Norwegian Labour Law

This overview of Norwegian employment law has been written by attorney Svein Steinfeld Jervell partner and co-leader of DALAN employment law department.

The outline is an overview of Norwegian Employment law. In order to contact us, please send an email to the author (jervell@dalan.no or post@dalan.no) or use our contact form.

1. Introduction

1.1 What is labour law?

Labour law, also known as employment law or labor law, regulates the employment relationship between employers and their employees. This relationship is often referred to as the individual part of labour law or individual labour law.

Labour law also has a collective aspect; it concerns the interaction between unions (which act on behalf of organized employees) on the one side and employers or employers’ organizations on the other side. That legal relationship has its origin in collective agreements into which the parties has entered.

In a broader sense, labour law also includes state sponsored or co-cosponsored benefits such as unemployment benefits, work assessment allowances, private and collective retirement pension etc.

1.2 National source of regulation of Norwegian labour law

The primal source of regulation of Norwegian Labour law is the Working Environment Act. The exception is employment within central government, which is regulated by the Civil Servant Act.

The Working Environment Act and the Civil Servant Act are similar, but there are some differences.

Different aspects of labour law are also regulated in other laws, for instance;

• the Personal Data Act
• the National Insurance Act;
• the Act of General application of Collective agreements etc;
• the Holidays Act;
• the Industrial Disputes Act; and
• the Civil Service Disputes Act.

A secondary source of Norwegian employment law are the different collective agreements, which most often contain regulation concerning wage settlements, working time, leave of absence (with or without pay). Some of the regulation in collective agreements, have created the basis for case law, for instance the regulation of temporary lay-off, se section 13 below.

Even though much of Norwegian labour law is regulated by law, an important source of Norwegian labour law is rulings, especially by the Norwegian Supreme Court and the Labour Court. The Labour Court has, among other things, authority when it comes to legal disagreements concerning collective agreements, rights or duties which arise from such agreements as well as industrial disputes.

1.3 International source of regulation of Norwegian labour law

Norwegian employment law is, in the same way as is the case within other European countries, influenced by EU regulation.

Norway is a part of The European Economic Area (EEA), which unite the current 28 EU member states and three participating EFTA in an internal market. A central cornerstone within EEA is the “four freedoms” e.g. – the free movement of persons, goods, services and capital. The four freedoms, especially when it comes to free movement of persons and services, influence Norwegian employment law.

Even though EU regulation must be brought into Norwegian law through national legislation to have effect, most EU regulation with regards to employment law has been implemented in Norway.

That is e.g. the case for;

• the Working Time Directive (2003/88/EC);
• the Posted Workers Directive (96/71/EC);
• the Temporary Work Agency Directive (2008/104/EC);
• the Collective Redundancies Directive (98/59/EC);
• the different discrimination directives;
• the Directive of the Transfer of Undertakings (2001/23/EC) and
• the Directive of General Date Protection Regulation (GDPR) (EU 2016/679)

The directives contain minimum requirements for employee’s rights, but member states are free to implement stricter regulation in favour of employees. In many areas Norway has implemented stricter regulation in favour of employees, as is the case in other European countries and as is required under relevant EU regulation.

1.4 Implemented measures to counteract social dumping

Norway has seen an influx in foreign labour on both permanent and temporary basis, also due to the EU expansions in 2004 and 2007. As a consequence, there has been political focus in combating what is seen to be breaches of minimum standards concerning health, safety and working regulations for employees as well as unreasonably low wages. This is often referred to as “social dumping”

Norway has thus, within certain sectors, implemented regulation with minimum requirements with regards to wages, payment of travel expenses, lodging, working clothes and other issues concerning health, safety and working conditions. The sectors affected by minimum requirement to counter social dumping, are;

1. construction;
2. the maritime constructions industry;
3. agriculture and horticulture;
4. cleaning sector;
5. fish processing industry;
6. freight transport industry;
7. hotels, restaurants and catering; and
8. passenger transport by tour bus.

Outside those sectors there are no minimum requirements with regards to pay, though there are minimum requirements concerning health, safety and working conditions as laid out in the Norwegian Employment Environment Act.

The Norwegian Labour Inspection Authority supervises compliance with above named regulation. Additional compliance seeking measures have also been put into place:

• Union or employee representatives may demand that employers (within the above-named sectors) provide documentation that pay and working conditions are in accordance with general applicable collective agreements.
• Contractors at the top of the chain are jointly liable for the obligations of their contractors further down the contractor chain as regards payment of a statutory minimum wage.

1.5 Characteristics of Norwegian Employment regulation

In many areas, Norwegian employment regulation goes further in protecting employees’ rights than is the case in other European countries, and which is required under EU-regulation.

Compared to other European countries, regulation is relatively strict when it comes to;

• protection of SHE (Safety, Health and Environment) for employees;
• dismissal of employees, especially when grounded on circumstances related to the employee;
• proceedable rules in dismissal processes;
• employment of employees on a temporary basis; and
• compensation for overtime and regulation of working time.

In addition, there is mandatory holiday pay, occupational pension, sickness and unemployment benefits and temporary redundancy pay. Some of those benefits, for instance sickness benefits and temporary redundancy pay, are paid for by the state after an initial employer financed period, see sections 7.3 and 13.3 below.

Another aspect which stands out in Norwegian employment law, is the importance of unions and employers’ organizations. Many aspects of Norwegian employment law are regulated through collective agreements into which employers have entered, either by themselves or through employers’ organizations.

Collective agreements often include provisions concerning wage policy, including conditions and procedures for pay rise, regulation concerning the right to leave of absence, contractual early retirement pension scheme (AFP) and pensions schemes etc.

