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Labour law and related issues
Employees in Norway enjoy considerable statutory protection. The vast majority of employees in Norway are members of trade unions, and a majority of jobs in the private sector are with employers who are members of employers associations. Collective agreements are an important supplement to the statutory rules.
The relationship between employer and employee is largely regulated in statute. The Employment Act of 17 June 2005, which replaces the former Act from 1977, lays down minimum requirements for the work environment, the workplace, working hours, employment contracts, employment protection, dismissal, redundancy and summary dismissal. Other relevant legislation includes the Gender Equality Act 1978, the Discrimination Act 2005, the Civil Servants Act 1983, the Holiday Act 1988, the Temporary Lay-Off Act 1988 and the National Insurance Act 1997. In general, the legislation is designed to secure safe working conditions and to promote and strengthen employee protection.
8.2 Employment contracts
The general terms for wages and working conditions are largely governed by collective bargaining agreements between employers’ associations - or the individual employer - on the one part and labour organisations on the other. Collective bargaining agreements are binding and the parties to such agreements cannot enter into individual employment contracts that deviate from the terms of the existing collective bargaining agreements, regardless of whether the individual terms would improve or worsen the working conditions of the employee in question. However, the parties to an individual employment contract are free to agree to terms and/or conditions that fall outside the scope of the collective bargaining agreement. Norway does not have any statutory minimum wage. However, wage levels and minimum wages are in general laid down in collective bargaining agreements. Minimum wages may also be imposed pursuant to the provision of the Act relating to General Application of Wage Agreement 1993, see Chapter 8.5. The Employment Act requires that employment contracts be in writing. The contract must state factors of major significance for the employment relationship including a description of the place of work, the work to be performed, the duration and disposition of the agreed daily and weekly hours, length of breaks, the wage and wage payment procedures, supplements and other remunerations not included in the pay, for instance pension, the number of vacation days and the period of notice required upon termination of employment. As a general rule, a contract of employment cannot be for a fixed term and will run until it is terminated by one of the parties. However, the chief executive officer of a company and other particular occupational groups may be employed on fixed term contracts. Termination by the employer is subject to strict statutory requirements of fairness, see below. However, the Employment Act permits temporary employment contracts when “warranted by the nature of the work and the work differs from that which is ordinarily performed in the undertaking”. This includes seasonal labour and projects. Other groups explicitly listed include trainees and locums. An employee who considers his/her temporary employment is in breach of the legislation may institute legal proceedings. If the court finds in favour of the employee, the employment shall as a general rule become permanent. The employee may, in addition or as an alternative, claim compensation in the same way as for unfair dismissal, see below. An employee who has been temporarily employed for four consecutive years enjoys the same employment protection as a permanent employee. The same strict rules that apply to temporary employment also apply, as a general rule, to employees hired from temporary staff recruitment agencies. Hiring of employees from companies whose objective is not to hire out employees are not subject to the same rules, however, the hirer is obliged to discuss the hiring, and in some cases enter into an agreement, with the employees’ elected representatives. An employment contract may provide for a probation period of up to six months to give the employer the opportunity to evaluate the employee’s abilities. Dismissal during the probation period must fulfil the general statutory requirements of fairness (see below), or be based on the employee’s adjustment to the work, technical/professional skills or reliability. The employee’s protection against dismissal is not quite as strong during the probation period as after the expiry of this period. Furthermore, the employee is as a general rule not entitled to remain in his or her post during any legal proceedings, see below. Outside the scope of individual employment contracts, labour legislation and collective bargaining agreements, the employer is generally free to organise and regulate the work requirements. However, the Supreme Court has stated that a general principle of objectivity and sound practice and procedures applies to decisions made by the employer according to his management prerogative. As a matter of general employment law, employees are deemed to owe a duty of loyalty towards their employer. Norwegian law contains extensive rules prohibiting discrimination. Discrimination in the workplace on the grounds of gender, part-time or temporary employment, religion or belief, ethnic or national origin, political affiliation, trade union membership, sexual orientation, disability or age is strictly prohibited. Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation has been implemented into Norwegian law, see Chapter 13 of the Employment Act and the Discrimination Act. The prohibition against discrimination applies in all matters relating to the workplace and employment, including job applications. The employer is not allowed to ask about or attach weight to a job applicant’s or employee’s religion, colour, national or ethnic origin, political affiliation, membership of a trade union, sexual orientation or cohabitation, disability or age unless these issues are relevant to the employee’s work or to the job in question. The prohibition against discrimination against part-time and temporary employees was introduced in the 2005 Act and implements the Council Directive 97/81/EC on part-time work and Council Directive 99/70/EC on temporary employment. In addition to protection against discrimination, part-time employees have a preferential right to an extended position in circumstances where the employer otherwise would have created a new position. The preferential right is subject to the employee being qualified for the post and that the exercising of the right does not cause significant inconvenience for the employer. In addition, a preferential claim to new employment applies to employees who have been dismissed due to rationalisation measures or who have objected to transfer to a new employer in case of a transfer of undertaking, see below.
