‘An American on a Maltese ship in The Netherlands…’

This is not an introduction to a silly joke, but a very brief summary of an industrial accident that has been referred to the Court of Appeal in The Hague.[1] It’s a case with many (legal) uncertainties: Sick? Repatriate? Employee or contractor? Infringement of the duty of care? With a claim of over USD 600.000,– the stakes are high!

Read a brief summary below. For more information contact mr. E. van Gruijthuijsen 010-2811811 or email edward.vangruijthuijsen@boonkvanleeuwen.com.

Facts

The German based company ‘RS’ is owner of a seagoing vessel that carries out inspections and repairs on offshore wind farms. The ship sails under the Maltese flag with the Eemshaven in Groningen (Netherlands) as its home port. The American has carried out offshore work on board of the seagoing vessel during various periods. In between these projects, the American stayed at home in Texas. The parties did not put anything on paper, but correspondence shows that they did not intend to conclude an employment contract. The American sent invoices to RS for the work done and RS paid them.

At some point the American gets sick. A doctor determines that he has a viral infection and that he is ‘unfit for work‘, but that he does not need to be repatriated. A week and a half later, the American falls down the stairs during a coughing attack, whereby he twists his ankle. In the hospital an ankle fracture is diagnosed. Recovery will take six to eight weeks, during which time the American will not be able to work.

Subdistrict Court judge

The American demands before the Subdistrict Court’s judge to order RS to pay the damages he suffered as a result of the accident, with an advance payment of USD 250,000. He also claims the order of RS to pay USD 600.000,– as a result of RS’s behavior after the accident and an order to comply with RS’s reintegration obligations. The Subdistrict Court considers that Dutch law applies and that there is a contract of assignment (no employee). All claims of the American are rejected. The American appeals at the Court of Appeal in The Hague.

Court of Appeal

Which law is applicable?

The parties have not agreed in advance on the law applicable to their legal relationship. Since both parties come from different countries (Germany and the United States) and the accident took place in the Netherlands, the applicable law must be determined on the basis of the Rome I regulation[2]. This regulation determines the law applicable to contracts. Thus, in the case of a ‘contract of assignment‘, the law of the country where the contractor (the American) has his habitual residence, i.e. the federal law of the United States and Texan law, will apply. In the case of an ‘employment contract‘, other rules of reference apply. Depending on the circumstances, Dutch law or German law would be applicable.

The legal status between the parties must therefore be qualified in order to determine which law applies between the parties. For the answer to the question whether there is an employment contract in the sense of the Rome I regulation, three objective criteria have to be considered: (i) labour, (ii) salary and (iii) relationship of subordination. The Court finds that these requirements are reflected in the actual performance of the parties. Under the laws of the European Union, the agreement between the American and RS qualifies as a contract of employment. Subsequently, the court of appeal finds that the employment is performed from the Eemshaven in Groningen, with the result that Dutch law applies to the legal relationship between the parties. The question which rights and obligations the parties have agreed on each other must therefore be judged accordance with Dutch law.

Situation according to Dutch law?

In order to determine the rights and obligations of both parties, the legal relationship must be qualified. Is there – under Dutch law – a ‘contract of employment‘ or a ‘contract of assignment‘? According to the Court of Appeal, the question whether there is an employment contract under Dutch law must be examined in addition to the objective criteria (i) labour, (ii) salary and (iii) relationship of subordination, also in the light of the (subjective) intention of the party and the way parties acted. The court finds that there is labour and salary. Furthermore, the American and RS did not intend to enter into an employment contract and the actual execution by the parties does not indicate the existence of an employment contract. Under Dutch law, the agreement between the American and RS qualifies as a contract of assignment and not as a contract of employment.[3]

Liability RS, infringement of the duty of care?

The employer (and the clienthas a duty of care to arrange a safe working environment of the employee (and the contractor). [5] A high level of safety is required and the employer must supervise compliance with the safety instructions. In this case, the American has suffered an accident during the performance of his duties on the vessel. That means – in principle – that RS is liable for the damages related to the injury of the American, unless RS can prove that it fulfilled its duty of care.

The Court of Appeal states that the stairs were equipped with measures to prevent slipping. Hence, the stairs met the requirements so on this aspect, RS fulfilled its duty of care. In the fact that the American remained on board during his illness, the court did not see any violation of RS’s duty of care. RS was not obliged to repatriate the American after he had been labeled ‘unfit for work‘. Although seafarers have the right to repatriation, RS is not obligated to do so. The doctor did not advise repatriation, the American did not request it and RS did not oblige him to stay on board. The American’s assertion that RS should have prevented him from going to work (as a sick seafarer) is also not followed by the Court of Appeal.

Verdict

In summary, the Court of Appeal deceides that there is a contract of employment under European law, that Dutch law applies to the legal relationship between the parties, that under Dutch law there is a contract of assignment and that RS has fulfilled its duty of care. The judgment of the Subdistrict Court is upheld and the American is left empty-handed.

Remarkable

Based on European criteria, the Court of Appeal ruled that there was an employment contract, whereas on the basis of the Dutch criteria it ruled that there was an contract of assignment. The parties’ intention is decisive in this respect. The difference between the European and Dutch approach makes it impossible for international employees and employers to understand the court’s ruling. International practice needs a uniform interpretation. How do international parties operating in a third country now know where they stand and how to act?

A lot of ambiguity has recently been resolved. The ‘established case law of the Supreme Court‘ to which the Court of Appeal refers has recently been changed. In its judgment of November 6^th 2020, the Supreme Court ruled that the qualification of an agreement is about the question: “if the agreed rights and obligations comply with the legal description of the employment contract.” And the Supreme Court states further: “Contrary to what was inferred from the Groen/Schroevers judgment, the intention of the parties therefore plays no role in the question whether the contract should be regarded as an employment contract”. To qualify an employment contract, the law requires: (1) employment, (2) salary and (3) a relationship of subordination. The same objective criteria as the qualification according to the Rome I regulation. With this recent judgment of the Supreme Court, the qualification in the procedure between RS and the American should have led to a different outcome, namely that under Dutch law there is also an employment contract.

Completing

This example shows that with a simple and common cooperation a number of (legal) problems and liabilities can arise. The consequences differ per case. In any case, it will help if the parties in advance put agreements on paper and that they actually implement these agreements in practice. In this case the parties have litigated for almost five years, paid a lot of legal fees and end up with nothing. That could have been different…

Are you as a client or contractor looking for advice about a contract? Are you involved in an industrial accident? Are you confronted with a claim of an employee? Or do you, as an employee/contractor, want to know what your rights are? Then please contact mr. Edward van Gruijthuijsen at Boonk Van Leeuwen Advocaten by phone: +31(0)10-2811811 or by e-mail: edward.vangruijthuijsen@boonkvanleeuwen.com.

[1] Court of Appeal The Hague April 7^th 2020, ECLI:NL:GHDHA:2020:795.

[2] Regulation (EG) Nr. 593/2008 on the law applicable to contractual obligations.

[3] Article 7:400 BW.

[4] Article 7:658 sub 4 BW.

[5] Article 7:658 sub 1 and sub 2 BW.