When does chain liability apply?
- When there is a chain of companies, each carrying out part of an assignment or project. This includes foreign-based companies.
- When the links of the chain draw up project agreements or building contracts to execute that assignment or project.
- 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.
At what point do links in the chain become liable?
The links in the chain are liable for paying the overdue wages one at a time. The most direct link from the employee's point of view is first in line. The main contractor is the last in line. This is called successive liability.
How does the process go?
Direct employer or contractor is held liable first
- The employee reports to their own employer that their wages are not being paid, or that they are being underpaid. The employee can also turn directly to the company that contracted their employer.
- Still no wages? The employee can go to court to demand the overdue wages from their employer or from the contractor.
- Does the court rule that the employee is right? The employee goes back to the employer or contractor to demand payment of their wages. For example, by sending a registered letter or a bailiff.
- Only if that does not work can the employee turn to the next link.
Employer or contractor nowhere to be found
- Are the employer and the contractor untraceable? In that case, the employee can go to the next link in the chain directly. They need a bailiff's declaration for this.
- Does the next link in the chain know where the employer or contractor is? In that case, the employee must apply to the employer or contractor for their wages.
Employer or contractor is not registered with KVK
The employee can turn to the next link in the chain directly if the employer or contractor is not registered with the Netherlands Chamber of Commerce KVK, nor with a foreign business register.
Employer or other link is bankrupt
The employer, or the second link in the chain, may be bankrupt. If that is the case, and there are not enough funds to pay the overdue wages, the employer can turn to the next link in the chain.
Contractor is not responsible
The court may rule that the contractor who gave the employee their assignment is not liable for paying the overdue wages. This may happen if the contractor has done everything in their power to prevent liability. In that case, the employee may turn to the next link in the chain.
Directly to the original contractor
An employee is allowed to turn directly to the original contractor in 2 situations:
- If the overdue wages still have not been paid after a year.
- In case of serious underpayment. The employee can turn to the original contractor after 6 months, if that is the case.
Serious underpayment means:
- the employee receives less than half the agreed-upon wages for at least 3 months, or
- the employee receives less than 70% of the minimum wages and the minimum holiday allowance for at least 3 months.
In both cases, the clock only starts ticking when the employee has lodged a claim with their employer, and informs the main contractor about this.
Consequences for the higher links in the chain
If the employee holds you liable, the court may summon you to pay the overdue wages. Higher links in the chain can try to reclaim that amount from the lower links.
How do you prevent chain liability?
There are 5 steps you can take:
- Check the KVK registration of the companies you do business with. In the case of a foreign-based company, check their registration.
- Only work with companies that have the certificate to demonstrate they pay the agreed wages.
- Pay a fair price for the agreed work.
- Set down the working conditions in the contract you draw up with your subcontractors.
- Act when you notice the contract is not being honoured, or employees are not receiving payment. For example, act as an intermediary between subcontractors and their employees.
These 5 steps are the main things you can do to prevent liability. But each situation is different. Think about different steps you could take to reduce the risk of chain liability.
Other types of liability
If you are a contractor, you will also have to deal with chain liability for payroll taxes.