development, usually formalised as business referral contracts or commercial agent contracts, as outlined in our last article, must strictly respect the intermediary’s freedom and independence so that the relationship does not fall under labor legislation.
The intermediary, whether a business broker or a commercial agent, is independent from the company.
This independence implies a certain degree of freedom, particularly in their working relationship. Otherwise, the relationship may be requalified as an employment contract under certain conditions.
In particular, the courts focus not on the wording of the contracts, but on whether the reality of the contractual relationship between the parties reflects the existence of a subordinate relationship between the company and the intermediary.
Definition
When the intermediary’s work is carried out:
- under the authority of an employer,
- who has the power to give orders and instructions,
- to monitor its performance,
- and to sanction any breaches by their subordinate,
a labour law relationship may be established.
Requalification of the contract: body of evidence
The subordinate relationship is inferred from a body of evidence. This implies that judges do not look for a single criterion to infer the subordinate relationship, but rather a set of indicators including, in particular, the following indicators:
- the imposition of working hours or rest days on the intermediary, and more generally, whether instructions are imposed regarding the organization of the intermediary’s work,
- the fact that the intermediary has only one client,
- whether the intermediary’s role corresponds to work they previously carried out for the client as the client’s employee,
- the intermediary carries out their work on the client’s premises, using the client’s equipment and as part of a team of the client’s employees,
What are the sanctions?
If a judge finds that the intermediary is in fact an employee, the financial consequences for the company are severe:
- The client must pay to « URSSAF» the social security contributions (employer and employee) not paid for the current year and the three preceding years, including surcharges on these contributions.
- Amounts due to the worker: the intermediary, now considered an employee, may claim paid leave, possibly bonuses, and redundancy pay (the termination of the intermediary’s contract being regarded as unfair dismissal).
- Criminal sanctions: the relationship can be considered as undeclared work. The penalty can be up to a €45,000 fine and a prison sentence.
How can risks be mitigated?
To prove the intermediary’s independence, the following best practices are particularly recommended:
- ensure that the intermediary has their own legal entity and, ideally, their own email address;
- allow the intermediary to organize their own schedule. You should not impose working hours on them / ensure their availability in advance / ask them about their holidays;
- Ideally, they should use their own equipment and have their own business email address.
- Encourage the intermediary to take on other clients to ensure they do not become financially dependent on you alone.
Please note: these risks of a contract being reclassified as an employment contract also apply to individual service providers, or ‘freelancers’, working for a company.
LINKEA represents its clients before the courts and assists them proactively to ensure their interests are secured in their contracts. Please feel free to contact us!