The manager (employee) who becomes a franchisee – fictitious employment?

On 14 December 2016, the subdistrict court judge of the District Court of Noord-Holland, ECLI:NL:RBNHO:2016:11031 (Employee/Espresso Lounge), considered the situation in which an employee had entered into a letter of intent to become a franchisee of her employer. The question was whether the employment contract still existed, or at least there was a fictitious employment relationship. The applicant seems to argue that she was surreptitiously parted with “cheaply” by converting the collaboration from an employment contract into a franchise agreement. 

The employee was employed as a manager at a coffee bar. The employer had been presented with a settlement agreement to terminate her employment. The employee did not agree to this. Instead, a letter of intent has been entered into to enter into a franchise agreement for the coffee bar in question. A few months later, the coffee bar closes. 

The applicant argues that there is (still) an employment contract, that she is entitled to overdue wages and that the employment contract must therefore be dissolved with a severance payment being awarded. 

The subdistrict court presupposes that there is an employment relationship if the employee has committed himself to personally work for the employer, the employer is obliged to pay the employee wages for the work and there is a relationship of authority between the employee and the employer. 

Shortly after commencing her employment in the coffee bar sector, the applicant had set up her own business, which was registered with the Chamber of Commerce. In addition, she employed employees through a payroll company. She also decided who was hired. Moreover, she no longer received any wages and independently derived her income from the profit. The income and payments went through bank accounts in her name. 

The Subdistrict Court is of the opinion that there was no longer an employment relationship, now that the applicant worked for herself, no wages were paid anymore and there was no relationship of authority. The employment contract was therefore apparently terminated by mutual consent. 

mr. AW Dolphijn – Franchise lawyer 

Ludwig & Van Dam Franchise attorneys, franchise legal advice. 

Do you want to respond? Go to dolphijn@ludwigvandam.nl .