A recent news story highlighted by Les Echos illustrates how sensitive the boundary between independent contracting and employment can be, particularly when it comes to social security contribution reassessments. In practice, a contract labelled “services agreement” is not enough: what matters is the reality of the relationship as it is experienced and organised on a day-to-day basis, so as to avoid the risk of reclassification as an employment contract.
Why is this topic back in the spotlight?
The debate over how to classify “independent contractor / principal” relationships is longstanding, but it becomes especially visible when major players are involved (UBER in this case). The key value of these high-profile matters is to reiterate a simple rule: contractual labels do not prevail over the facts.
For businesses (SMEs, mid-caps, start-ups, platforms, agencies, IT service providers, professional firms, etc.), the issue is very practical: a collaboration model involving freelancers, consultants or subcontractors may be challenged if, in practice, the organisation of the work resembles an employer/employee relationship.
Reclassification: what exactly are we talking about?
Reclassification means recognising that a relationship presented as independent (services, subcontracting, freelance, self-employed, micro-entrepreneur, etc.) in fact corresponds to an employment contract. Reclassification may be argued before the courts, and it may also have consequences in the event of a social security audit.
The central test: the relationship of subordination
The key factor is the relationship of subordination. In practical terms, this involves assessing whether the individual performs the assignment under the authority of a principal who gives instructions, monitors performance and has the power to sanction.
It is not the contract that matters most: it is day-to-day performance
A contract may be perfectly drafted yet “contradicted” by actual practices: overly directive oversight, reporting that amounts to hierarchical management, a lack of genuine autonomy, full integration into the team, etc. This is often where the risk arises.
Key warning signs for businesses
Below are common situations that may increase the risk of reclassification (to be assessed on a case-by-case basis, as everything depends on the facts):
- Imposed working hours or on-site presence (or de facto required availability)
- Systematic reporting and approvals akin to hierarchical management
- Exclusivity (or strong economic dependence) and extensive integration into internal operations
- Tools, processes and methods imposed with no real latitude for autonomy
- Ongoing, long-term engagement paid “monthly”, with no deliverables/project-based rationale
Conversely, genuine autonomy, a deliverables-based approach, an independent organisation and, often, a plurality of clients are factors that can help to secure independent contractor status.
What are the consequences of reclassification?
1) Social security consequences: contributions, reassessments and surcharges
Reclassification may lead to a challenge of the contributions paid on the basis of independent activity, with adjustments and, depending on the circumstances, surcharges. This is often the most immediate — and most costly — impact for the business.
2) Employment tribunal consequences: back pay and compensation
The “contractor” may seek recognition of an employment contract and then claim, depending on the circumstances, entitlements associated with employee status: back pay, paid leave, working time issues, and consequences relating to termination (for example, recharacterising a termination as a dismissal).
3) Additional risks: reputation, compliance and a domino effect
Beyond the financial aspect, reclassification can create reputational risk and trigger a domino effect on other similar relationships within the organisation. Hence the benefit of a global approach, not merely a “case-by-case” review.
4) In certain cases: issues related to concealed work
In specific situations (particularly where intent is at issue), reclassification may raise more sensitive questions. Each matter must be analysed carefully, in light of the facts, documentation and internal practices.
How to mitigate the risk: good practices (contract + operational reality)
Structure the engagement as a genuine service
- Define clear deliverables, milestones, objectives and scope
- Focus assessment on the outcome rather than the manner of performance
- Provide for genuine organisational autonomy (method, hours, location where possible)
Avoid “HR reflexes” in day-to-day management
- Limit practices that resemble hierarchical management
- Manage access to internal tools and team integration (access where needed, assimilation no)
- Be mindful of “indirect” sanctions (withdrawal of assignments, penalties, delisting, etc.)
Document and align practices
- Implement an internal checklist for independent contractor engagements
- Train operational teams (those who manage the assignment day to day)
- Regularly reassess long-term engagements
How Patchwork Avocats can help
Our firm supports businesses and independent professionals to:
- Assess reclassification risk (contracts + actual practices)
- Secure services agreements and related documentation
- Implement operational recommendations tailored to your organisation
- Assist you in the event of an audit or dispute
Our recommendation: align the contract… and, above all, the operational reality.
Information purposes only: a tailored legal analysis may be required depending on your circumstances.
