Be Aware - August 2024

How many consecutive fixed-term employment contracts can be signed?

Companies often use fixed-term contracts to create flexibility in their workforce. As long as all legal conditions are met, the employer doesn't have to pay a termination indemnity if a fixed-term contract runs until its end date and isn't renewed.

But there are also disadvantages to fixed-term contracts. Terminating a fixed-term contract before its end date can be more expensive than terminating an employment contract of undefined duration. A fixed-term contract can't be terminated by respecting a notice period, except during the first half of the duration of the contract, up to a maximum of six months. If the parties sign consecutive fixed-term contracts, the possibility to terminate by respecting a notice period only applies to the first contract.

Secondly, the indemnity in lieu of notice when terminating a fixed-term contract equals the remuneration for the remaining term of the contract. This is subject to a maximum of twice the indemnity in lieu of notice that would have been applicable if the contract was an employment contract of undefined duration.

These two rules apply if the contract is terminated either by the employer or by the employee.

There are also restrictions regarding signing consecutive fixed-term contracts. If these restrictions aren't met, the employment relationship is deemed to be an employment contract of undefined duration.

Article 10bis of the Act of 3 July 1978 concerning employment contracts allows employees to sign up to four consecutive fixed-term contracts, provided each contract has a duration of at least three months and the total duration of all contracts does not exceed two years. The reason why fixed-term contracts are used is in that case irrelevant.

The article adds it is possible to sign consecutive contracts with a total duration of up to three years, provided each contract lasts at least six months and the social inspection has approved the signature of fixed-term contracts in advance. In practice, hardly any employers invoke this exception.

Consecutive fixed-term contracts are possible under article 10 of the Act of 3 July 1978 “when the employer establishes the used of consecutive fixed-term contract is justified due to the nature of the work or due to any other legitimate reason." The Act doesn't define these notions in more detail.

A recently published judgement from the Employment Appeal Tribunal of Brussels on 2 January 2024 clarifies this exception. The case concerned a teacher at a European school in Brussels. He signed a new employment contract each year covering the period between September to August. After ten years, he wasn't offered a new employment contract and he didn't receive an indemnity in lieu of notice. The employee claimed the conditions for signing consecutive fixed-term contracts had been infringed and that the employment relationship should be seen as an employment relationship of undefined duration, so an indemnity in lieu of notice was due.

The Employment Appeal Tribunal concluded the school didn't establish legitimate reasons for signing consecutive fixed-term contracts for such a long period. While the number of teachers the school needs depends on the number of pupils, which the school doesn't know before the start of the school year, this by itself doesn't justify using consecutive fixed-term contracts. Almost any employer will have at least some uncertainty around the workforce needed in the future. In the case at hand, the number of pupils at the school moreover gradually increased over the years. An employment contract of undefined duration is considered the normal way of employing staff, so using consecutive fixed-term contracts for longer periods is only accepted in exceptional circumstances, for instance if a new work permit has to be applied for every 12 months or if a scientist is working on temporary projects financed by subsidies granted for a repeated period (eg per year).

 

When do claims by the National Office for Social Security for arrears of social security contributions become time barred?

The National Office for Social Security normally automatically provides employers with the precise amount of social security contributions they have to pay. But there can sometimes be disputes about the amount of these contributions. For instance an employer might pay the employee an expense allowance and the National Office for Social Security might decide the employer doesn't establish the amount of genuinely incurred professional costs. Or the National Office might claim a person pretending to be self-employed is actually an employee or that an employer wrongly considered a foreign social security regime would apply.

So how long can the National Office for Social Security go back in time when claiming arrears of social security contributions? A recently published judgement from the Brussels Employment Appeal Tribunal of 18 January 2024 provides some information.

The case concerned a transport company based in the Netherlands, close to the Belgian border. In 2015 the company recruited a truck driver who lived in Belgium and assigned the driver to the Dutch social security regime. The truck driver worked in Belgium for between 25% and 40% of his working time.

The Belgian National Office for social Security thought the worker should have been assigned to the Belgian social security regime. The European Regulation 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems stipulates that if an employee works in several EU Member States and works a substantial part of the working time in the country where the worker resides, then only the social security regime of the country of residence is applicable. A “substantial part" is construed as meaning at least 25% of the total working time.

As it was clear the truck driver lived in Belgium and was working far more than 25% of the working time in Belgium, the Employment Appeal Tribunal held the Belgian social security regime should have been applied and the contributions due under Belgian law should have been paid. The question was for which period the contributions could still be claimed.

The truck driver was recruited in 2015, and the National Office for Social Security started the litigation in 2021.

Article 42 of the Act of 27 June 1969, as applicable in 2021, stipulated that the claims by the National Office in principle become time-barred after three years. However, if the claim is the consequence of a regularisation due to fraudulent affiliation or in the case of forged or deliberately incomplete social security declarations, the time bar was seven years, which was increased to ten years in 2022.

The National Office argued there was fraud, as they had informed the company in 2018 the Belgian social security regime was applicable. But the transport company continued to apply the Dutch social security regime and pay the contributions due under Dutch law.

The Employment Appeal Tribunal considered “fraud” requires a deliberate intention to harm a party. In the case at hand, the company argued it paid the social security contributions due under Dutch law, so the Employment Appeal Tribunal concluded this was a mistake, but without the required bad faith. The extended time bar in case of fraud was not applicable.

The company was ordered to pay the contributions due since 2015 on the basis of another argument.

Article 218 of the Code on Social Criminal Law stipulates that the non-payment of the social security contributions due is a criminal offense for which a sanction of level 2 can be imposed (a fine of up to EUR4,000). Under tort law and criminal law, the victim of a crime can claim compensation for the prejudice suffered. When it comes to the crime “non-payment of the social security contributions due,” the victim is the National Office for Social Security, and the prejudice are the contributions that should have been paid.

The National Office formulated its claim as a claim based on criminal law because such a claim is subject to the time bar under criminal law. According to article 2262 of the (old) Civil Code, the time bar is five years, starting when the victim becomes aware of the prejudice and the identity of the person who caused it.

Criminal law also has the notion of “continued crime.” This notion implies that if a person repeatedly commits the same infringement based on the same intention, then all infringements are considered one single crime. With a continued crime, the sanction for the crime in question can only be imposed once, even though there were several infringements. But the time bar for a claim by the victim only starts when the last infringement is committed.

In the case at hand, each month the company committed the infringement of “non-payment of the social security contributions due” as a result of the erroneous view the Dutch social security regime would be applicable. The Employment Appeal Tribunal ruled this was a continued crime, so the time bar of five years only started when the employment relationship ended and there were no longer any contributions to be paid. The claim by the National Office for Social Security ordering the company to pay the social security contributions due under Belgian law since 2015 was therefore considered founded.