Here at The Local, we’ve written numerous articles on the pros and cons, the ups and downs of being self-employed - and what you need to know if you are self-employed in France.
But when is self-employment not self-employment? When it’s actually employment disguised as self-employment, which is also known as ‘disguised employment’ (emploi déguisé), and – in French law – is considered to be undeclared work, or travail dissimulé.
And penalties may be severe.
Let’s start with the distinction between ‘self-employed’ and ‘employed’.
Self-employed - A self-employed person is one who works for themselves, who may sell their services to clients but operates independently of them, and can (among other things) determine their own business organisation, who they work for, and how much they charge for their services. Whether any business is willing to pay those rates is another question entirely.
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If you are going to be self-employed in France you need to register yourself as a small business with URSSAF (and that includes people who are working remotely for clients in other countries).
As a general guideline, it is a good idea for a self-employed person to have at least three separate clients in any given year.
Self-employed people do not benefit from things like paid holidays. They may be entitled under the French social model to maternity/paternity leave or sick pay, but this would not be paid by any of their clients but would instead come from their own contributions and the French state.
Employed - Someone who is employed, however, has signed an employment contract with their employer. They perform their work in a relationship of subordination with their employer in return for a salary.
They are entitled to things like 25 days (or part time equivalent) of paid leave per year, sick leave, maternity/paternity leave and various other perks. They have the right to go on strike.
Crucially, their employers must also pay social contributions for each employee they hire, in addition to the employee's salary.
The law
It is the notion of ‘subordination’ that is crucial to the difference between self-employed and employed.
In 1996, France’s highest judicial court, the Cour de cassation set the terms like this: “The relationship of subordination is characterised by the performance of work under the authority of the employer who has the power to give orders and directives, to monitor their execution and to sanction the failures of his subordinate.
"Work within an organised service may constitute an indication of the relationship of subordination when the employer unilaterally determines the conditions of performance of the work.”
Thus, as soon as a relationship of subordination exists, a worker is no longer independent and the situation may be reclassified as an employment contract.
And it doesn't matter what, if any, contracts you have in place - freelance work can become legally 'employment' if various conditions are met.
Although it is prohibited, some companies use freelance workers or contractors (commonly those registered as micro-entrepreneurs) within an employer-employee framework, rather than a client-provider one, because taking on a freelance worker means they aren’t required to cover employee benefits such as minimum wage, holidays, or overtime.
The way French law sees this, the employer is denying rights and protections to workers who are entitled to it under the law.
What does this mean in practice?
If a freelancer works full-time for just one business and is effectively or explicitly prevented from developing a network of clients of their own; and if that worker is obliged to respect working conditions and rules established by their client, this may be considered ‘disguised employment’.
It's for this reason that freelancers/contractors are advised to have at least three separate clients in any given year.
This is not to say that a company hiring an independent contractor cannot set objectives and deadlines. They can. It simply means that they cannot impose conditions for carrying out work.
In practice, a contractor may be considered to be employed, rather than self-employed, if, for example:
- Working hours and organisation are imposed by the company for which the contractor works;
- Working and holiday periods are dictated by the company;
- A contractor has to commute to a client’s premises and use equipment assigned to them by the client;
- A company integrates a contractor into their organisational structure – for example, they are listed on company information sheets, or have a company email address;
- The company has or has had employees that do the same job.
Crucially, the implicit relationship between company and worker matters, rather than the explicit one. It doesn’t matter what’s written in any contract or agreement, likewise it doesn't matter if both parties are happy with the arrangement.
What matters is the reality on the ground.
At one time, multi-national operations such as Uber and Deliveroo based their business modelling on saying that all their staff were ‘self-employed’ workers. But a series of court cases in France concluded they were really employees – entitling the workers to benefits such as sick pay, and holiday pay.
READ ALSO 9 lessons I’ve learnt about being self-employed in France
For the record, however, an employment contract must specify: compensation/wage rate; required skill sets and qualifications; work hours; employee’s duties; obligations for both the employee and the employer.
Sanctions
A self-employed person who considers themselves in ‘disguised employment’ can refer their case to the Conseil de prud’hommes (industrial tribunal).
The labour inspectorate (l’inspection du travail) or URSSAF inspectors can also refer the matter to the public prosecutor if they suspect disguised employment based on either information submitted or a tip-off.
If ‘disguised employment’ is ruled, the company may be obliged to pay wages, compensation (overtime or holiday pay) corresponding to the remuneration they would have received as an employee.
READ ALSO URSSAF: What is it, how it works, and how it affects you
They may also have to repay social security contributions that they should have paid, and may also have to pay damages to the employee.
In the most serious cases, the company may be prosecuted on undeclared work charges – specifically the employment of undeclared employees. And the business could face administrative closure, the loss of public subsidies for up to five years – and the repayment of public subsidies received in the previous 12 months, prison sentences and a fine of up to €225,000 (€45,000 for an individual).
On the other hand, the self-employed person does not face prosecution for emploi déguisé – but they may have to repay any social benefits that they may have received while they were in the irregular work situation.
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