The main employer organizations in Norway are:

• NHO
• Virke
• Spekter
• KS

Whereas the main trade unions in Norway are:

• LO
• YS
• UNIO
• Akademikerne

An employer is neither obliged nor has the duty to negotiate or enter into collective agreements. Unions nevertheless have the right to use labour dispute means – most often strike or blockade – to force through a collective agreement. Collective agreements are therefore voluntarily established, though some agreements have been reached through pressure from unions through strikes or blockade (boikott).

2.  When will Norwegian employment law have effect?  (Choice of law and legal forum)

2.1 Legal forum

In accordance with The Norwegian Civil Procedure Act Section 4-5 and Lugano Convention article 19 no. 2 a) an employee can initiate legal proceedings in the state where he or she is domiciled or in another state where the employee habitually carries out his or her work. If there is no such place, litigation can be established at the place where the business which engaged the employee is situated.

Norwegian law and courts place considerable emphasis on decisions made by the European Court of Justice, also concerning matters grounded on the Lugano Convention. The decision is to be based on an overall assessment, where the European Court of Justice has pointed out certain criteria for asserting where the employee is deemed to habitually carry out his or her work. Relevant criteria are; from where the employee receives instructions, where the employee organizes the work, where tools are located and where the employee returns at the end of his or her work assignments.

2.2 Choice of law

Whether or not Norwegian law would apply for the case depends on an overall assessment on where the case has its strongest connection. Relevant criteria are; where the work is to be performed, in which country the parties have entered into the employment contract, the nationality, the formulation of the employment contract including choice of law and language, the parties’ behaviour during the employment relationship etc.

3. Recruitment and employment

3.1 The employer’s freedom to choose whether to recruit

Whether or not to recruit, as well as when to recruit, is based on the choice of the employer and is not regulated by law. Given that the employer has reached a decision to recruit, the employer is bound by certain rules on how to proceed.

3.2 Employment on a permanent basis

The main rule is that labour is supplied through employment on a permanent basis. In accordance with the Working Environment Act Section 14-9, temporary employment may nevertheless be agreed upon:

1. when the work is of a temporary nature,
2. for work as a temporary replacement for another person or persons,
3. for work as a trainee,
4. with participants in labour market schemes under the auspices of or in cooperation with the Labour and Welfare Service,
5. with athletes, trainers, referees and other leaders within organized sports or
6. for a maximum period of twelve months. Such agreements may apply to a maximum of 15 percent of the employees of the undertaking, rounded off upwards, but temporary employment may be agreed upon with at least one employee.

If temporary employment can no longer be grounded on the above-mentioned alternatives, the employee may be deemed as permanently employed, given that he or she initiates legal proceedings with a claim to be in fact permanently employed, cf. the Working Environment Act Section 14-11.

If a temporary employment is ended, e.g. due the expiration of a temporary commission, and the employee initiate legal proceedings claiming to be in fact permanently employed (thus disputing the termination), the termination might me deemed as invalid and the employee permanently employed. The employer would then be liable to damages for economic and non-economic loss pursuant to the Working Environment Act § 15-12.

3.3 An employer’s right to attract labour through other alternatives (contractors, temporary work agencies etc.)

An employer can attract labour through contractors, either temporary work agencies or through other means, but there are restrictions.

According to the Working Environment Act Section 14-12, an enterprise can only hire labour from a temporary work agency to the extent there is access to temporary employment under Section 14-9 of the Working Environment Act, ref section 3.2 above. Hiring through temporary work agencies might thus be a reasonable alternative when unforeseen fluctuations or seasonal peaks arise.

Temporary work agencies are required to register their activity with the Norwegian Labour Inspection Authority.

Seasonal peaks can be met through posted workers from abroad, though within certain sectors, as mentioned in point 1.4, there are minimum requirements which must be met when it comes working conditions and wage.

Labour can also be hired from undertakings whose sole object is not to supply labour (temporary work agencies) given that the following conditions are met:

• The hired worker is a permanent employee of the undertaking from where he or she is hired
• No more than 50 percent of the undertaking hiring out is engaged said activity
• The hiring out must take place within the main areas of activity of the undertaking
• Hiring of labour must be discussed with employee representatives and in certain cases agreed upon beforehand

Labour can also be attracted though contractors, though the contractor may be deemed as in fact employed, due to an overall assessment of the relation between the contractor and the employer. In accordance with the Working Environment Act Section 1-8, an employee is defined as anyone who performs work in service of another. It has been determined that the definition of employed is to be interpreted widely.

Certain criteria have been laid out which indicate that he or she is considered an employee:

• An employee is obliged to provide his or her personal labour and cannot use an assistant or helper at his or her own expense
• The employee is obliged to subordinate himself or herself to the employer’s management and control of work
• The employer provides the work premises, as well as machinery, tools, work materials and other auxiliaries needed in performance of the necessary tasks
• The employee receives payment in some form of salary or wage
• The contractual relationship between the parties is deemed as stable, predictable and is terminable within certain deadlines
• An employee usually works for one employer.

3.4 Who to employ? The employers right to choose employee

As a main rule, an employer has the right to choose who to recruit. The exception is within the public sector, where the employer must choose the employee deemed as most qualified for the position.

Certain employees might have a preferential right to employment:

• Employees who have been made redundant within the last 12 months and who are qualified for the new position, have a preferential right to that position, rather than that employer creates new position, see the Working Environment Act Section 14-2
• Employees who are temporarily engaged and who, owing to circumstances relating to the undertaking, is not offered employment, has a preferential right to a new position, given that they are qualified, see the Working Environment Act Section 14-2 (2). However, this does not apply to employees engaged as temporary replacements
• Part-time employees have a preferential right to an extended post, rather than that the employer creates new positions in the undertaking, see the Working Environment Act Section 14-3. The part-time employee must be qualified for the post, and the exercise of the preferential right must not involve significant inconvenience for the undertaking

It is furthermore forbidden to directly or indirectly discriminate based on gender, pregnancy, parental leave or care, ethnicity (including national origin, lineage, colour or language), religion, perception on life, disability, sexual orientation, gender identity, gender expression, age, or a combination of these reasons. It is also forbidden to discriminate based on political views or membership of employee organizations on appointment.

