No employment
The employment contract is governed by Title 12 of Book 7 of the Civil Code. The legal provision giving the meaning of this agreement has one very important element. Namely, that the construction contract is an out-of-work contract. This means that there is no employment contract between the client and the contractor. Under the construction contract, the contractor only undertakes to complete the work within a certain period of time. He does not have to perform this work himself and may outsource it to subcontractors. However, he remains liable for the work that is delivered.
'Wet ketenaansprakelijkheid' (Chain Liability Act)
In addition to the liability for the work that is delivered, there is also the 'Wet ketenaansprakelijkheid' (WKA) (Chain Liability Act). This law regulates which party is liable for the payment of payroll taxes of the (sub)contractors. In general, the (main) contractor/client is jointly and severally liable for the payroll taxes owed by its subcontractor in respect of the work. The subcontractor can outsource (part of) the contracted work to another (sub)contractor. The main contractor is therefore jointly and severally liable for the payroll taxes owed by that other subcontractor. Each subcontractor is also jointly and severally liable for the payroll taxes of the subcontractors to whom he has outsourced work, and of any subsequent subcontractors. This creates a chain of liable contractors. If one of the subcontractors in the chain does not pay the payroll taxes related to the work, the contractors higher up in the chain can be held liable.
Entering into the construction contract in writing
There are ways to get out of the WKA's chain liability. It is important for this to be properly arranged contractually. That is why we recommend that you always enter into a construction contract in writing. In principle, entering into a written contract to accept work is only mandatory if the contractor accepts a job from a natural person.
Covering liability WKA
The liability arising from the WKA can be covered by meeting certain invoice, payment and administration requirements. If you have these requirements in order, as a contractor you can derive a legal liability indemnity from this at the moment that you have deposited the amount for the wage tax into the g-account of a subcontractor. Both the contractor and the subcontractor must meet these requirements. That is why it is important to include these requirements in the contract of employment.
Fixed price or 'direction'?
In the construction contract it is agreed what the fee for the subcontracting is. This fee can be a fixed fee or a 'direction' fee. A fee based on direction means that the price which the client owes the (sub)contractor under the construction contract is calculated on the actual costs incurred plus a profit mark-up. This is not entirely without risk because a guide price is usually agreed at the outset from which no more than a certain percentage can be deviated. If this turns out to be the case when calculating the guide price, it will be adjusted to the maximum fee based on the guide price.
Special rules
In addition to the WKA, the law also contains other special rules that apply to the construction contract. For example, there are rules about the delivery of the work, the requirements with which the work must comply, and more and less work. There are also specific rules regarding the termination of the contract for the contracting of work. For example, the parties can have the agreement dissolved by the court if it becomes clear that one of the parties does not comply with the agreements, and the client is entitled to terminate the agreement at all times. If the client terminates the agreement, he must compensate the contractor. This compensation consists of the applicable price for the entire work reduced by the savings resulting from the termination.
Problems and disputes
The execution of a construction contract can sometimes cause problems in practice. Disputes may arise, for example, about the (im)soundness of the delivery, whether or not a payment is lawfully suspended and whether or not there is more or less work.
Please contact us
Because of the many problems and disputes that arise in practice when it comes to subcontracting, we can well imagine that you have questions about the contract to subcontract work. Would you like support in drawing up this agreement? Or do you have a dispute about a subcontracting agreement? Our legal experts will be happy to assist you. Feel free to contact us for more information.