Can the employer be liable for damages for employees' acts of corruption?

Under Norwegian law, the employer can be held liable for acts of corruption committed by employees. It follows from the Damages Compensation Act (skl.) § 1-6 first paragraph. The provision entered into force in 2008 and has its background in the Council of Europe's civil law convention on corruption of 4 November 1999 (ETS no. 174). Below we explain the conditions under which the employer can become liable for damages under the provision. We also provide some general advice on how employers can avoid liability for employees' acts of corruption. At the same time, we emphasize that every situation is unique. Knowledge of the actual conditions is required to be able to assess the risk of liability under the provision. 

Conditions for compensation

The starting point in Norwegian tort law is that a legal basis (basis of liability) is required for an injury to be borne by someone other than the person who suffered the injury. The Compensation Act § 1-6 first paragraph is such a basis for liability. In tort law, there are four main conditions for there to be liability for damages. There must be one Damage, to which a must be attached basis of liability to. The must be able to demonstrate one causation between the damage and the basis of liability, and this must be considered to be predictable or adequate. 

The starting point according to Section 1-6 first paragraph of the Damages Compensation Act is that the injured party can, under certain conditions, make a compensation claim both against the person responsible for the corruption and against the responsible person's employer. This is a special provision, which comes in addition to the general employer's liability which follows from § 2-1 of the Damages Compensation Act. The provision reads as follows:

The employer can only be held liable if the employee, for his part, fulfills the liability conditions according to skl. § 1-6 first sentence. It is therefore necessary to look at the conditions in the first sentence in order to assess any employer liability. 

Below is an overview of the application of skl. § 1-6 by answering three very central questions: 

1. Who can claim compensation? 
2. In which cases is the causal relationship requirement met?
3. When can the employer become liable for damages? 

Under question 3, advice is given to companies on how they can avoid liability for damages for employees' acts of corruption. 

1. Who can claim compensation?

The person who has "suffered damage"

Anyone who has "suffered damage" as a result of corruption can claim compensation according to skl. § 1-6 first paragraph. Where there is damage, the injured party must, based on the fundamental consideration of restitution in Norwegian tort law, be put in the same financial situation as before the damage occurred.

It is the directly injured party who can claim compensation. An injury can be any material, personal or property damage. It is the financial loss for injured parties that must be covered. 

The injured party can be a natural person or an enterprise/business. If an employee has received or given someone a bribe or has been guilty of influence peddling, the employer may be directly harmed as a result of the employee's acts of corruption. In such situations, the employer can demand compensation from the employee. 

In cases where a supplier who submitted the best offer in a tender was not selected as a result of corruption, the supplier can demand compensation from the person or persons who committed the act of corruption. Compensation can be demanded from the supplier who used bribery or influence peddling to get the contract in competition with other suppliers. It may also be relevant to demand compensation from the company that was corrupted in connection with the announcement of a tender and/or from the employee who took part in the act of corruption itself. 

2. In which cases is the requirement for causation met?

The damage a "consequence of corruption"

In order for the injured party to be able to claim compensation under § 1-6 of the Damages Compensation Act, the damage must be a "consequence of corruption". The concept of corruption coincides with that used in § 387 of the Criminal Code, and also includes illegal influence peddling according to § 389 of the Criminal Code. In this context, it refers to the objective the description of the offense in the sentencing notices, and not those subjektiv to the conditions of criminality. The provision covers both the fact that the company or employee is the one who gives or offers someone an undue advantage, and cases where the company or employee for themselves or others demands, receives or accepts an offer of an undue advantage which is to be considered corruption. 

The wording "as a result of" invites an assessment of whether there is a causal connection between the loss suffered and the act of corruption. This is an expression of the general doctrine of conditions that applies in Norwegian tort law, i.e. that compensation requires that there is an adequate causal connection between the tortfeasor's behavior and the result of the damage. If the financial loss would still have occurred if the tortfeasor's acts of corruption were not considered, there would be no grounds for claiming compensation.

