Background

Over the last couple of years, there has been a growing presence of EORs in Belgium.

The exact activities of EORs depend on the circumstances but can generally be described as the EOR being a third-party organization that legally employs employees on behalf of another company, with the EOR handling administrative tasks like payroll, taxes, and compliance with local labor laws.

Under Belgian law, there is no specific legal framework that is tailored to EORs, which implies that EORs are currently operating a legal grey zone.

Belgian law does have a so-called prohibition of employee lending, which implies that it is prohibited for one company to exercise employer's authority (e.g., determining salary and benefits, imposing working time, deciding on absences, deciding on hiring and termination) over employees of another company.

There are a couple of exceptions to the principal prohibition of employee lending. The most common exception is the model of a temporary employment agency, where temp workers are being lent by temporary employment agencies to user companies for a limited period of time.

EORs active in Belgium were thus already required to navigate through this strict legal framework and ensure that their activities do not constitute prohibited employee lending.

Opinion of the Flemish government

The Flemish government has recently enhanced its supervisions on EORs and has now issued a (brief) statement on their website on the applicability of the rules of temporary work on EORs.

In particular, the Flemish government states that, in Belgium, there is a general prohibition on lending employees to another company that then employs them under their own employer's authority. The only legal exception to this is the activities of temporary employment agencies, for which licensing is mandatory. The Flemish government thus concludes that companies contracting with EORs must ensure that these EORs are licensed as a temporary employment agency.

Impact

The Flemish Government is the first regional authority to explicitly state a position on EORs. Although it merely concerns a statement on a website and not an official communication or regulatory guideline by the Flemish Government or the Flemish Social Inspectorate, it can be expected that the position that EORs must be licensed as a temporary employment agency will be enforced in practice in the Flemish region.

This will have the following consequences.

• EORs can only operate in the Flemish region once they have obtained a formal license as a temporary employment agency.

To obtain such a license, an EoR must demonstrate that it meets certain conditions, including the payment of a substantial financial guarantee of EUR 75,000 to the Security Fund, through a formal application procedure.

• Companies contracting with EORs in the Flemish region will have to ensure that the EOR has a license as a temporary employment agency.
• EORs not having a license and companies contracting with such EORs face potential civil consequences (employment claims, joint liability for employment, tax and social security contributions) and could be imposed administrative or even criminal fines.

Final considerations

At first glance, the opinion from the Flemish government brings certainty for EORs and their clients in what was previously a legal grey area.

However, the statement from the Flemish government does not solve all legal uncertainties.

• The position from the Flemish government that EORs should be licensed as an agency makes sense insofar employees of an EOR would effectively work under the employer's authority of another company (i.e., the client of the EOR).

However, not necessary all activities that can potentially be performed by EORs should necessarily be considered as activities of a temporary employment agency. In particular, where an EOR would render subcontracting services, i.e., where the EOR would render services to a client through the use of the EOR's own employees without these employees being under the employer's authority of the client, this does in principle not constitute a (prohibited) lending of personnel.

• The current Belgian legal framework for temporary employment agencies is not tailored to the business activities of EORs. Temporary agency work is only permitted in specific legally defined cases, such as the replacement of an employee, a temporary increase in workload, the performance of exceptional work, or the "in-flow" of an employee. For each of these grounds, specific requirements apply to both the temporary employment agency and the user and time limitations apply.

The business concept of EORs usually implies that employees are being placed with a client for an indefinite period of time. This is thus not reconcilable with the concept of temporary agency work which must, under current legislation, always be limited in time.

This might potentially change in the future as the Belgian government has announced that it would introduce temporary agency work for an indefinite term. This could potentially allow the reconciliation of the EOR business model with the strict legal requirements for temporary agency work but is currently not yet implemented in legislation.

• Although the opinion from the Flemish Government strictly speaking does not stretch out to the Brussels Capital Region or the Walloon Region, it is likely that this position will be applied in those regions as well.