THE BOTTOM LINE
- Choice of Law is Powerful: Foreign companies seconding staff to the Netherlands may not be subject to mandatory Dutch sectoral pension schemes if their employment contracts validly choose another EU country’s law.
- The “Better Protection” Test is Key: This exception only applies if the home country’s pension system provides a level of protection that is not demonstrably lower than the Dutch equivalent. The burden appears to be on the Dutch pension fund to prove its system is superior.
- Review Your Contracts: Businesses operating across borders should review their employment contracts and home-country pension schemes to assess their compliance position, potential cost savings, and liabilities when operating in the Netherlands.
THE DETAILS
The case involved a Luxembourg-based staffing company, Presta Meat S.A., that provides workers to the Dutch meat processing industry. A mandatory Dutch sectoral pension fund, VLEP, argued that these employees, while working in the Netherlands, must be enrolled in its scheme. However, Presta’s employment contracts explicitly stated that Luxembourg law applied. This created a classic conflict of laws, pitting a contractual choice of law against a national mandatory rule, with the outcome decided under the EU’s Rome I Regulation. The core question for the court was whether the choice of Luxembourg law could hold up against the Dutch mandatory pension rules.
Following a directive from the Dutch Supreme Court, The Hague Court of Appeal applied a crucial test from EU law. A court cannot simply set aside a valid choice of law clause in an employment contract. Instead, it must perform a concrete comparison: does the law that would apply without a choice (in this case, Dutch law) offer the employee a higher level of protection than the chosen law (Luxembourg law)? The court emphasized that this is not an abstract comparison of national systems but a practical assessment of the tangible outcome for the specific group of internationally mobile workers involved. It also rejected the pension fund’s argument that its scheme was an “overriding mandatory provision” that must be applied regardless of the circumstances.
In its detailed analysis, the court concluded that the Dutch pension fund had failed to prove its system offered better protection. A decisive factor was how contributions are calculated. The Luxembourg pension scheme calculates contributions on the employee’s full gross salary. In contrast, the Dutch VLEP scheme applies a significant deductible (a “franchise“), meaning contributions are only paid on the portion of the salary above that threshold. For the workers in question, this meant their actual pension accrual was higher under the Luxembourg system. The court was not persuaded by the fund’s counterarguments, including a 10-year vesting period in Luxembourg, noting that the short-term nature of the work meant any Dutch pension would also be minimal and likely subject to a small buy-out.
SOURCE
The Hague Court of Appeal (Gerechtshof Den Haag)
