New Dutch court decision establishes shared liability between hirers and payroll companies, even with indemnity clauses
A recent Dutch court ruling should prompt companies to reconsider their approach to payroll liability in the Netherlands. The decision establishes that hirers and payroll companies share responsibility for compliance errors, even when contracts include indemnity clauses designed to shift liability to one party.
The Case That Changed Everything
A company in the fashion industry approached a payroll company seeking services for their workers. During initial discussions, the payroll company’s representative provided pricing based on minimum employment conditions under civil code, noting that the hirer was not bound to any Collective Labour Agreement (CLA). This assessment overlooked the generally binding sector CLA for the fashion industry, known as the MITT.
The parties signed a hiring contract containing standard language requiring the hirer to provide correct information about applicable employment conditions and indemnify the payroll company for any claims resulting from incorrect information. During client onboarding, when asked whether a CLA would apply, the hirer responded “no CLA applicable” based on the earlier correspondence with the payroll company.
After the worker began performing duties under the hirer’s supervision and control, they filed a wage claim arguing they should be compensated according to the MITT agreement. The payroll company ultimately settled the claim and then sought reimbursement from the hirer, arguing the hirer had failed to provide correct employment condition information.
The Court’s Decision: “Let’s Go Dutch”
The Dutch court delivered a ruling that surprised both parties by establishing shared liability. The court found that while the hirer could reasonably rely on statements from an experienced professional payroll company regarding CLA applicability, the hirer’s failure to conduct their own investigation into sector-specific employment conditions contributed to the incorrect application.
Rather than placing full responsibility on either party, the court split liability 50/50, requiring both the hirer and payroll company to cover settlement costs equally.
What This Means for Your Business
This ruling establishes several critical principles that affect how companies approach payroll compliance in the Netherlands:
Courts May Split Liability Despite Contract Terms
Even with contractual indemnity clauses, both hirers and payroll providers bear responsibility for ensuring correct employment conditions are applied. Courts will examine each party’s contribution to compliance failures rather than simply enforcing contractual liability shifts.
Due Diligence Requirements Have Expanded
Hirers can no longer rely solely on payroll provider expertise. Companies must conduct independent research into applicable CLAs and employment conditions for their industry sector, regardless of what their payroll provider advises.
Professional Advice Doesn’t Eliminate Liability
While hirers can reasonably rely on professional payroll company guidance, this reliance doesn’t absolve them of their own verification responsibilities. Both parties are expected to perform due diligence.
Key Action Steps
Verify Industry Requirements Independently
Research applicable CLAs for your specific sector, even if your payroll provider indicates none apply. Industry-specific agreements may not be immediately obvious but can significantly impact employment conditions.
Document Your Compliance Efforts
Maintain records of your research into employment conditions and CLA applicability. This documentation demonstrates good faith compliance efforts that courts consider when determining liability allocation.
Review Existing Contracts
While indemnity clauses remain important, understand they provide less protection than previously assumed. Focus on building collaborative compliance verification processes with your payroll provider.
How People2.0 Supports Compliance
At People2.0, we understand the complexities of Dutch employment law and the importance of accurate CLA determination. Our Netherlands team works collaboratively with clients to verify applicable employment conditions, ensuring both parties fulfill their due diligence responsibilities.
We provide comprehensive support for CLA identification across all Dutch industry sectors and maintain current knowledge of sector-specific requirements. Our approach includes independent verification alongside client-provided information, helping protect all parties from compliance risks.
Moving Forward Together
This court ruling reinforces that payroll compliance requires active participation from all parties involved. As the court demonstrated, when compliance errors occur, liability may be shared based on each party’s contribution to the problem.
The key takeaway is clear: both hirers and payroll providers must independently verify employment conditions and cannot rely solely on the other party’s expertise or contractual indemnity clauses for protection. As the Dutch saying goes, when both parties contribute to the problem, they may indeed end up “going Dutch” on the costs.
Contact our Netherlands team to discuss how this ruling affects your payroll arrangements and learn about our collaborative approach to CLA compliance verification.