8.3 Trade unions
Trade unions have enjoyed a powerful position in the Norwegian labour market since the early 1900s. The two most important unions are the Norwegian Federation of Trade Unions (LO), representing employees, and the Confederation of Norwegian Business and Industry (NHO), representing employers. Both unions are umbrella organisations and consist of a number of smaller unions. They are actively involved in both political and judicial issues and have become powerful actors in Norwegian community and social life. The most visible impact of the unions is the extensive collective bargaining agreements that have been developed between them. LO and NHO are involved in most of the collective bargaining agreements entered into in Norway and have developed the so-called Main Agreement. The Main Agreement is a framework agreement that contains the general rights and basic rules in the workplace. The Main Agreement is incorporated into the first part of all collective bargaining agreements entered into by affiliated organisations. Several of the central provisions of the Main Agreement have become so widely practised that they have subsequently been codified in legislation and are thus binding on the entire work force regardless of any affiliation with a trade union. Collective bargaining agreements between employee and employer organisations usually have a duration of two years. The Main Agreement and some other agreements oblige the parties to maintain industrial peace for the duration of the collective bargaining agreement. This means that measures such as strikes and lockouts, etc., may not be employed during labour conflicts until the collective bargaining agreement has expired. Trade union negotiations during recent years have generally been peaceful and characterised by a large degree of consensus, although discussions relating to pension rights in recent years have led to strikes. In addition, the use of the National Wage Board to resolve conflicts has reduced the number of serious labour conflicts in Norway. Disputes about the validity or content of collective bargaining agreements and disputes arising out of the collective bargaining agreements are heard by a separate tribunal, the Industrial Court.
8.4 Working conditions
The Employmet Act contains compulsory rules regarding the environment and conditions in the workplace. The provisions of both individual employment contracts and collective bargaining agreements may provide for additional employee protection. In general, the Employment Act applies to employees at all levels. However, employees in management positions and employees in particularly independent positions are exempt from the statutory rules regarding working hours and overtime pay. Working hours are generally limited to 40 hours a week or 9 hours a day. Additional restrictions apply to shift work, Sundays and holidays. Overtime must be compensated by overtime pay amounting to at least 40% of ordinary salary and is only permitted when there is an exceptional and time-limited need for it. The Act gives employees the right to flexible working hours insofar as this does not cause considerable inconvenience to the employer. The Employment Act imposes a duty on the employer to provide a safe and secure working environment. An employer must provide good lighting, minimize noise and vibrations and ensure that the air quality indoors meets a certain standard. An employer must also take steps to secure the health and safety of employees against pollution, injury, fire, explosions etc. in the workplace. The Employment Act also emphasises the psychosocial working environment, and the employee shall not be subject to harassment or other improper conduct. The obligation to ensure compliance with the regulations in the Act will mainly rest with the employer. However, employees are obliged to take part in and cooperate on the implementation of measures to create a satisfactory and safe working environment. The employer’s responsibility is not limited to his own employees. The employer is also obliged to ensure a fully satisfactory working environment for contract workers and self-employed persons who perform tasks in connection with the employer’s activities or installations. Each workplace must appoint a personnel safety representative who shall ensure that these obligations are complied with. In addition, the working environment committee has particular duties and authorities in the health, security and environment work in the company. Working environment committees are obligatory for undertakings employing more than 50 employees and may also be required in smaller undertakings if demanded by one of the parties or the Labour Inspection Authority. Safety and environmental