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Joint and Several Liability for Wage Claims in the Construction Sector

The system of joint and several liability for wage debts in the construction industry has been in place for almost ten years. Since 20121, employees have been able to claim back wages from their employer’s direct co-contractor in the event of the latter’s default.

This regime only applies to “activities in the construction sector”. Furthermore, the new regime applies both to contractors with seconded employees who come to work in Belgium and to contractors established in Belgium who hire Belgian employees.

The joint and several liability is limited to the “direct contractor”. This includes the principal, the contractor and the intermediate contractor. The principal is the party who orders the contractor to carry out, or have carried out, activities in the construction sector for a price. The contractor is the party who binds himself to the principal. The intermediate contractor is a subcontractor who himself engages a subcontractor to carry out the work entrusted to him. This joint and several liability is only aimed at the direct contractual relationship that these parties have with their counterparty.

Construction Workers on Work Site

Construction Workers on Work Site

The principal is jointly and severally liable for the wages due to the contractor from the employee. It is of no importance whether the contractor is established in Belgium or not. The principal (natural person) who has work carried out exclusively for private purposes does not fall under this regime.

The contractor is jointly and severally liable for the wages owed to the employee by the subcontractor – with whom he has contracted directly. The law specifies that this liability applies “in the absence of a chain of subcontractors”.

The subcontractor is jointly and severally liable for the wages due to the employee by the subcontractor with whom he has directly contracted. This subcontractor is an “intermediate contractor” vis-à-vis the subcontractor with whom it has directly contracted.

Please note: in case of a chain of subcontractors, the contractor can never be held jointly and severally liable. After all, he does not have the capacity of “intermediate contractor”.

The liability regime applies immediately (automatically) in the event of non-payment of the salary due. This means that the principal, contractor or intermediary contractor never has to be notified in advance by the inspection authority. The employee can jointly and severally sue his employer’s counterparty who fails to pay, without having to wait for a payment from any fund.

Usually in the building contract, the principal, the subcontractor or the intermediate contractor can exclude his joint and several liability by means of a written statement. This declaration must contain (1) the coordinates of the FOD WASO website (http://www.werk.belgie.be) and (2) a confirmation from the other party that it does not and will not pay the wages owed to its employee. Furthermore, this declaration must be signed by the jointly and severally liable person and the employer.

The exemption from liability is reinstated when the principal, contractor or intermediary contractor is informed that the employer is not paying the wages due to its employee(s). This knowledge can be proved by all means of law or when the inspectorate has sent a letter.

The renewed joint and several liability applies from the 14th day after the notification and thus only to the future wage debts. During this grace period of 14 days, the principal, contractor or intermediary contractor has time to take the necessary measures to avoid liability. He can, for example, have the breach of law stopped or terminate the contract with the direct contractor.

The employer must post a copy of the notice at the employees’ workplace. If he does not do so, the jointly and severally liable party must post the copy. Any person who believes he has been wronged may lodge an appeal with the president of the labour court.

Joint and several liability is further governed by Articles 1200 to 1216 of the Civil Code.11 Articles 3 to 6, 10, 13 to 16, 18 and 23 of the Wage Protection Act apply by equating the joint and several liability with the employer. They deal with the method of payment, the wages in nature, the interest due by law and the permitted deductions.

The jointly and severally liable person who does not pay the wages or fails to attach a copy of the notification by the inspection will be punished with a criminal (€ 50.00 to € 100.00) or administrative (€ 25.00 to € 250) fine.

Decision:

It is important to draft your contracts with (sub)contractors in a watertight manner and to include appropriate clauses to limit or exclude your potentially very large joint and several liability.

Authors:

Roxanne Sleeckx

Roxanne Sleeckx

Update UBO: Deadline UBO Register 31 August 2021 Has Passed

In our previous article ‘Update UBO register’ 1, you could already read that companies and non-profit organisations have until 31 August 2021 to comply with the provisions concerning the UBO register. Meanwhile, almost two months have passed and the FOD Financiën is serious. Those who do not comply with the registration can expect an administrative fine.

The UBO register is a register in which all the ‘Ultimate Beneficial Owners’ of a company or other legal entity are registered. The register is part of the fight against money laundering and seeks to put an end to the practices of money launderers who launder money through the creation of companies as intermediaries. Such a UBO register should make it possible to find out who is behind certain legal arrangements and entities. The intention is therefore to register details of the most influential actors.

The new UBO register will require companies, (international) non-profit organisations and foundations, as well as trusts and other legal entities similar to trusts, among others, to obtain and maintain adequate, accurate and up-to-date information on their Ultimate Beneficial Owners (UBOs). In addition, the Act provides for the obligation of directors to electronically transmit information on the beneficial owners to the UBO register within one month, under penalty of financial fines.

1. Companies

Ultimate beneficiaries in the case of companies include natural persons who hold a sufficient percentage of the voting rights or of the ownership interest in the company. A percentage of 25% is considered as sufficient. Individuals who have a degree of control by other means or who are members of the senior management are also ultimate beneficiaries.

2. (International) non-profit organisations and foundations

Ultimate beneficiaries in the context of non-profit organisations and foundations include:

  1. the members of the board of directors;
  2. the persons authorised to represent the association;
  3. the persons in charge of the daily management of the (international) association or foundation;
  4. the founders of a foundation;
  5. the natural persons or, if these persons have not yet been designated, the category of natural persons in whose main interest the (international) not-for-profit association or foundation was established or operates;
  6. any other natural person who ultimately controls the (international) association or foundation through other means.

