Fine for franchisor because aspiring franchisee is foreigner

On 5 July 2017, the Council of State, ECLI:NL:RVS:2017:1815, decided whether the franchisor needed a work permit in the (proposed) collaboration between a franchisor and an aspiring franchisee, because the aspiring franchisee is a foreign national. The work was apparently carried out in the pre-contractual phase prior to the conclusion of the franchise agreement. 

A franchisor has been fined under the Foreign Nationals Employment Act because someone with Chinese nationality was performing work. The franchisor states that it cannot be regarded as the foreign national’s employer, because the foreign national is co-owner of its franchisee, as appears from the franchise agreement submitted. The franchisor also argues that there was no question of compensation or instructions about the work to be performed. Insofar as the foreign national has performed massages on busy days, these are activities that he performed on the basis of his upcoming franchiseeship that he decided on his own initiative. 

However, the Council of State rules that the person who actually has a foreign national perform work is an employer subject to a permit. The existence of an employment contract or relationship of authority is irrelevant in this respect. The fact that a foreign national has performed work on behalf of or in the service of an employer is already sufficient for the assumption of actual employment status. The nature, scope and duration of the work and whether wages have been paid or whether it only concerned assistance are also irrelevant to the qualification of the employer. The fact that it concerned work in anticipation of the franchisee status of the foreign national and that he did not receive any wages does not alter the above. In view of the above, the franchisor, as an employer within the meaning of the Foreign Nationals Employment Act, should have been in possession of a work permit for the foreign national. Since the franchisor did not have that, the fine imposed on the franchisor is justified. 

Franchisors would do well to verify the identity of the prospective franchisees in the pre-contractual phase, where training is provided or trial sessions are carried out, and where necessary to apply for a work permit. 

mr. AW Dolphijn – Franchise lawyer 

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .