One illegal worker, multiple fines: the risks of the Netherlands Foreign Nationals Employment Act

The worker in the company canteen. The cleaner, hired by the cleaning company, who enters the premises in the evening. Do you know exactly who these workers are and whether they are allowed to work in the Netherlands? 

Under the Dutch Foreign Nationals Employment Act (Wet arbeid vreemdelingen or WAV), all personnel who perform work for your organisation fall under your responsibility regardless of whether they are on your payroll. This applies to temporary workers, self-employed contractors and employees of supply chain partners such as caterers, security companies or subcontractors as well as your own employees.

The Dutch Labour Inspectorate strictly enforces WAV and recent cases show that the financial consequences of infringements can be significant. For example, a freelance platform recently received EUR 66,000 in fines for WAV violations for deploying foreign workers who were not permitted to work in the Netherlands. Nine hiring companies also received fines totalling EUR 80,500. In another case this year, a cleaning company was fined EUR 28,500 for insufficiently verifying whether hired workers possessed the required documents.

These examples highlight one of WAV’s most important features. Not only the formal employer is at risk, but clients, contractors, hiring companies and other parties in the supply chain can also be considered employers and receive fines even when they do not directly employ the worker concerned. In this CMS law article, we discuss how the WAV framework operates and what measures can be taken to mitigate risks.

WAV framework

WAV prohibits employers from allowing workers from outside the European Economic Area (EEA) and Switzerland to perform work in the Netherlands without the required work permit (TWV) or the combined residence and work permit (GVVA).

Importantly, the definition of "employer" under WAV is broadly interpreted. Anyone who allows work to be performed may qualify as an employer. An employment contract is not required.

Certain exceptions apply, including highly skilled migrants, specific categories of self-employed individuals and certain intra-company transferees.

The financial risks for violations are considerable. Currently, the starting fine for companies is EUR 6,000 per illegally employed worker. Depending on the seriousness of the violation and the degree of culpability, this amount can increase to EUR 11,250 per violation. In the case of repeated violations within a five-year window, fines can increase by 50%, 100% or even 200%.

Supply chain liability: why you may also be at risk

The broad definition of employer means that multiple parties within the same employment relationship can simultaneously be considered employers. In practice, this means that supply chain partners can be fined separately for the same violation.

A defence based on unawareness of the actual deployment of workers offers little protection. The Dutch Labour Inspectorate expects parties in the supply chain to actively verify whether work by all their workers is being performed lawfully. It must be established in advance who will perform the work, whether the correct work and residence documents are available and whether clear agreements have been made with supply chain partners on this matter. These agreements must not only exist on paper, but there must also be demonstrable compliance.

How employers can reduce risks

Verify identity and documents: Organisations have a verification obligation, retention obligation and duty of care. Verify the authenticity and validity of identity documents before work commences, retain a copy in accordance with statutory requirements and ensure that workers can identify themselves during working hours.

Contractual arrangements: Stipulate that further subcontracting is only permitted with prior consent, that relevant documents are provided and that supply chain partners must be WAV compliant. A WAV indemnity clause does not prevent a fine but may be relevant for recovering damages.

When hiring temporary workers: Engaging a NEN-certified temporary employment agency and working with SNA-registered companies can reduce risk in the hiring process and may play a role in assessing culpability.

Employment contract: For workers requiring a permit, contracts should include a suspensive condition until the required permit has been granted and a resolutive condition in case the permit expires.

Workplace inspections: Conduct periodic and unannounced checks to establish who is actually working. Do not rely solely on information from supply chain partners.

Notification obligation: For certain exemption categories (e.g. Ukrainian refugees or self-employed persons in designated sectors) no permit is required, but a notification obligation to the UWV does apply. Always verify whether notification is required.

After a violation: adequate measures can reduce the fine: Taking adequate measures to prevent recurrence can lead to a fine reduction of 12.5%. Document these measures properly so that they can be demonstrated in objection proceedings. In the case of a first violation involving no more than five foreign nationals, a written warning may suffice in certain cases.

Conclusion

WAV has a broad employer definition and an extensive form of supply chain liability. Since one illegally employed worker can lead to multiple fines within the same supply chain, organisations should not only have their own personnel files in order, but carefully monitor hired workers and supply chain partners. A thorough identification policy, clear contractual arrangements and regular inspections can make the difference between compliance and a costly fine.

Organisations should look beyond their own workforce and actively monitor contractors, subcontractors and temporary workers. A strong identification process, clear contractual arrangements and regular compliance checks can significantly reduce the risk of costly enforcement actions.

For more information on WAV obligations, inspections by the Dutch Labour Inspectorate and the design of effective compliance processes in the Netherlands, contact your CMS client partner or the CMS experts who contributed to this article.