standards in the workplace are enforced by the Labour Inspection Authority. The 2005 Act introduced a right for the employee to raise concerns about malpractice in the workplace (whistle-blowing) and prohibits retributive action against the person who raises the concern. Any concerns must be raised in a proper and reasonable manner, which means that concerns should, as far as possible, be raised internally first. Nevertheless, the employee has a right to notify supervisory authorities or other public authorities. The employer has the burden of proving that a whistle-blower has acted in violation of the Act. If there has been any illegal retribution, the employee may claim a remedy regardless of whether the employer is at fault. The employer is required to establish routines and procedures at the workplace for internal whistle-blowing. The 2005 Act introduced regulations in regard to control measures. Such measures must be objectively justified by circumstances relating to the undertaking and shall not involve undue strain on the employees. The employer shall discuss such measures with the elected representatives and provide information to the affected employees before implementing such measures. Particular strict rules apply in connection with health information and medical examinations. The Personal Data Act 2000 applies to the employer’s handling of information of personal data.
8.5 Foreign employees
The Employment Act applies to all businesses that employ people in Norway, regardless of the nationality of the employer or the employee. The EEA agreement provides citizens of EU/EEA countries with free access to the Norwegian labour market (see EU decree no. 1612/68 regarding the free movement of employees). Thus, employees from other EU/EEA countries working for Norwegian companies are employed on the same terms as Norwegian citizens, and job seekers from other EU/EEA countries can compete for positions in Norwegian companies on the same terms as Norwegians. Citizens of countries outside the EU/EEA must apply for a work permit before accepting employment in Norway, see Chapter 8.4 above. In order to prevent social dumping, minimum wages may be imposed pursuant to the provision of the General Application Act. According to the Act, the Tariff Board may decide that a nationwide wage agreement shall apply in full or in part to all employees carrying out certain work. Under regulations of 2005, the collective bargaining agreements for construction sites in Oslo and in some other counties have been made generally applicable, so that all employers are obliged to pay foreign workers at least the minimum wage prescribed in these collective bargaining agreements.
8.6 Employee participation in the management of the workplace and regulations regarding information and discussion
The Norwegian Constitution gives employees the right to participate in the management of the workplace. Both the Limited Companies Act 1997 and the Public Limited Companies Act 1997 entitle employees to representation on the board of directors if the company has more than 30 employees. The number of employee representatives on the board varies depending on the total number of employees and whether the company has a corporate assembly. Employee directors have the same powers and responsibilities as directors appointed by the shareholders, but cannot be removed by the shareholders. Limited companies with more than 200 employees are required to have a corporate assembly, where the employees have a right to be represented. However, the company and a majority of the employees or trade unions representing at least two-thirds of the employees may agree that the company shall not have a corporate assembly, even if the number of employees exceeds 200. Employee representation is limited to one third of the total number of the members of the corporate assembly, whilst two thirds of the members are elected by the general meeting of shareholders of the company. The Employment Act has several provisions regarding information and discussion. The main purpose of these regulations is to ensure that the employees receive updated and adequate information of relevance to their employment. Chapter 8 of the Employment Act implements Directive 2002/14/EC into Norwegian law and contains general provisions regarding information and discussions. These provisions only apply to companies that employ more than 50 employees. In addition, the Act has several provisions that will apply to particular situations, for instance in connection with collective redundancies and transfers of undertakings, see below. Furthermore, most collective agreements contain detailed regulations on the employer’s duty to inform and consult the employees’ representatives.
