With the start of the new year, the second part of the Act to Prevent Labour Market Fraud (Wet aanpak schijnconstructies) went into force.
The act is relevant for companies who, instead of hiring employees themselves, use external third party contractors to provide certain services for them. In particular, companies in the building and construction industry and the packaging and logistics industry make widespread use of third party contractors.
- First part of the act introduced last year
On July 1, 2015, the first part of the act introduced an increased civil liability (ketenaansprakelijkheid) by introducing a joint and several liability for salary payments.
With the first part of the Act, an employee working for a company that is part of a chain of principals and contractors can now, provided certain procedural requirements are met, claim the unpaid part of the salary his employer is required to pay from his actual employer, as well as from the first principal higher up in the chain. Further, in a case where the principal of his employer does not provide adequate recourse, the employee can go up one level higher in the chain, ultimately to the main principal, to recover the unpaid portion of his salary. For example, an employee working for a construction company that fails to pay him salary, under the first part of this act, can claim the unpaid part of his salary from both his employer and the principal that contracted with the construction company.
A principal has only limited grounds to defend itself against such claim. Most importantly, the principal should be able to demonstrate sufficient measures were taken to verify whether the third party contractor was compliant with payment of salary.
To be able to defend against employee claims, it is recommended to contract with reputable contractors certified by an industry-wide body. Also, the contract between principal and contractor should include adequate provisions allowing the principal to verify whether the contractor did actually pay salary to its employees. For example, a provision can be included that creates an obligation for the contractor to provide the principal with copies of bank statements evidencing the salary payments.
- Second part of the act now in force
As for the second part of the act, in force as of Jan. 1, 2016, employers can no longer deduct or set off certain benefits provided to the employee from or against the legal minimum wage.
Furthermore under the second part of the act, at least the minimum wage must be paid to the employee by bank transfer. Only the part of the salary that exceeds the minimum wage can be paid in cash.
Finally, employers now need to provide their employees with clear and understandable salary slips, including a specification of allowances to which the employee is entitled.