Online grocery deliverers Picnic and Flink fall under supermarket collective bargaining agreement

The Arnhem-Leeuwarden Court of Appeal recently ruled that online supermarkets Picnic and Flink fall under the collective bargaining agreement for the food industry (CAO LMB). This ruling applies despite the fact that they have no physical stores, but so-called ‘hubs’ from which groceries are collected, packed (called fulfillment) and delivered. This means that for the period 2022-2023 they should have applied the collective bargaining agreement LMB even though they apply their own collective bargaining agreement: the collective bargaining agreement E-commerce Netherlands. The online supermarkets must pay retroactive surcharges to employees and former employees,

What about the obligation to apply a collective bargaining agreement? And who should assess whether a collective bargaining agreement applies? What are the risks?

Application of an AVV collective agreement: obligation, responsibility and scope

Collective agreements are concluded between employer and employee organizations. In principle, employers who are not members of the employers’ organization are not required to apply the collective agreement. But: in the Netherlands, collective agreements can be declared generally binding (AVV) by the Minister of Social Affairs and Employment (SZW). In that case, the provisions of the collective agreement are binding on all employers and employees within its scope – regardless of membership. The AVV scheme prevents unequal treatment between organized and unorganized parties. It protects employees who are not union members.

Obligation to apply an AVV CBA

Once a CBA is declared universally binding, its provisions are legally binding. It is then effectively “law” for all covered employers and employees. An overview of all AVV collective agreements can be found on the website of the Ministry of SZW. Only with dispensation from the minister can an employer withdraw from the application of an AVV cooa.

Responsibility for assessment

It is up to the employer to assess whether his company falls within the scope of an AVV CBA. That assessment is made on the basis of the descriptions and definitions in the CBA. The Inspectorate SZW can enforce if it appears that a CAO has been wrongly not applied.

Don’t forget the pension fund: many collective agreements have a compulsory industry pension fund attached to them. These funds independently investigate employers who fall within their scope in order to enforce contribution payments. These pension funds may retroactively claim unpaid premiums.

What if you apply a different collective bargaining agreement?

If an employer applies its own collective bargaining agreement, but there is overlap with a collective bargaining agreement that has been declared generally binding, the following applies:

– The AVV collective agreement always takes precedence, unless dispensation has been granted.

– The own collective agreement is only valid insofar as it does not conflict with the AVV collective agreement.

– Without dispensation, the AVV CBA applies in full to all employees covered by its scope.

Scope

The scope determines to whom the collective bargaining agreement applies and defines who is considered an employer and employee. Sometimes the scope provision and definitions conflict internally. In that case, the text must be interpreted according to the “collective bargaining norm”: the meaning must be determined according to objective standards, where the wording, read in light of the entire text of the collective bargaining agreement, is decisive. In case of persistent doubt, collective bargaining parties can be asked for an opinion. After all, as parties they are responsible for the establishment of the collective agreement. In the extreme case, the court will decide.

 Picnic and Flink operate virtual stores

The dispute with Picnic and Flink centered on the interpretation of the collective bargaining agreement (CBA) LMB. The CBA LMB talks about physical as well as virtual stores. Picnic argued that it does not operate a store because most of its staff is engaged in packing and delivery work. The court did not go along with this and ruled that packing and delivery are also part of the operation of a virtual store – something that is no different at all and was already a common activity of supermarkets in the past.

Picnic and Flink also argued that their employees do not have positions that correspond to the job profiles in the collective bargaining agreement LMB. The court rejected this argument: the CBA LMB works with reference jobs as a cap and standard, not an exhaustive list. Employers must classify their jobs “comparatively.

 Objection due to competitive position

The real objection of Picnic and Flink to application of the LMB collective bargaining agreement is that application of the LMB collective bargaining agreement leads to unfair competition. Because their activities largely take place in the evenings and weekends and their staff is generally older than in (because of driving license requirements) than in regular supermarkets, the mandatory surcharges would lead to higher labor costs. This would make it harder for them to compete with regular supermarkets.

The court does not recognize these disadvantages as legally decisive. Those who choose this business model also bear the associated risks. Incidentally, Picnic was granted dispensation for the collective bargaining agreement LMB for 2024, but that did not apply for 2022-2023. Read the entire ruling here.

Conclusion

It is very important for employers to be alert to collective bargaining obligations. Are you starting a business, expanding or taking over a company? Then a collective bargaining agreement can apply just like that. The risk of incorrect application is great: subsequent payments of bonuses, wages, leave or pension premiums can be considerable.

Do you have questions about the scope or applicability of a CAO? Feel free to contact us by  email, phone or fill out the contact form for a no-obligation initial consultation. Our specialists will be happy to advise you.