Fine for violation of the Dutch Foreigners (Employment) Act can also be imposed on a natural person after termination of the sole proprietorship

Administrative Division of the Council of State on 2 March 2022, ECLI:NL:RVS:2022:619

An employer is prohibited from having a third country national perform work in the Netherlands without a work permit or without a third country national in possession of a combined permit for work with that employer. This is the main rule of the Dutch Foreigners (Employment) Act, the most relevant law when employing non-EU, EEA or Swiss foreign nationals. If the conditions for a residence permit are not met – usually as a highly skilled migrant – then this main rule will be reverted to.

In the event of a breach of this provision – observed by Netherlands Labour Inspectorate (formerly: the Inspectorate SZW) – the Minister for Social Affairs and Employment can decide to impose a sanction, including an administrative fine of € 8,000 per foreign national per entity. On 2 March 2022 our highest administrative court, the Administrative Division of the Council of State (hereinafter: ‘the Division’), has ruled that a fine can also be imposed on a natural person whose sole proprietorship is no longer registered in the Trade Register. The date of the violation is relevant for the imposition of a fine. In that context, the Division indicates the following under 5.1:

‘5.1. The Division assumes that in view of its decision of 7 April 2010, ECLI:NL:RVS:2010:BM0220, under 2.4, the date of the violation determines the answer to the question on whom the fine can be imposed and not the date of the decision imposing the fine. As the court has rightly considered, it appears from an extract from the Trade Register of the Chamber of Commerce attached to the report of the fine that [company] was transferred to [appellant 2] on 28 June 2018. [company] was therefore registered in the Trade Register as a sole proprietorship at the time of the violations in the period from 1 January 2018 to 28 June 2018. The court has therefore rightly ruled that [appellant under 1] as the owner of [company], despite the later contribution to [appellant under 2], is liable for the obligations and debts of [company] in the aforementioned period, including the fine imposed on her for violation of the Dutch Foreigners (Employment) Act, (…).’

The company concerned, the sole proprietorship, was transferred to a natural person with effect from 28 June 2018, as a result of which the company no longer existed. In the period from 1 January 2018 to 28 June  2018 the company was registered in the Trade Register. During this period, three third-country nationals, all with Russian nationality, were employed by the company as highly skilled migrants. In 2019, the labour inspector of the Inspectorate SZW noted that during the aforementioned period the gross monthly salary, which must be credited to the personal bank account of the highly skilled migrants within a period of no longer than one month, was not transferred monthly to the account of the highly skilled migrants, as a result of which the conditions of the Highly Skilled Migrants scheme were not met.

As mentioned, this revives the main rule of the Dutch Foreigners (Employment) Act, namely that an employer is prohibited from having a third country national perform work in the Netherlands without a work permit or without a third country national in possession of a combined permit for work with that employer. There was no work permit or a combined permit for work, because there was a highly skilled migrant residence permit. Thus an administrative fine was imposed on the former owner of the sole proprietorship for violation of the Dutch Foreigners (Employment) Act.

In short, a former owner of a sole proprietorship, who is no longer registered in the Trade Register, can still be fined as a natural person if a violation under the Dutch Foreigners (Employment) Act is detected. The natural person remains liable for the obligations and debts of the sole proprietorship at the time of registration in the Trade Register! It is therefore important that the conditions that apply to highly skilled migrants are always met in order to prevent problems in the future. My colleagues David Wernsing and Miriam Berendes-Currey have already explained in detail what conditions a highly skilled migrant must meet in two blogs, namely ‘When is someone a higly skilled migrant?’ and ‘Everything about the salary criterion for highly skilled migrants’.

Do you have questions about this topic? Please do not hesitate to contact Drenusha Hoxha. She is happy to assist you!