Employees have recently increasingly found that their employers do not have the funds to pay their wages. What rights do you have as an employee when your employer suspends payments? Is there anything you can and should do to avoid losing your right to wages and vacation pay?

Insolvency of the employer

When someone is no longer able to pay their bills and this persists over time, while the value of their assets is less than their total debt, they are said to be insolvent. If your employer finds themselves in this situation and is no longer able to pay your salary and/or vacation pay, it is important that you know your rights.

If the business your employer runs ceases trading permanently, you should of course look for a new job. But what about the wages and vacation pay you have already earned but are unlikely to receive? As long as the company you work for is unable to pay you but continues to exist, you will normally have no prospect of receiving payment. You may have heard that there is a scheme whereby the government covers wages and vacation pay for employees when their employer is unable to pay. This is correct, but the prerequisite is that the employer goes bankrupt.

How to declare your employer bankrupt?

To declare someone bankrupt, a bankruptcy petition must be submitted to the district court (Oslo City Court in Oslo). The bankruptcy petition must explain and document your claim. For employees, this will typically involve attaching a copy of their employment contract and recent pay slips, and explaining the periods during which they have not received wages and/or vacation pay. You should also be able to document that you have tried unsuccessfully to collect the claim. In certain cases, a separate bankruptcy notice must also be served in advance on the person against whom bankruptcy is being petitioned.

It is worth noting that employees are exempt from what is known as requisitioner liability, i.e. a guarantee to cover the costs of estate administration, which as of January 1, 2017, amounts to NOK 52,450.

There are guides online on how to file for bankruptcy. However, we recommend that you seek professional help from a lawyer with experience in bankruptcy and wage guarantee cases to ensure that your employer is declared bankrupt as soon as possible and that you receive the best possible coverage for your claims. You can claim the legal fees you incur in this connection through the wage guarantee scheme, together with your wage claim.

What happens after bankruptcy proceedings are initiated?

When bankruptcy proceedings are initiated against your employer, the court appoints a lawyer as trustee. Among other things, he or she will assist employees in applying for coverage of their wage and vacation pay claims through the wage guarantee scheme. This is administered by NAV, and it is they who ultimately decide how much you will receive and who pay the money to you via the trustee.

Depending on whether the employees' wage claims are considered simple or complex, NAV's processing of the case may take from a few weeks to several months. If, for example, there are no payroll records or other documentation available from the employer, or if the employees do not have proper employment contracts and have worked on commission, an hourly basis or similar, the claims will quickly be classified as complex by NAV, and the case processing could take a long time.

In order to be entitled to unemployment benefits, it is important that you register with NAV as unemployed immediately after the bankruptcy proceedings have been initiated. Many people will experience a significant reduction in income when they switch from their regular salary to unemployment benefits. If it takes time before you find a new job and before you receive your outstanding salary and vacation pay through the wage guarantee scheme, we recommend that you contact your bank and others you owe money to, explain the situation, and ask to defer payment of installments and, if applicable, interest for a period of time. Most banks are understanding in such situations.

For more information about what you can claim through the wage guarantee scheme, who is entitled to coverage, etc., please refer to the article "Employee rights in the event of employer bankruptcy" elsewhere on this website.