8.7 Holiday rights and holiday pay
Minimum holiday rights for employees are laid down in the Holiday Act, which grants an employee a minimum right of twenty-five working days’ holiday per year. The term “working days” includes Saturdays. Employees over 60 years of age are entitled to an additional six working days’ holiday leave. The holiday year runs from 1 January to 31 December. Many collective agreements, including tariff agreements between LO and NHO, grant extended holiday rights and five weeks’ holiday is now quite common in Norway. As a general rule, an employee is entitled to eighteen consecutive working days’ holiday leave during the period 1 June and 30 September. An employee is also entitled to take the remaining seven working days’ holiday together. Employees are entitled to take holiday irrespective of whether they are entitled to receive holiday pay. On the other hand, an employee may normally refuse to take holiday in so far as he is not entitled to holiday pay that would compensate him for loss of salary during absence on holiday. The employer must discuss the fixing of holiday dates and setting up of holiday lists with the employee or employees’ representative well in advance of holidays. This must be done in due time before the holiday starts and at least two months before. However, it is the employer who makes the final decision if the parties disagree. Holiday pay for a current year is calculated on the previous year’s remuneration for work. Holiday pay amounts to 10.2% of the previous year’s remuneration if the employee is entitled to twenty-five working days’ holiday. The amount is 12% if an employee is entitled to five weeks’ holiday under an individual or collective agreement. Holiday pay is paid on the last normal pay day before the main holiday, i.e. the summer holiday. The last pay day is normally in June. In June, the employees will receive holiday pay plus an amount equal to the difference between normal working days in June and the holiday pay, if any. An employee may nevertheless demand payment of holiday pay at the latest one week prior to the beginning of the holiday. When employment is terminated, all holiday pay entitlements are to be paid on the last normal pay day before the post is vacated.
8.8 Social security
Norway has an extensive social security system ensuring financial support for all citizens during times of illness and unemployment, etc. The rules are contained in the National Insurance Act 1997. Employees who are sick are entitled to sick leave and have the right to full compensation for the salary they would have earned during the period. Sick pay covers 100% of the salary, within an indexed maximum limit that currently amounts to NOK 400,872 per year (up to six times the Base amount – NOK 66,812 per 1 May 2007). There is a self-certification scheme whereby an employee is entitled to sick leave and sick pay for up to four periods of three days without having to provide a doctor’s certificate. Any absence exceeding three days requires a doctor’s certificate. The first 16 days of sick pay are paid by the employer, after which the obligation is transferred to the National Insurance. To reduce the period of absence and to encourage a faster return to work, both the employer and the employee are obliged to prepare a follow-up plan and the employee shall as a general rule as soon as possible try work-related activities. An employee can claim sick pay for up to one year. Longer periods of absence due to sickness are covered by rehabilitation pay and, if necessary, a disability pension. Those who become unemployed have a right to unemployment benefits amounting to two thirds of their former salary. The maximal benefit basis is, as for sick pay, six times the Base amount. Employees are also covered by the Occupational Injuries Insurance Act 1989. The provisions of this statute require an employer to insure his employees against occupational injury or illness. This insurance must provide full compensation for loss of income caused by injury or illness arising in the workplace. Employees have the right to pay during maternity and paternity leave. The compensation is either 80 per cent of the salary for 54 weeks or 100 per cent for 44 weeks. For leave of absence due to adoption the compensation is either 80 per cent of the salary for 51 weeks or 100 per cent for 41 weeks. Compensation during this period is covered by the National Insurance. Parental benefits cover the loss of income within an indexed maximum limit of six times the Base amount, currently NOK 400,872 per year. Many public and private sector employers make up any differences between their employees’ actual salaries and the statutory entitlement. The period of maternity/paternity leave may be shared by the parents in any way they see fit, provided however that three weeks before the birth and the first six weeks after the birth are reserved for the mother and six weeks are reserved for the father. Furthermore, parents have the right to take leave of absence for an additional year without compensation. Parental benefit may be combined with reduced working hours. The benefit is then reduced, but the period is extended. Employees who return to work after maternity or paternity leave are entitled to the same position they held before the leave of absence. Employees are also entitled to take paid leave of absence for a certain number of days each year to care for their children when they are sick. An employee has the right to an old-age pension upon retirement. The normal retirement age is 67. In addition, disability pensions are available to persons who become permanently disabled before the normal retirement age. The Norwegian pension system is financed from income tax revenues. The state pension system is based on two principles. First, the pension is intended to ensure a minimum standard of living for its recipient. Secondly, it is intended to maintain the recipient’s accustomed standard of living. Pensioners who formerly earned high incomes will therefore in general be entitled to higher old-age state pensions than pensioners who formerly earned low incomes. The amount of the pension is based upon previous tax returns, which in turn are based upon the employee’s taxable income. Private pension plans have gradually become more common as a supplement to payments by the State. Several companies and labour unions have organised collective pension plans for their employees and members. Many employees are thus entitled to an “AFP” pension pursuant to a contractual pension scheme from 62 years of age. With effect from 1 July 2006, the Occupational Pension Schemes Act obliges all employers to have occupational pension schemes for their employees that give employees a right to an old-age pension in addition to the State pension. The employer is obliged to pay an annual contribution to the pension scheme for each employee. This contribution must constitute a minimum of 2% of the employee’s salary.