If a job applicant submits information substantiating discrimination, the employer has the burden of proof that such discrimination has not occurred, see the Working Environment Act Section 13-8.

3.5 Job ads and job interviews

There are restrictions about what to write in job advertisements and which information to obtain through interviews or by other means.

The employer must not when advertising for new employees or in any other manner request applicants to provide information concerning their views on political issues or whether they are member of employee organizations. Nor must the employer implement measures to obtain such information in any other manner, see the Working Environment Act Section 13-4.

It is furthermore forbidden to advertise a position just for one gender or to otherwise directly or indirectly discriminate as laid out in point 3.4 above.

4. Employment

4.1 The employment contract

The employment, whether part-time or fulltime, on a permanent or temporary basis, must be subject to a written contract of employment, see the Working Environment Act Section 14-5. The employment contract must state the factors of major significance for the employment relationship, including;

• The identity of the parties
• The place of work
• A description of the employee’s title, post or category of work
• The date of the commencement of the employment
• Whether or not employment is of a temporary nature, and if so, its expected duration and basis
• Provisions regarding a trial period, periods of notice for dismissal, pay, right to holiday and holiday pay, duration of agreed daily and weekly working hours (including length of breaks).

The full list of which factors an employment contract must include is laid out in the Working Environment Act Section 14-6.

An employment contract could also contain non-compete clauses, non-solicitation clauses, provisions of duty of confidentiality concerning business practices / know-how, ownership to intellectual property created in the line of work etc.

4.2 The importance of the employment contract

The employment constitutes what is viewed as agreed upon between the employer and the employee. The contract will thus give guidance as to which rights and duties have been agreed upon between the parties.

If individual rights have been established for the employee, it could limit the employer’s management prerogative, for instance if the employer wishes to make changes in place or time of work. The employer’s freedom to manage is thus often constrained by what has been agreed upon between employer and employee, as laid out in the employment contract.

Given that there has been changes in the employment relationship, each party can demand the changes reflected in the contract of employment, see the Working Environment Act Section14-8. Violation of the provisions concerning a written employment contract, can lead to reactions from the Labour Inspection Authority. Current remedies are orders, coercive fines, halting of work or administrative fines or penal provisions, see the Working Environment Act Sections 18-6, 18-7, 18-8, 18-10 and 19-1.

Furthermore, certain provisions must be reflected in a written employment contract to be valid or to have effect. This applies to amongst other things a trial period.

4.3 Non-compete clauses

A non-compete clause is a clause limiting the employee’s freedom to take up a post with another employer, or to commence, operate or participate in other undertakings, following the termination of the employment. The regulation of non-compete clauses are laid out in the Working Environment Act Sections 14 A-1 – 14 A-3. There are certain restrictions concerning non-compete clauses:

• For a non-compete clause to be valid it must be in writing, either in the employment contract or in a separate document / agreement
• A non-compete clause may not be invoked on dismissal by the employer, unless the termination is justifiable based on circumstances relating to the employee
• On written enquiry from the employee, the employer shall, within four weeks, provide a written statement as to whether and to what extent the non-compete clause will be invoked
• If a non-compete clause is invoked, the employer shall pay the employee a compensation equivalent to 100 percent of the employee’s salary, limited to eight times the National Insurance basic amount (NOK 749 072 per 1 January 2017). Thereafter a minimum of 70 percent of the employee’s salary in excess of eight times the National Insurance basic amount, though limited to twelve times the National Insurance basic amount (NOK 1 123 608 pr. 1 January 2017).

4.4 Non-solicitation of customers clauses and non-solicitation of employee-clauses

A non-solicitation of customers clause is an agreement between employer and employee limiting the employee’s freedom to contact the employer’s customers following termination of employment. Such a clause may only apply to customers with whom the employee has had contact or for whom he or she has been responsible during the year prior to which the clause has been invoked, as laid out in the Working Environment Act Section 14 A-4 (3).

The clause does not prevent the customer from contacting the employee.  It is contact initiated by the employee which usually are regulated by costumer clauses.

Non-solicitation of employees’ clauses can be an agreement between the employer and other undertakings preventing or limiting the employee’s possibility of taking up an appointment in such undertaking. Such clauses are deemed as illegal, except for instances as referred to in the Working Environment Act Section 14 A-6 (2).

The non-solicitation of an employees’ clause may also be an agreement between the employer and the employee preventing or limiting the employee’s freedom to approach and recruit the employer’s other employees. Such clauses are not regulated, which means they can be freely agreed upon by the parties. Nevertheless, such agreements may in extreme instances be deemed as in breach of the reasonableness censorship in the Contract Act Section 36.

4.5 Clauses with compulsory time of employment

An employment contract is terminable by both parties with a notice period, even though the threshold for dismissal by the employer is high. An employment contract which is not terminable could constitute a provision to the detriment of the employee, and thus be in violation of the Working Environment Act Section 1-9 cf. Section 15-3.

It has still been accepted that an employer who pays for education may demand a compulsory service period in return for payment. The length of the compulsory service must be in proportion with the costs covered by the employer, or the provision might be in violation of the Working Environment Act Section 1-9 or the Contract Act Section 36.

4.6 The CEO (chief executive officer)

The company’s CEO (chief executive officer) is perhaps the most important position within the undertaking. He or she is responsible for the company’s management of day – to – day operations, see the Companies Act Section 6-2.  He or she is also responsible for the reporting of operations to the board.