3. Trusts and other legal entities similar to trusts

Are considered as beneficial owners in case of trusts, fiduciaries and other legal arrangements similar to trusts:

  1. the settlor;
  2. the fiduciary or trustee(s);
  3. the protector, if any;
  4. the beneficiaries, or if the persons who are the beneficiaries of the fiduciary or trust have not yet been designated, the category of persons in whose main interest the fiduciary or trust was established or operates;
  5. any other natural person who, by virtue of being a direct or indirect owner or by other means, ultimately controls the trust.

It’s a nice initiative, but the practical implementation of it is proving to be quite challenging. The deadline for registering the beneficial owners in the UBO register has been extended several times.

As of 11 October 2020, every obliged entity is obliged to include in the UBO register every document that supports and proves the adequacy, accuracy and timeliness of the data. It is no longer sufficient to simply present these documents for verification purposes. This includes the identity card of the UBO, the deed of incorporation and the articles of association of the company, etc.

One would have the time until 30 April 2021 to submit these documents, but again the deadline for uploading supporting documents and annual confirmation of the information in the UBO Register was extended to 31 August 2021. This according to Minister of Finance, Vincent Van Peteghem, in order to be able to support authorities to comply with the new rules imposed by the Royal Decree of 23 September 2020.2

In the meantime, we are at the end of October ’21 and the FOD Financiën has become serious. Companies that have not followed up on the tax authorities’ reminder letters to bring their registration in order will be faced with an administrative fine of €500.00 per director. This would concern approximately 80,000 companies that have not yet put their registration in order.

If you still have questions after reading this article, do not hesitate to contact us via [email protected] or 03 216 70 70.

What Is Collaborative Negotiation?

Collaborative negotiation is a special form of conflict negotiation. Article 1738 Ger. W. defines it as “a voluntary and confidential procedure of dispute resolution by negotiation involving conflicting parties and their respective attorneys and the latter acting under an exclusive and limited mandate of assistance and advice to achieve an amicable agreement.”

The disputes listed in article 1724 Ger. W. can be the subject of collaborative negotiation. In general, all private law conflicts of a patrimonial nature and non-pecuniary conflicts that are amenable to settlement can be the subject of a collaborative negotiation.

The extrajudicial collaborative negotiation originates in the agreement between the parties. Judicial collaborative negotiation arises from the agreement of the will between the parties during a lawsuit.

A collaborative negotiation protocol is drawn up (“contract”). This protocol is signed by the participants and the collaborative lawyers. This protocol identifies the parties, defines the conflict, includes the confidentiality principle, voluntariness, and so on.

Please note that signing this protocol suspends the statutes of limitations regarding the conflict, but not the expiration periods. The expiry can only be avoided by issuing a summons. Also the taking of protective and provisional measures is temporarily not allowed anymore.

Although the legislator speaks of a “procedure”, it is essential that the participants negotiate with each other themselves. The parties undertake not to initiate or continue litigation.

Furthermore, article 1739 Ger. W. that “only collaborative lawyers may conduct the collaborative negotiations”. This exclusivity is also confirmed by the Constitutional Court since there are other forms of negotiation and mediation that can be carried out by other lawyers and experts.

A collaborative lawyer is a lawyer who has followed special training, acquired the required knowledge, subscribes to the regulations for collaborative lawyers and is registered on the list of collaborative lawyers. Their role is limited to providing assistance to the client (negotiation coach). The collaborative lawyer ensures that his client’s agreement to the collaborative negotiation agreement is pure will.

Should one of the parties withdraw from the collaborative negotiation, the collaborative lawyers may no longer intervene in a lawsuit between the same parties in the context of a dispute that was the subject of the collaborative negotiations (withdrawal obligation).

According to the Constitutional Court , this obligation to withdraw does not prevent the right to a free choice of lawyer. This right continues to exist in full in other cases and, moreover, the participants freely choose to take part in the collaborative negotiation.

The documents prepared and communications made in the course of the collaborative negotiation are confidential. On the other hand, the information and documents that existed before the start of the collaborative negotiation are not covered by this confidentiality principle.

However, an essential feature of collaborative negotiation is the spontaneous provision of full disclosure of information. In order to prevent transferred information and documents from being used in the lawsuit that follows an unsuccessful collaborative negotiation, the parties may agree in writing that this information is subject to the confidentiality of article 1745, §3 in conjunction with article 1728 Ger. W.

The collaborative negotiation process shall proceed as follows:

  1. Initial consultation between the collaborative attorney and his client;
  2. Collaborative lawyers contact each other;
  3. Preparation of the collaborative negotiations by the collaborative lawyer and the client;
  4. Preliminary consultation between the collaborative lawyers;
  5. First collaborative consultation session (first meeting);
  6. Debriefing between the collaborative lawyer and the client and between the collaborative lawyers themselves;
  7. Further preparation meetings with the client and consultation sessions between the participants and the collaborative lawyers;
  8. Draft text of the agreement.

After the clients agree to the draft text of the agreement, the lawyers organise a signing session. As a last resort, the participants and collaborative lawyers will then formally confirm and sign the agreement.

A collaborative negotiated agreement is in principle legally enforceable (settlement agreement). The facts and rights of the parties are laid down in a binding way. If the parties have made mutual concessions, this is referred to as a settlement agreement.

This agreement is binding on the parties and is therefore, in principle, non-confidential.

Note: this agreement can be enforced in court. If necessary, the collaborative negotiating agreement can be converted into an enforceable title by including it in a notarial deed or in a court order.

Authors:

Roxanne Sleeckx

Roxanne Sleeckx