Chain liability for wages
Do you ever hire employees through another business? And does that business also work with other businesses to carry out the job? If so, you may have to deal with chain liability. For example, if wages are not paid. Read how to avoid the consequences of chain liability.
What is chain liability?
Chain liability arises when you temporarily hire employees from another business that then has (part of) the work done by another business. For example, through a (sub)client, an employment agency or a fellow company. This creates a chain (row of things that follow one another) of clients. All parties in that chain are responsible for paying the employees in that chain.
Workers get their wages from their own employer. Are the wages not paid? Then you as a client can be held liable in certain situations. This means you will be held responsible. This is called chain liability for wages.
Chain liability and wage level
Does a collective labour agreement (CAO) apply to your business? Then employees working for you from another business must receive at least the CAO wage. Check with your sector organisation for the level of the CAO wage. Does no CAO apply to your business? Then employees working for you from another business must receive at least the minimum wage.
When does chain liability apply?
- When there is a chain of companies, each carrying out part of an assignment or project.
- When the businesses or clients of the chain enter into agreements about carrying out the work
- When the employees who do the actual work do not receive (full) payment.
When does chain liability not apply?
- In sales contracts. For example, if you buy office supplies.
- If freelance workers (zzp'ers) do the actual work.
- When a private individual hires a company to do a job.
How do you prevent chain liability?
Your employee can go to court if he has received no or too little pay. And demand that you pay the unpaid wages. It is important that you can show that your business has done everything possible to avoid underpayment. Follow these 5 steps to avoid chain liability:
Only cooperate with reliable businesses. Therefore, check whether the business is listed in the KVK Business Register or with a foreign trade register. Also check if the company details are correct.
Only work with businesses that can show that they pay the agreed wage. This can be done, for example, with a special certificate or quality mark. Temporary employment agencies, for example, can get the SNA quality mark. You limit the risk of hirer's liability (inlenersaansprakelijkheid) by hiring staff from a business with the SNA quality mark.
Use the Working with temporary employment agencies checklist (in Dutch) to find an agency that follows the rules.
If a business presents a low price quotation or participates in a tender for a low amount, it has to make savings somewhere. For example, by not paying enough wages. As the client, you may be liable for this. So, pay a fair price for the work.
Make clear agreements on terms of employment and working conditions. Refer to:
- collective labour agreements or tendering procedures
- laws and regulations
- a quality mark or code
List all agreements in a contract. Make sure the agreements apply to all businesses and employees in the chain.
Something can always go wrong. Take action immediately. For example, have a check carried out at the business that does not pay. Or put the employer and employee in contact with each other and demand that they stick to the agreements in the contract.
What can your employee do?
The businesses in the chain are liable 1 by 1 for payment of unpaid wages. Find out what steps your employee can take
- The employee reports to their own employer that they have received no or too little pay. The employee can also report directly to the employer's direct client.
- Still no pay? Then the employee can go to court to claim the unpaid wages from the employer or direct client.
- Does the court rule in favour of the employee? Then the employee must go back to the employer or direct client to claim the wages. For example, with a registered letter or with the help of a bailiff.
- Only if that fails can the employee go to the next client.
Are the employer and direct client untraceable? Then the employee can go directly to the next client in the chain. This does require a statement from a bailiff. Does the next client manage to find the employer or direct client? Then the employee must claim the wages there.
Is the employer or direct client not registered with the KVK? Or with a foreign Business Register? Then the employee can go directly to the next commissioning company.
Is the employer bankrupt? Or a subsequent client? And is the estate also not enough to pay the unpaid wages? Then the employee can go directly to the next client in the chain.
Does the court rule that a client is not liable for payment of any unpaid wages? For example, because this client has done everything possible to avoid liability? Then the employee can approach the next client in the chain.
In 2 situations, an employee may go directly to the main client:
- If the unpaid wages have still not been paid after one year.
- In case of serious underpayment. Then the employee may go to the main client after 6 months.
Serious underpayment occurs if:
- the employee receives less than half of the agreed wage for at least 3 months
- the employee receives less than 70% of the minimum wage and minimum holiday allowance for at least 3 months.
In both cases, the time does not start until the employee submits a claim to the employer. And informs the main client accordingly.
Consequences of being held liable
Does an employee hold you liable for not receiving wages? If so, the court may rule against you. You will then still have to pay the unpaid wages, for example. Higher clients in the chain may try to reclaim this amount from lower clients.
Other types of liability
If you are a contractor, you will also have to deal with chain liability for payroll taxes.
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Questions relating to this article?
Please contact the Ministry of Social Affairs and Employment, SZW