The CEO reports to the board, is employed by the board and can only be dismissed by the board. It is not uncommon that the employment contract of the CEO contain;

• Non-compete clauses, customer-clauses etc;
• Bonus system and bonus schemes, stock option schemes;
• Provisions of confidentiality; and
• Termination payment provisions.

When it comes to termination payment provisions, the Working Environment Act Section 15-16 states that the employer may enter into written agreement with the chief executive of the undertaking;

• that disputes in connection with termination of the employment relationship shall be settled by means of arbitration; and
• that the CEO relinquish the job protection provisions pursuant to the Working Environment Act chapter 15 in exchange for compensation on termination of employment.

The CEO would be bound by such agreement. If such agreement has not been agreed upon prior to a dispute, the CEO would have protection from the dismissal in same way as any other employee. Though the threshold for what is viewed as justifiable termination are nevertheless lower, as the expectations for competence and capability of the CEO is higher. The issue of trust between the CEO and the board is also of greater importance. Breach of trust if founded upon reasonable conditions could thus more easily constitute grounds for dismissal of the CEO.

4.7 The employee’s trial period

The employer and employee may agree on a trial period for the employment. For such a trial period to have its effect, it is required that provisions for the trial period are included in a written employment contract, see the Working Environment Act Section 15-6 cf. Section 14-5.

The trial period may last for up to six months. If an employee has been absent from work during this period, the employer may extend the agreed upon trial period by a period corresponding to the period of absence, see the Working Environment Act Section 15-6 (4). The right to extend does not apply for absences caused by the employer and the employer’s right to possible extension must be agreed upon before employment. Lastly the employee must be informed prior to extension, and the right to extension must be reflected in the employment contract.

During the trial period an employee may be dismissed due to lack of suitability for work, lack of proficiency or reliability, see the Working Environment Act Section 15-6 (1). The threshold for dismissal with notice during the trial period is lower than is the case thereafter.

If an employee is to be dismissed with notice due to circumstances relating to the undertaking (for instance redundancy), ordinary rules for dismissal with notice apply, even though the dismissal takes place during the trial period.

5. The employer’s management prerogative

The employer has the discretionary power to manage its employees and the business. The employer’s management prerogative or freedom to manage include the freedom to organize, prioritize, control and direct the performance of its work and business. Decisions which can be based on the management prerogative, might include:

• Change of working time
• Change of office or department
• Change of position – removal or change of responsibilities or tasks.

The employer’s management prerogative is nevertheless limited by:

• The law (the Working Environment Act)
• Jurisprudence
• Collective bargaining agreements
• Employment agreements and contractual rights of employee’s
• So-called universal requirement for objectivity.

The “requirement for objectivity” means that the decision has to be based on correct facts and due process and not based on random or irrelevant circumstances.

Lastly the management prerogative cannot make changes to the fundamental characteristics of the position.

There have been several court cases concerning whether decisions by employers may be based on the management prerogative. Given that the decision is deemed as outside the management prerogative it might be viewed as a dismissal in combination with employment on new conditions. Such dismissal might be considered invalid, given that the mandatory rules for dismissals are not followed, or the dismissal is not viewed as justifiable in accordance with the Working Environment Act Section 15-7.

6. Working time

The Working Environment Act chapter 10 have detailed regulation when it comes to;

• working time;
• breaks and time off; and

6.1 The term “working time”

In accordance with the Working Environment Act Section 10-1, “working hours” is defined as the time when the employee is at the disposal of the employer. Off duty time means when the employee is not at the disposal of the employer. Whether or not time is considered working time depends on a concrete assessment of whether the employee is at the disposal of the employer, or not.

When it comes to time spent travelling, the Supreme Court concluded in Rt. 2001 s. 418 that travelling time to fixed or habitual place of work, is not to be considered working time.

In 2018 (HR-2018-1036-A) the Supreme Court furthermore concluded that time spent travelling to or from a location other than the employee’s fixed or habitual place of attendance, is considered working time. The ruling was in line with the European Free Trade Association (EFTA) Court’s advisory opinion (case E-19/16), which reached the same conclusion, based on the EU working time directive (2003/88/EC). The ruling might have broader implications. For instance, travelling time to courses has usually not been considered working time. It is not a given that the conclusion would be the same, due to the ruling from the Supreme Court and the EFTA Court.

6.2 Daily and weekly working time, overtime, overtime pay and time off in lieu

The prescribed limits to normal working time in the Working Environment Act are:

• 9 hours per 24 hours
• 40 hours per 7 days.

If the work exceeds those limits, or below set limits in the employment contract, the excess would constitute overtime with the right to overtime pay. Mandatory overtime pay is an increase of salary by 40 percent, although the increase is often set to 50 percent in collective agreements or employment contracts. The increments must be paid, the overtime hours may be paid in time taken off work instead of through payment (time of in lieu or banked time), see the Working Environment Act Section 10-6 (12).

There are limits as to how much overtime an employee is allowed work. The limits are laid out in the Working Environment Act Section 10-6.

The employer has the duty to keep an overview of the working time for its employees, see the Norwegian Employment Act Section 10-7. Worker representatives and the Norwegian Labour Inspection Authority may require viewing of these lists.

6.3. Work during night time and during weekends

The Working Environment Act Sections 10-10 – 10-11 concern regulation of working time on Sundays and during night.

Night work is prohibited unless the nature of the work makes it necessary. The employer has a duty to discuss night work with worker representatives, and night work would reduce working time.

Work during weekends is similarly forbidden unless the nature of the work makes it necessary.