8.9 Termination of employment8.9.1 Ordinary dismissal and redundancy
As mentioned above, employment contracts are not generally limited by a period of time and most employment relationships are terminated either by resignation by the employee or dismissal by the employer. The Employment Act provides that a dismissal must be objectively justified due to circumstances relating to the operation of the business, the employer or the employee. This applies to both individual and collective dismissals. The requirement is absolute and cannot be contracted out of. There is one exception to this rule: the provisions of the Employment Act relating to dismissal/redundancy do not apply to the chief executive officer of the company if he or she has contractually agreed to waive such rights in return for payment upon termination of employment. Unlike in many European countries, Norwegian employment legislation does not specify or indicate by way of example what kind of conduct on the part of the employee is sufficient to justify a dismissal. This must be determined on the basis of a consideration of all of the circumstances of the case. In individual dismissals based on the conduct of the employee, there is no statutory obligation to give a written warning or to consider other suitable available work for the employee, but these are circumstances that are often taken into account in the consideration of whether the dismissal was justified. In cases of redundancy, both the rationalisation measures and the individual dismissals must be justified. The employer shall weigh the needs of the enterprise against the disadvantage for each employee. There is a statutory duty to consider whether the employee can be given suitable alternative work within the enterprise and dismissal will not be deemed to be justified if the employer has other suitable work to offer the employee. The requirement that the dismissal must be objectively justified also obliges the employer to consider less drastic alternatives than redundancy, for instance temporary lay-off. The law does not prescribe selection conditions other than the previously mentioned requirement thatthe notice must be ”justified”. The most common selection conditions are based on a combination of the principles of length of service and qualifications, at the same time as individual and social circumstances are taken into account. Employees with a considerable length of service and seniority enjoy stronger protection. Most collective bargaining agreements lay down a seniority principle that applies unless there are grounds for deviating from it. Employees who are made redundant have a preferential claim to new employment for 12 months after the expiry of the notice period, provided the employee is qualified for the vacant post and the employee has been employed by the company for a total of at least 12 months within the past two years. Certain employees enjoy special protection against dismissal. Sick or injured employees cannot be dismissed on the grounds of sickness or injury during the first 12 months after the sickness or injury took place. Pregnant employees cannot be dismissed on the grounds of pregnancy and employees who are serving military or civilian service cannot be dismissed on the grounds of absence for this purpose. Employees who are on maternity, paternity or adoption leave for up to one year, cannot be given notice of dismissal that becomes effective during this period. In the case of collective redundancies, i.e. dismissal of more than 10 employees within a period of 30 days, the employer has a duty to inform and consult with the employee representatives. The Employment Act implements into Norwegian law Council Directive 75/129/EEC, as amended by Council Directive 92/56/EEC, relating to collective redundancies. An employer who is considering collective redundancies shall as early as possible hold meetings with the employee representatives with a view to reaching agreement in order to avoid a collective redundancy or to reduce the number of dismissals. The Labour and Welfare Service shall also be notified, cf. the Labour Market Act 2004. Redundancies and other rationalisation measures must also be considered by the company’s working environment committee, if such exists. Working environment committees are obligatory for employers that employ more than 50 employees. In case of reorganisation processes that cause changes of significance to the employee’s working situation, the employer is obliged to ensure the necessary information, participation and competence development that is required to ensure a fully satisfactory working environment. Whether the dismissal is individual or collective, the company is obliged to discuss the situation with the employee and his or her representative, if any, before making any decision to dismiss an employee. The purpose of the meeting is to give both parties the opportunity to