Long-term secondments can become Dutch employment: key takeaways from the Tata Consultancy Services ruling

What happened?

• An employee was seconded from Tata Consultancy Services Limited (India) to Tata Consultancy Services Netherlands B.V. under a Deputation Agreement starting in 2015, initially for two years.
• The deputation was extended in writing five times, with the last extension expiring on 27 January 2023.

• After that date, no new agreement was signed, but in practice nothing changed:

  - the employee continued to work in the Netherlands,
  - he received new assignments from the Dutch entity, and
  - his salary and allowances were paid without interruption by Tata NL.

• When the employee refused to return to India, the Indian entity terminated the deputation, stopped paying salary and blocked his access to systems.
• The employee went to the Dutch court, claiming he had an employment contract with the Dutch company.

How did the court decide?

The Amsterdam District Court held that:

1. A Dutch employment contract had arisen with the Dutch subsidiary
   Once the last deputation extension expired in January 2023 and the work simply continued, the legal test for an employment contract under Dutch law was met: the employee performed work, under the authority of Tata NL, in exchange for pay, for an indefinite period.
2. The deputation had become permanent in practice
   The secondment lasted over ten years. The employee had not been warned that the deputation was ending or that he needed to be ready to return. The court considered that a supposedly temporary arrangement had effectively become permanent.
3. The Dutch entity was the real employer
   In day-to-day reality, the employee:
   • received all instructions from Tata NL,
   • was accountable only to Tata NL, and
   • applied for leave through Tata NL.
     The intercompany agreement even described Tata NL as the “economic employer” with full management and control. There was no evidence of ongoing direction or remuneration from India.
4. Indian law and arbitration clauses no longer applied
   The choice of Indian law and arbitration in the Deputation Agreement did not govern the later Dutch employment relationship. That relationship is subject to Dutch law, as the Netherlands was the habitual place of work.
5. Requiring a return to India was unreasonable
   After more than ten years in the Netherlands, Dutch citizenship, Dutch pension accrual and full integration into the Dutch tax and social security systems, the court held that it was not reasonable to demand that the employee definitively return to India.

Why this matters for international employers

For Indian IT and consulting groups – and more broadly, for any non-EU business deploying staff to the Netherlands on long-running secondments – the ruling is a clear warning:

• Labels do not control reality
  Calling an arrangement a “deputation” will not prevent a Dutch employment contract from arising if, in substance, the Dutch entity behaves as the employer over a long period.
• Long-term secondments carry “permanent” risk
  Multi‑year, repeatedly extended secondments (5–10 years) are likely to be treated as permanent employment in the Netherlands, with all associated Dutch employment law protection.
• Intercompany wording can be used against you
  References to “economic employer”, “full management and control” and “exclusive disposal” in intercompany agreements may support a finding that the Dutch entity is the true employer.
• Choice of foreign law has limits
  Once a Dutch employment relationship is found to exist, Dutch mandatory employment law will apply, regardless of a previous choice of foreign law or arbitration.

What should employers do now?

Groups using similar deputation/secondment structures into the Netherlands should:

• map all current long-term secondments (e.g. over 3–5 years);
• review whether documentation, practice and internal communications are consistent;
• reconsider repeated extensions without a clear end strategy; and
• assess whether certain secondees should in fact be moved onto Dutch employment contracts.