6.4 Calculation of working time based on a fixed average for a certain period

Working time may be calculated based on a fixed average for a certain period, see the Working Environment Act Section 10-5. Such calculation would make the definition of working time more flexible, hence reducing the period of overtime. In practice an employee may work more than the normal working time (6.2 above) for a certain period, given that the worker takes time off in lieu in other periods. The average within the period must be within the limits of working time.

Calculation of a fixed term average must be agreed upon in writing between employer and employee, either through the employment agreement or through a written agreement or annex. It can also be laid down in a collective agreement between the employer and a union or be granted by the Labour Inspection Authority.

6.5 Exceptions; employee’s in leading or especially independent positions

Two groups of employees are, with some exceptions, exempted from the working time regulation in the Working Environment Act chapter 10. These groups are:

• Employees in managerial or leading positions
• Employees in “particularly independent” positions

Such employees are, among other things, not entitled to overtime pay.

Whether an employee is deemed as in managerial or leading position or in a particularly independent position depends on an overall assessment of the position.

The decisive factor in assessing whether the employee has a “managerial or leading position” is whether the work is of a leading nature. This must be assessed based on the job’s function, work and responsibilities. The provision must be interpreted in accordance with the Working Time Directive 2003/88 / EC, Art. 17 No. 1 (a).

To have a “particularly independent” position, the employee must, among other things, be able to control their own working hours or have flexible working hours. An especially independent position must also imply a clear and obvious «independence» as to which tasks they do themselves and which they delegate to others. They should also have the freedom to decide how and when tasks are to be performed.

6.6 Certain employee’s right to reduced working time

Four groups of employees have a right to reduced working time:

• Employees over 62 years have a general right to reduced working hours
• Health reasons
• Social reasons
• Important welfare reasons.

The underlying reasons need to be documented, for instance through a medical certificate. The precondition for reduced working time is that it will not cause significant disadvantage for the employer. Reduction in working time would reduce pay correspondingly. If the parties disagree on reduced working time, each party can bring the issue before the Dispute Resolution Committee, see the Working Environment Act Section 17-2.

6.7 Flexible working time

The parties have a right to agree to flexible working time. An employee is furthermore entitled to flexible working hours, if this can be arranged without major inconvenience to the undertaking, see the Working Environment Act Section 10-2 (3). Many collective agreements have regulations concerning flexible working time.

7. Wages (salary) and bonuses

7.1 The employee’s right to wages etc.

Outside the sectors as mentioned in 1.4, there is no minimum pay in Norway. However, a number of collective agreements have requirements for minimum pay.

The Working Environment Act has regulation concerning the procedures for payment of salary and for deductions in pay. Regulation concerning holiday pay, taxes (income tax and employers’ national insurance contributions) and payment of pension contributions is found in other laws.

The Working Environment Act Section 14-15 states that the written employment agreement must include regulation concerning wages, payment method and the of payment. Employees furthermore have a right to a written pay statement, which must show the method used for calculating the pay, the basis on which the holiday pay is calculated as well as any deductions made.

If the employer does not pay its wages it might constitute a breach of the employment contract. The employee may initiate legal proceedings to force through pay, but there is a period of limitation of three years, see the Limitation Act Section 2.

7.2 Deductions in pay

An employer cannot make deductions in pay outside the instances as laid out in the Working Environment Act 14-15. These instances are:

• Deduction authorized laid down by the law
• Deduction for the employees’ contributions to service pension schemes subject to the Company Pensions Act, the Contributory Pension Schemes Act or public service pension schemes
• Deduction stipulated in advance in a written agreement
• Deduction in accordance with a collective pay agreement, providing for the withholding of trade union dues, including premiums for group insurance linked to trade union membership or contributions to information and development funds or low-income funds
• Deduction for damage or loss suffered by the undertaking and caused wilfully or by gross negligence on the part of the employee in connection with the work, when the employee has acknowledged his / her liability in writing or it has been established by a court decision, or when the employee unlawfully terminates his / her employment.

An employer cannot make deductions in pay through the managerial prerogative, neither in a concrete case nor on a permanent basis. The deduction must be warranted in the Working Environment Act 14-15.

7.3 Wages and payment during sick leave (sickness benefits)

Employees who, due to sickness or injury, are occupationally disabled, have the right to sickness benefits, see the National Insurance Act Section 8-3 (1).

Sickness benefits equal full salary, but the employee is not entitled to a sickness benefit basis exceeding 6 G (national insurance base). Employers who advance sickness benefits, may nevertheless decide to pay sickness benefits exceeding the maximum amount. This is often agreed upon between the parties, for instance in the employment contract.

To be entitled to the benefits, the employee must;

• be occupationally disabled clearly due to sickness or injury;
• be a member of the National Insurance Scheme;
• have been working for the last four weeks; and
• lose pensionable income due to the occupational disability.

Pursuant to the National Insurance Act Section 8-19 the employer must pay sickness benefits for the first 16 days. Thereafter sickness benefits paid for by the employer will be refunded by the Norwegian Labour and Welfare Organization (NAV), see the National Insurance Act Section 22-3. The sickness benefits may also be paid out directly by the Norwegian Labour and Welfare Organization, see the National Insurance Act Section 22-2.

In addition, an employee may either verbally or in writing notify the employer that he or she is sick for up to three days. The employer may still demand that the employee fills in a written self-certified sick leave form. With further illness beyond three days, the employee must provide a doctor’s certificate. Self-certified sick leave can be used four times by the employee annually.

An employee may receive sickness benefits for a maximum of 52 weeks. During this period the employee is protected from dismissal pursuant to the Working Environment Act Section 15-8, see 19 below.

To be entitled to sickness benefits, the employee must attempt work-related activities as soon as possible:

• Within four weeks the employee and the employer must set up a follow-up plan that aims for the employee to return to work
• If the employee has not returned to work within eight weeks, it is required that significant medical problems preventing work-related activities is documented through an expanded medical certificate.