present their case, to clarify any misunderstandings and, where appropriate, to discuss alternatives to dismissal e.g. a severance agreement. The employee is entitled to be assisted by an employee representative or any other self-appointed advisor at the discussion meeting. There are strict procedural rules that have to be satisfied when dismissing employees. Failure to comply with the procedural rules shall, as a general rule, lead to a finding that the dismissal was unfair and unjustified. A notice of dismissal must satisfy certain formal requirements, including information about the employee’s rights. It must be in writing and be delivered to the employee personally or by registered mail. The notice of dismissal need not contain a reason for the dismissal. However, the employee can request an explanation for the dismissal and it is therefore normal to give a short explanation for the dismissal in the notice. The period of notice is often stipulated in the contract of employment. If not, the statutory period of notice is usually one month. Employees of senior age combined with a long period of service, are entitled to longer notice, up to a maximum of 6 months. Until notice of dismissal has been given, the employer cannot agree with the employee on a mutual notice period shorter than one month. There is no statutory right to severance pay in Norway. The only payment that the employee is entitled to, is payment during the period of notice in accordance with the terms of employment. Notwithstanding, many employers choose to offer some kind of severance package including, for instance, job-training, education, release from the duty to work and severance pay, etc. The right to such benefits is normally conditional upon the employee entering into a termination agreement whereby the employee, inter alia, waives the right to institute legal proceedings pursuant to the Employment Act. Termination agreements may be entered into before the employee receives notice, or the parties may reach an agreement after notice is given. An employee who considers a dismissal to be unfair or unreasonable may contest it and claim that it was invalid and/or claim damages. If a dismissal is contested, both parties can, within certain time limits, demand that negotiations are held after notice is given. Both parties may be assisted at such negotiations. If the negotiations are not successful, or if no negotiations are held, the employee may institute legal proceedings. Provided that the notice of dismissal complied with the formal requirements, the time limit for instituting proceeding is eight weeks from the conclusion of negotiations or, if negotiations were not held, from the date when notice of dismissal was received. If the employee’s claim is limited to damages, the time limit for instituting proceedings is six months. Provided that the employee institutes proceedings within eight weeks from the conclusion of negotiations or, if negotiations were not held, from the date when notice of dismissal was received, and within the notice period, the employee is, as a general rule, entitled to remain in his or her post during any ongoing legal proceedings pending final resolution. This right includes the right to perform ordinary work tasks and to receive wages and additional benefits until the parties have reached an agreement or the case has been legally and finally settled. The employer can apply to the court for an order that the employee shall vacate his or her post after the expiry of the notice period. Such an order can be granted at the discretion of the court if it finds that it would be unreasonable for the employment relationship to continue pending judicial determination. If the court finds in favour of the employee, the dismissal shall, as a general rule, be deemed to be invalid and the employee may continue in his or her employment. In exceptional circumstances, the court can, however, find that the employment shall be terminated, notwithstanding that the dismissal was invalid. The employee may also claim compensation for economic and non-economic loss as a result of the dismissal. Such compensation shall be at the discretion of the court having regard to the employee’s loss of income, any future losses and the other circumstances of the case. The employee may also be awarded legal costs.
8.9.2 Summary dismissal
An employer may summarily dismiss an employee, i.e. dismiss him without notice if the employee is guilty of a gross breach or other serious breach of the contract of employment. The Norwegian courts have adopted a strict approach in recent years and summary dismissals are only found to be justified in exceptional cases. The procedural requirements referred to above apply equally to summary and ordinary dismissals. However, an employee who contests the lawfulness of a summary dismissal is not entitled to remain in his post during any ongoing legal proceedings.
