Joint and several liability entails that a client is liable for the duties contractors down the contract chain have to pay wages in accordance with generalised regulations.
Joint and several liability entails that all clients in a contract chain have a “one for all and all for one” liability to workers at the bottom of the chain whose employer does not pay them the generalised wages to which they are entitled.
Joint and several liability applies to clients (contractors and subcontractors) in a contract chain, but not to the party purchasing the product or final result, e.g. a building or ship (principal).
Joint and several liability applies in all industries with generally applicable collective agreements, such as construction and shipbuilding. The liability only applies if the contractor/supplier is engaged in commercial activity. A supplier engaged in commercial activity, however, has joint and several liability regardless of whether the client is another enterprise or a consumer.
Joint and several liability only applies up the contract chain. This means a subcontractor cannot be held jointly and severally liable if the contractor fails to pay its workers. Similarly, subcontractors ranking pari passu cannot be held jointly and severally liable for failures to pay. In this context, pari passu refers to subcontractors that are fulfilling part of a contract for a client, but that do not have contracts with other subcontractors fulfilling other parts of the contract.
Joint and several liability for clients only applies in industries where collective agreements have been given generalised application.
Clients can be held jointly and severally liable for wages and overtime compensation in accordance with generalised collective agreements and holiday pay in accordance with the Holiday Act. If a higher wage than the minimum wage required by generalised agreements has been agreed, the client’s liability is limited to the minimum wage.
See overview of minimum wages in industries with generalised collective agreements
Joint and several liability takes effect when the wages are overdue but have not been paid or have only been paid in part. This is normally when the contractual date of payment has passed.
The worker must make a written claim within three months, and the claim must include documentation, e.g. a copy of the employment contract, pay slips, time sheets, bank statements, or other relevant documentation. The client must make payment within three weeks. The worker is free to make a claim against any client if there are more than one. It is not a requirement that the worker first make the claim against their own employer.
In a contract chain with multiple liable clients, it can be difficult to verify what is paid to a worker invoking joint and several liability. To ensure that the other clients receive sufficient information about payments, the client against which the claim is made must issue a written notice to the other clients within two weeks. Among other things, this serves to prevent duplicate payments, as well as to inform all clients that a claim has been made against a client that is jointly and severally liable.
The client receiving a claim and settles it, shall have the right to distribute the liability across the other clients (recourse). In contractual relationships with multiple guarantors, this is in line with long-standing court practice. One must presume that the same applies to jointly and severally liable clients. Nevertheless, the Labour Inspection Authority recommends that contracts include a clause specifying that any liability can be distributed across all clients up the contract chain. In addition, it may make sense for some clients to withhold part of contract remuneration as security for any joint and several liability.
If an employer goes bankrupt, the worker must file a wage claim with the public wage guarantee scheme (nav.no). In this case, the worker cannot choose whether the claim is made against the wage guarantee scheme or a client with joint and several liability. If the client has settled the worker’s wage claim, the client may join the worker’s claim against the estate in liquidation.
It is up to the individual worker to determine whether they have a claim against the client. The Labour Inspection Authority can provide information about the provision.
The Labour Inspection Authority has supervisory authority to ensure compliance with wage and working conditions that follow from general application regulations. The Authority exercises this authority through ordinary means, which include orders, fines, and work stoppages. The Labour Inspection Authority cannot, however, order the payment of wages, as this is considered a matter of private law and therefore outside the Authority’s mandate.