7.4 Wages and payment during parental leave (parental benefits)

Employees have the right to paid parental leave, based on income at the start of the leave. Parental benefits are paid by NAV, though NAV does not cover part of income which exceeds 6 G (national insurance base). An employer may agree to pay the amount which exceeds 6 G up to the yearly income.

Employees have a right to choose between 100 percent coverage for 49 weeks or 80 percent coverage for 59 weeks. The parents must choose the same amount of coverage.

7.5 Bonus and bonus systems

Employers often have bonus schemes and bonus systems for its employees. Such bonuses may originate from the employee’s own work, they might be team based or they might be based on how the company performs. Often the bonus system comprises of a combination of these factors.

Unlike what is the case with salary, an employer may as a main rule unilaterally, and within the managerial prerogative, make changes to the bonus system.

A bonus is subject to withholding tax and employers’ national insurance contributions. A bonus may also be included in holiday pay and be deemed pensionable income, though this would depend on how the bonus scheme is formulated.

8 Holiday and holiday pay

8.1 Who is entitled to holiday pay?

Employees have a right to vacation and holiday pay, see the Holidays Act Section 2. Independent contractors or freelancers are not entitled to holiday pay. It is therefore of importance if the person performing tasks for the employer is deemed an employee or, for instance, an independent contractor, see 3.3 above.

8.2 Holiday

In accordance with the Holiday Act Section 5, employees are entitled to 25 working days’ leave (four weeks and one day). Though many employees are entitled to five weeks of holiday, either through collective agreements or through individual agreements with the employee (the employment contract).

Employees who reach the age of 60 during a holiday year, shall be given 6 working days as extra holiday.

Employees who start a job after 30 October are entitled to six paid working days’ holidays.

In accordance with the Holiday Act Section 7 the employee may demand to take out his / her main holiday, comprising 18 working days, during the main holiday period, 1 June and 30 September. Furthermore, employees over the age of 60 may normally decide to take out their extra vacation comprising of 6 working days, see above. The remainder of one’s holiday must be taken outside that period, though the employer sets the timeframe, as regulated by the Holiday Act.

The employer and the employee may agree to transfer up to two weeks of holiday to the following year.

There are special rules regarding holiday during a period of notice for dismissal, see the Holidays Act Section 8.

8.3 Payment and calculation of holiday pay

Holiday pay is accrued based on the salary of the employee the year before and it is paid instead of salary when the employee takes holiday leave (usually June). In accordance with the Holiday Act Section 5 on the last day before the main holiday period, see 8.2 above.

The employer must thus set aside holiday pay so that it is paid the following year on the last day before the holiday.

Only salary or wages constitutes the basis for holiday pay. For bonuses etc. to be included in the basis of holiday pay, the bonus must be linked to the employee’s work effort in such a way that it is deemed as wages in accordance with the Holidays Act Section 10.

An employee is entitled to holiday pay from his employer amounting to 10.2 percent of the basis on which holiday pay is calculated. For employees over 60 years the rate is 12 percent, see the Holidays Act Section 10 (2) and (3).

For employees who are entitled to five weeks of holiday, either through collective or individual agreements, the rate is 12 percent for persons under 60 years old and 14.3 percent for persons older than 60 years.

8.4 Taxes and holiday pay

The holiday payment in itself is not subject to tax deduction, as slightly higher tax is deducted from the other salaries during the year of accrual.

9. Leave of absence – with or without pay (paid and unpaid leave)

Employees have a right to paid or unpaid leave. Some rights are established by law, namely the Working Environment Act, some by collective agreements and some by individual agreements or custom in the undertaking (employer).

9.1 Leave of absence after the Working Environment Act

The Working Environment Act (Sections 12-5, 12-6 and 12-8 – 12-10) provides the following ground for paid leave:

• Pregnancy check-ups, pregnancy leave and breastfeeding breaks
• Illness of children or childminders
• End-of-life care for close relative
• Religious festivals for employees not belonging to the Church of Norway

The Working Environment Act (Sections 12-3, 12-6, 12-7 and 12-10 – 12-12) provides the following ground for unpaid leave:

• For fathers or others, assisting mother in connection with childbirth
• Extended parental leave
• Care and nursing for close relative and /or another close person
• Educational leave
• Military service

Right to absence with or without pay can also be grounded on collective agreements or individual agreements or costume.

9.2 Dispute resolution concerning paid or unpaid leave

Disputes concerning the right to paid or unpaid leave in accordance with the Working Environment Act, may be brought before the Dispute Resolution Board for a decision. It cannot be brought before the courts until it has been reviewed by the Dispute Resolution Board and the board has reached a decision. Disputes concerning paid or unpaid leave, grounded on collective agreements, are settled by the Labour Court.

10. The employers right to initiate control measures

The employer may implement control measures in relation to employees, given that conditions, as laid out in 10.1 below, is fulfilled.

The term control measures embrace a wide range of measures taken by the employer against an employee or a group of employees. Examples of control measures are:

• Drug testing
• Email inspection
• Time recording
• Surveillance (GPS)
• Access control
• Data logging

10.1 Conditions for control measures

Employers may only implement control measures in relation to employees when such measures are;

• objectively justified by circumstances relating to the undertaking;
• and it does not involve undue strain on the employees, subject to the control measure.

Additionally, the employers right to initiate control measures must be within the legal frame as laid out in data protection regulation and GDPR, given that personal information is collected and handled.

Lastly the employer has the duty to inform, consult and evaluate the control measure as laid out in the Working Environment Act Section 9-2.  Before implementing control measures the employer shall provide affected employees with information concerning;

• the purpose of the control measures;
• practical consequences of the control measures, including how the control measures will be implemented; and
• the assumed duration of the control measures.