3. When can the employer become liable for damages?

Whoever, with "intention or negligence", is responsible for the corruption

After skl. § 1-6 no. 1 first sentence, the injured party can claim compensation from the person who with "intention or negligence is responsible for the corruption or for complicity in the corruption". The culpability requirement under the provision is lower than the culpability requirement under the Criminal Code's corruption provisions. The milder liability requirement according to skl. Section 1-6 first paragraph, seen in the context of the more relaxed proof requirement that generally applies in civil law cases, enables legal prosecution under the Damages Compensation Act to a significantly greater extent than under the Criminal Code. 

The employer is liable for corruption damage caused by the employee

If the employee has committed corruption, the injured party can initially demand compensation from the relevant employer. 

The injured party can claim compensation from the responsible employer. An employer will be anyone who has someone in their "service". It includes companies, the state, municipalities, etc. In this lies a responsibility for the employer for both permanent and temporary employees, and for the person the employer uses to carry out individual tasks for him, regardless of whether the person in question receives a salary or remuneration for his work. 

Questions may be raised as to whether the employer can also become liable for damages for agents, distributors, commissioners or others who act on behalf of the business. A central question in this context will be how far the concept of employee extends in the context of compensation law. This is stated in the preparations for skl. § 2-1 (Ot.prp. no. 48 (1965-1966) p. 79) that the term employee does not only include workers and white-collar workers, but also "overall the entire scale of the activities carried out in the employer's service from top to bottom". 

The starting point is that the employer's liability for injury applies to anyone who does work or performs duties in the employer's service. Self-employed contractors fall outside the definition of employee. Self-employed contractors perform work or duties for the employer, but not in the employer's service.  

The employer's liability also includes so-called anonymous and cumulative errors. This means that the employer can become liable for damages for an act of corruption committed by one or more people in the employer's service, even if it is not possible to identify the person responsible. 

Furthermore, it is a condition for the employer's liability that the corruption has occurred "in connection with the performance of work or duties for the employer". Actions or omissions made by the employee as a private person, which do not affect the work for the employer, do not entail any liability for the employer.

Acts of corruption in or with connections abroad

Liability for compensation may also apply in situations where the corruption takes place abroad or where the damage occurs abroad, as long as the person responsible or his employer is domiciled in Norway. Companies that operate abroad therefore have a responsibility to inform their employees abroad about the rules that apply under Norwegian corruption regulations.

How can the employer be exempted from liability for damages?

The employer can be exempted from liability under the provision if the employer can demonstrate that "all reasonable precautions" to avoid corruption have been taken and that liability would also not be "reasonable" to impose after an overall assessment of the circumstances of the case. These are two cumulative terms. It is the employer who has the burden of proof that the conditions have been met.

How can the employer protect itself from liability for damages for employees' acts of corruption?

Employers can protect themselves against liability for employees' acts of corruption by taking "all reasonable precautions". What is required for "all reasonable precautions" to be met will depend on a specific assessment in the individual case. In the preparations for the Damages Compensation Act, it appears that the aim of the formulation is for it to have a preventive effect. Every business is required to pay considerable attention to its own anti-corruption work. In accordance with the preparations for the provision, it is, among other things, natural to take into account the nature of the business.

Even if the employer demonstrates that reasonable precautions have been taken, a reasonableness assessment must also be carried out. In order for the employer to avoid paying compensation for the employee's acts of corruption, the employer must prove that it would not be reasonable to impose compensation liability after an overall assessment of the circumstances in the case. The preparatory work indicates that guidance can be sought in the practice that has developed in connection with the general employer's liability, where conditions that can exempt the employer from liability are highlighted. It is mentioned, for example, that the size of the damage and the employer's financial situation will be taken into account in the assessment. Consideration should also be given to whether the corruption and the employee's duties were closely related, and thus also whether the action was foreseeable for the employer. 

The provision shall strengthen the employer's responsibility for acts of corruption. The employer is considered to be more likely to bear the consequences of an act of corruption carried out in the employer's service.  

The best way for an employer to protect itself against liability for employees' acts of corruption is to prepare a well-functioning anti-corruption programme. This program must be adapted to the nature and size of the business. Among other things, the program must include a risk assessment, anti-corruption policy and routines and guidelines that are adapted to the business. A well-functioning anti-corruption program alone will not be able to protect the business against liability for employees' acts of corruption. 

Do you have questions about liability for acts of corruption or would you like advice on the company's anti-corruption programme?