Company has to Pay the Employee, despite Uncertainty about the Employing Company

On the basis of the fact that a company was the client of the company that was said to be the employing company, the former company may be obliged to pay the wages that were not paid by the latter company.

In December 2021, a female employee entered into an employment contract with a company for which she would start working as a delivery driver. In the employment contract, however, the name of another company was mentioned as the employer.
When the employee fell ill in January and, as of February, no longer received her wages, she summoned both companies in summary proceedings in order to still have her wages paid. Since none of the companies showed-up during the proceedings, each party was ordered in absentia to pay the employee's wage. This enabled the employee to appeal to both parties for payment of her wage. The two companies should work together to find out which party’s obligation it was to ultimately pay the wages.

The company of which the name was mentioned in the employment contract then objected to the judgment in absentia. During the objections procedure, this company argued that it had never entered into an employment contract with the employee, that the other company had not been authorized to enter into an employment contract on its behalf and that it was the contractor’s company that had paid the employee's wages before. Nevertheless, the Sub-district Court ordered the company, the name of which was mentioned in the employment contract, to pay the wages. According to the Sub-district Court, it did not really matter which of the two companies had entered into the employment with the employee.
Even if the former company was not the employer, it still had to pay the wages, because in any case it was a client of the employing company and because, under the law, it is the company of the client that is liable for payment of the wages that the contractor's company is required to execute. The client company also had to provide a pay slip to the employee.
But the company was spared the statutory increase for late payment of the wages because it had not been established that the client company also was the employer.

On appeal, the client company reiterated that it had not entered into an employment contract with the employee and that it could not be blamed for failure to pay the wages. The company also stated that it could not provide a pay slip because it would imply that it would also have to pay the payroll tax.
The Court of Appeal, however, upheld the Sub-district Court’s judgment.
Since the company did not dispute the fact that it was the client of the supposedly employing company, it was jointly and severally liable for payment of the wages, unless it could substantiate the argument that it could not be blamed for the fact that the wages were not paid. The latter is only the case if the company would be able to demonstrate that prior actions were taken to ensure payment of wages, such as working with a certified contractor, or that this was done afterwards, such as by checking whether the employer had carried out the wage payments. Since no evidence of any of this had been revealed so far, the company had rightly been ordered to pay the wages.
The Court of Appeal considered that the company should also provide a pay slip to the employee, even if it would imply that it also had to pay payroll tax. The purpose of the pay slip is to provide information about the wages paid to the employee and, according to the Court, it is obvious that the person who pays the wages also provides this information.

The contractor’s and client’s joint and several liability for payment of the subcontractor’s or contractor’s employee’s wages is regulated in the Sham Employment Arrangements Act.
This law came into effect on July 1, 2015, but in practice little is heard about this liability.
The topic is rarely raised in case law. And also contractors and clients pay little attention in their agreements to the preventive actions that the contractor or client could take to ensure that employees of the subcontractor or contractor will actually receive the wages due, even though there is every reason to do so.