10.2 Restrictions concerning obtainment of health information and medical examination of job applicants and employees

There are restrictions in the employers right to obtain health information in connection with employment. In accordance with the Working Environment Act Section 9-3 it must be necessary in relation to performance of the duties associated with the post.

The employer may only require medical examinations to be conducted;

• when provided by statutes or regulations;
• in connection with posts involving particularly high risks; or
• when the employer finds it necessary to protect life or health.

10.3 Access o employee’s e-mail etc.

Employers’ right of access to employees’ e-mail, etc. when there is justifiable reason to believe that information in the email account when;

• considered necessary for daily operation or legitimate business interests; or
• when the employee is suspected of gross breach of duty.

The employee must, insofar possible, be notified in writing advance. If such notification is not possible, the employee must be informed after the email has been accessed. There are furthermore procedures as to how the email is to be accessed as laid out in regulation on processing of personal data. The regulation is fairly detailed and breach could trigger fines the Norwegian Data Protection Authority.

11. The employers’ duties to ensure fully satisfactory environment (Safety, Health and Environment regulation)

The employer has a general duty to ensure that minimum requirements as to Safety, Health and Environment (SHE) are met for its employees as well as other persons as laid down in the Working Environment Act Section 2-2.  This obligation includes the duty to;

• coordinate the SHE-work in the undertaking;
• ensure that the physical as well as the psychological working environment is fully satisfactory;
• implement measures to enable employees, who suffer reduced capacity for work as a result of accident sickness, or fatigue or the like, to retain work or be given suitable work; and
• ensure election of safety representative, given that the undertaking is obliged to elect such representatives (as a main rule employers employing more than 10 employees).

The regulation concerning to Safety, Health and Environment is laid down in the Working Environment Act chapters 2 – 6. Regulation concerning Safety, Health and Environment also follows from secondary law, for instance:

• Secondary Regulation on Systematic Health, Environment and Safety Work (the Internal Control Regulation)
• Secondary Regulation on Organization, Management and Participation.

The Labour Inspection Authority is responsible for ensuring that provision of the Working concerning Safety Health and Environment are complied with. Breach of the provision could cause reactions from the Labour Inspection Authority, such as orders of coercive fines, halting of work, administrative fines or penal provisions.

12. Employee’s right to notify censurable conditions at the undertaking

An employee and workers hired from temporary-work agencies has a right to notify censurable conditions at the employer’s undertaking, see the Working Environment Act Section 2 A-1 (1).

For a condition to be censurable after the provision, the conditions must constitute;

• criminal offenses or breach of statutory injunctions or prohibitions; or
• breach of the undertakings ethical guidelines or general, ethical standards which have broad support in society.

Political or professional expressions of more general and social affairs do not fall within the scope of the provisions of notification of censurable conditions. Such expressions are protected by Section 100 of the Constitution on the freedom of expression There are nevertheless limitation due to the unwritten principle of loyalty between employee and employer. Pursuant to unwritten principle of loyalty and employee must;

• loyally support the legitimate interest of the employer; and
• abstain from any undue infringement or undermining of these interests for the benefits for his or her own or others.

12.1 The employer’s duties in connection with notifications of censurable conditions

The employer has an obligation to prepare procedures for internal notification, given that the undertaking regularly employs five or more employees. Pursuant to the Working Environment Act Section 2 A-3 (5) the procedures shall be in writing and at least contain;

• encouragement to notify censurable conditions;
• procedure for notification; and
• procedure for receipt, processing and follow-up of notifications.

The procedures shall be easily accessible to all employees at the undertaking.

The employer must furthermore om refrain from direct or indirect retaliation in connection with notifications, see the Working Environment Act Section 2 A-2.

12.2 The employee’s duties in connection to notification of censurable conditions

The employee must proceed responsible when making notification, see the Working Environment Act Section 2 A-1. The employer nevertheless has the burden of proof that notification has been made in breach of the Working Environment Act Section 2 A-1.

Generally, if an employee notifies in compliance with the employers’ internal procedures, it is deemed as responsible and in compliance with the Working Environment Act Section 2 A-1.

In some instances, an employee will have an obligation to notify in the following instances:

• Pursuant to the Working Environment Act Section 2-3 (b) (d) and (e), an employee, must notify the employer and safety representative if they become aware of deficiencies that may endanger life or health, harassment or discrimination or when an employee is injured in during work.
• Safety representatives have an obligation to notify if they become aware of circumstances that may result in accidents and health hazards, see the Working Environment Act Section 6-2 (3).
• Health personnel have an obligation to notify supervisory authorities if they become aware of circumstances that may endanger the health of patients

12.3 Protection of employees who notifies

Any retaliation, whether direct or indirect, against an employee (or workers hired from temporary-work agencies) who notifies in compliance with the Working Environment Act Section 2 A-1, is prohibited. Any negative action formal or informal may be deemed as retaliation in accordance with the Working Environment Act Section 2 A-1. Examples of retaliations are:

• formal sanctions such as dismissal with or without notice, written or oral warnings etc;
• the employee being deprived of customary pay raise or working benefits; and
• changes being made in the employees’ position (change of position, removal or change of responsibilities or tasks etc).

If an employee submits information that give reason to believe that retaliation has taken place, it shall be assumed that such retaliation has taken place, unless the employer substantiates otherwise.

Anyone who has been subjected to retaliation may claim compensation, without regard to the fault of the employer. The compensation shall be fixed at the amount the court deems reasonable in

view of the circumstances of the parties and other facts of the case, cf. the Working Environment Act Section 2 A-2 (3).

