An employment contract is binding for both an employee and an employer. The employment contract includes rights and obligations for the employee and the employer. An employee is obliged to perform work and has the right to be paid for work performed. A significant delay in paying wages may constitute a breach of obligations by an employer, giving the employee the right to terminate the employment according to Section 4(3) of the Employment Protection Act. The employee may also be entitled to compensation according to Section 38 of the Employment Protection Act if an employer violates this law.
The main obligation of an employer in an employment relationship is to pay the employee's wages. If the employer fails to fulfill this obligation, the employee has a wage claim against the employer and the right to take legal action against the employer for the amount equivalent to the wages. When an employee has a claim against the employer, it means that the employer owes money to the employee for the wage amount. The due date is the day when the wages should have been paid out. If the employer has not paid the wages to the employee on the due date, the employee is entitled to late payment interest until the wages are paid, as specified in Section 3 of the Interest Act. However, it should be noted that the law in Section 1 of the Interest Act applies only when nothing else has been agreed upon.
If an employer fails to pay the wages on time or withholds the wages, the employer may be in violation of a collective agreement and may be required to pay compensation according to Sections 54-55 of the Act (1976:580) on Co-Determination in the Workplace (MBL), provided that the employer is bound by a collective agreement.