The 2005 Act introduces a general right for the employer to suspend an employee with pay in circumstances where there are grounds to believe that an employee is guilty of conduct that could justify summary dismissal pending the result of investigations. An employee can only be suspended if the needs of the employer’s business justify suspension. The employer is required to consider on an ongoing basis whether suspension is justifiable. An employee who considers the suspension to be unfair may institute legal proceedings and claim that the suspension is invalid. In addition, or as an alternative, the employee may claim compensation.
8.10 Temporary lay-offs
Temporary lay-offs are considered to be a less drastic measure than dismissal. Layoffs are executed by suspending the employer/employee relationship in accordance with the employment contract. Although Norwegian legislation does not directly regulate the employer’s right to lay off employees, certain rules have arisen from practice and the Main Agreement between LO and NHO. Even if an employer must also show good cause in the event of a lay-off, the burden is not as heavy as it is for dismissal. Still, the company must act reasonably in evaluating who should be laid off. An obligation to notify the Labour and Welfare Service may also apply. The employer pays salary for the first 10 days of lay-off in case of full lay-off or a reduction of at least 40 per cent in the working hours. If the working hours are reduced by less than 40 per cent, the employer’s period is 15 days. Employees who are temporary laid off are entitled to unemployment benefit.
8.11 Employee protections when the ownership of a company is transferred
The Employment Act contains extensive provisions on the rights of employees upon the transfer of an undertaking. The Act implements Council Directive 2001/23/EC – the Acquired Rights Directive. The provisions apply only where there is a transfer to a new owner, not where there is a transfer of shares alone. The transfer must concern an enterprise or part of an enterprise and must be as a result of a legal transfer or merger. Where only a part or parts of an enterprise are transferred, the provisions apply only to employees who have a primary factual connection to the transferred part. Generally, employees who spend at least 50% of their working time performing work tasks for the transferred part have a right to be transferred to the new owner. Hired workers and persons employed by an independent contractor who perform work for the transferred part, but who are not employees of the transferred part, do not have a right to be transferred to the new owner. The principal rule when an undertaking is transferred to a new owner is that the employment relationships of affected employees transfer automatically by law to the new employer with effect from the actual date of transfer, and that the individual employment terms and conditions of each employee remain unchanged after the transfer. The new employer is bound by the terms of the individual contract of employment, or of the employee’s individual terms and conditions pursuant to an existing collective bargaining agreement until it expires or is replaced by a new collective bargaining agreement. The 2005 Act decides that the new owner will be bound by any existing collective bargaining agreement as a whole unless he makes an express reservation against the agreement. Regardless, the new employer may in some cases be bound by the previous owner’s collective agreement based on general labour law principles laid down in case law. The 2005 Act also obliges the new owner to maintain payment of insurance premiums that guarantee the employees’ rights to old-age and invalidity benefits or benefits payable to surviving relatives in accordance with pension schemes. If the new employer has an existing pension scheme, he may elect to make this applicable to the transferred employees. If the employee’s previous pension scheme cannot be continued after the transfer, the new employer shall ensure the transferred employees the right to further earning of pension entitlement through another collective pension scheme.
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The previous owner and the new owner are obliged to discuss the transfer of the undertaking with the employees’ elected representatives as early as possible. The Act specifies the information that is to be given, and the same information shall also be given to the affected employees. Most collective agreements also contain regulations in regard to information and discussion. The transfer of an undertaking in itself is not sufficient grounds for dismissing employees. Furthermore, the Employment Act contains provisions on the rights of employees’ representatives’ after a transfer. The 2005 Act introduces a right for an employee to object to transfer to the new employer. This is not a right to remain employed by the previous employer. However, the Norwegian Supreme Court has found that an employee will be entitled to remain employed by the previous owner if the transfer implies substantial and real change in the employees’ employment terms or conditions. An employee who exercises his or her right to object to the transfer has a preferential claim to new employment with the previous employer for one year from the date of the transfer. The preferential claim is subject to the employee being qualified for the vacant post and having been employed by the company for a total of at least 12 months during the two year period prior to the date of transfer.