BlackBerrys and smartphones
Until recently, the Dutch Inland Revenue Services (“IRS”) considered BlackBerrys and smartphones to be ‘computer devices’. As a consequence thereof, these devices could only be provided tax free to an employee if their use was almost entirely work-related (at least 90%).
However, in a decree of 22 August 2007 the State Secretary of Finance indicated that BlackBerrys and smartphones must not be considered computer devices, but communication devices, since their main purpose is communication. The screen and the ability to input information in these devices is too limited to label them as computers.
Effect on employers
The above is good news for employers, since the regime for the tax free provision of communication devices is less strict. Therefore, employers may now provide BlackBerrys and/or smart phones tax free, provided that their work-related use is more than incidental (at least 10%).
Employment agreement or independent contractor?
We continue to see numerous cases wherein the legal status of a contract is in dispute: employment agreement or independent contractor? The effects of each qualification differ substantially. Proper drafting of the contractual arrangement is essential to avoid future problems, although the principle of “substance over form” applies as well.
A Dutch company contracted a German individual to perform certain services from his home address in Germany. The ‘appointment letter’ signed by both parties, includes the words ‘employment agreement’. It also refers to ‘other employment conditions’. However, the parties also agree that the individual will bear all tax consequences, employer’s as well as employee’s.
Based on the wording of the appointment letter, the court ruled that the appointment letter was intended to be an employment agreement. The Dutch company defended itself by arguing that the parties had intended the individual to be self-employed. The company based its argument on the fact that parties agreed that the individual would bear all tax consequences. The court set aside that defence by arguing that although the parties agreed that the individual would bear all tax consequences, nothing in the appointment letter shows that the individual would do this as a self-employed person (and not in the capacity of employee).
What this means for you
Employers should be aware that the intentions of the parties are decisive. Initially these intentions will be derived from the text of the contract. Careful drafting of the services agreement therefore is essential. Nevertheless deviating practice may override the analysis of the contract text (substance over form).
Non-compete clause requires careful drafting
In the we discussed a case regarding a non-compete clause in which the Dutch word “niet” (meaning “not”) was missing. Literal interpretation of the provision led to the employee (actually being encouraged to compete but in any case) not being bound by any prohibition to compete. In that matter the cantonal court decided that the statutory provisions which require non-compete clauses to be agreed in writing do not allow for courts to ‘repair’ incomplete wording if this would be detrimental to an employee. The consequence of the omission therefore was that the employee was considered not to be bound by any prohibition to compete.
Recently a court ruled in another case regarding a different non-compete clause. This non-compete clause prohibited the employee to “set up, conduct, jointly conduct, cause to be conducted or to have a financial interest in a business competitive with employer’s business”.
The court ruled that the (ex-)employee did not violate the non-compete clause by entering into the employment of a competitor of the (ex-)employer. The employer argued that the employee did violate the non-compete clause, since the employment relation caused the employee to have a financial interest in the competitor (the financial interest being the employee’s salary). The court set aside that defence by arguing that the prohibition to have a financial interest in a competitive business was immediately preceded by provisions regarding the prohibition to work as an (competitive) entrepreneur. Therefore the court concluded that the prohibition to have a financial interest did not refer to employment relations. The consequence of the wording of the non-compete clause therefore was that the employee was considered not to violate the non-compete clause by entering into the employment of a competitor of the employer.
What this means for you
Employers should be aware that careful drafting of a non-compete clause is essential.