13. Temporary redundancy (temporary lay-off)

With temporary redundancy or temporary lay-off means a temporary suspension of the employee’s obligation to work at the same time as the employer is temporary relieved of its obligation to pay wages. Even though the employee is temporary laid-off, the employment relationship persists.

The employer from the employer during the employer-financed period and from NAV for the remaining period, see 13.3 below.  Groups who are not deemed as employees, such as freelancers, independent contractors and

The temporary redundancy can be partial or fully. It can include all employees within the undertaking, a group or one employee for that sake.

The legal basis for temporary redundancy is collective agreements, which through jurisprudence / case law have been application also outside the collective agreements.

13.1 Conditions for temporary redundancy

There must be reasonable ground for temporary redundancy. For instance:

• temporary lack of orders or shortage of work;
• temporary curtailment of operations; or
• accidents etc.

It is only when the lack of work is temporary, that temporary redundancy is allowed. If the lack of work is permanent, the employer can only make reduction in staff through ordinary redundancy procedures, see 18 below.

13.2 Procedural rules in cases of temporary redundancy

In case of temporary redundancy, the employer is obliged to formally discuss the matter with worker representatives, before decision is made. The deadline for implementation begins after a discussion meeting with worker representatives concerning temporary redundancy have been held.

Thereafter the employer must give written notice to employees.  The period of notice is normally 14 days, though it can be shorter if unforeseen circumstances such as force majeure-circumstances constitute the basis for the temporary lay-off. The notification to the employees must include information;

• that lay-off has been decided and will occur after the period of notice; and
• concerning the length of the temporary lay-off. In case the length cannot be determined it is normally enough for the employer to inform of expected length or that the lay-off is until further notice.

In case no definitive length of the temporary lay-off has been informed and decided, the employer is obliged to discuss the matter again with worker representatives after one month, and thereafter each month.

For certain temporary lay-off the employer must give Norwegian Labour and Welfare Administration separate notice. The conditions are;

• that the temporary lay-off involves the same number of employees as is the case in so-called mass redundancies pursuant to Working Environment Act Section 15-2 (see section 3 below);
• that the temporary lay-off lasts atleast four weeks; and
• that the employees, due to the temporary lay-off, have their weekly working hour reduced with at least 50 percent.

13.3 The selection of employees for temporary lay-off

The selection of employees for temporary lay-off must be justifiable in a reasonable manner. Criteria for selection can be;

• which employees that currently have enough tasks and which employees who does not (due to the grounds that constitute the basis for the temporary lay-off);
• seniority among the employees;
• social conditions; and
• economic circumstances.

Since the lay-off is temporary, the employer is not obliged to rearrange and training of certain employees, as might be the case in ordinary redundancy processes. The employer furthermore has a margin of appreciation in the selection process for temporary lay-off.

13.4 Wages and benefits during temporary redundancy

The employer has duty to pay salary in the employer-financed period of ten days. Thereafter NAV will pay benefits. After 30 weeks with benefits the employer must pay salary for one week (five work days). Thereafter NAV will pay benefits up until 19 weeks.

The period for temporary redundancy without pay is thus 49 weeks (30 + 19 weeks). It cannot exceed that limit within a period of 18 months.

Temporary laid-off employees are not entitled to sick benefits from the employer but has a right for sick benefits in accordance with the rules that apply for unemployed.

13.5 Temporary lay-off and dismissal

A temporary lay-off only suspend the main aspects of the employment relationship (the right and obligation to work and the right and obligation to wages). For an employment relationship to cease, an ordinary dismissal process would have to be initiated.

If the employer dismisses the employee, the normal rules for dismissal processes will apply. The length of notice will follow what has been agreed between the parties within the scope of what follows from statutory regulation, cf. the Working Environment Act Section 15-3.

The employer would have to pay ordinary salary in the period of notice and there must be reasonable grounds for dismissal pursuant to the Working Environment Act Section 15-7.

An employee who wants to end the employment relationship can give written notice of dismissal. The period of notice is then 14 days, regardless of which period of notice which is laid out in the contract or which follow of the Working Environment Act Section 15-3, see the Working Environment Act Section 15-3 (9).

14. Discontinuance of  the employment relationship

An employment relationship can be terminated due to;

• agreement between the parties (a severance agreement);
• dismissal from the employee;
• dismissal from the employer;
• expiry of ending of a temporary employment relationship; or
• due to age of the employee.

The most common way in which an employment relationship is ended is either through dismissal from the employee or through an agreement between the parties.

15. Discontinuance of the employment relationship initiated by the employee

15.1 Dismissals by the employee

An employee can freely end an employment relationship, given that no clause of compulsory time has been agreed between the parties, see Section 4.5. If so the employee might be liable for damages.

Normal period of notice would nevertheless apply, unless the employer is in serious breach of its obligations in the employment relationship. The employer might then also be liable for damages in accordance with the ordinary tort law.

Pursuant to the Working Environment Act Section 15-4 (1) a dismissal from the employee must also be in writing. If the dismissal from the employee is not in writing, it is nevertheless not deemed as invalid, see wording in the Working Environment Act Section 15-5.

The employee has certain right to withdraw a dismissal within the so-called rules of re-integra. The main rule is that a dismissal from the employee is legally binding, though it may be withdrawn;

• if the notice of withdrawal is given within reasonable time (usually no more than a week;
• if special circumstances constitute the basis for the withdrawal; and
• the employer has not arranged matters in accordance with the dismissal.

Special circumstances might be that the dismissal has been delivered due to undue pressure from the employer, that the employee has not been fully informed of the situation and his or her rights (for instance in a consultation meeting pursuant to the Working Environment Act Section 15-1. In those situation the dismissal can be deemed as in fact given by the employer.

A special situation sometimes happens when an employee, without giving notice, walks out or quit showing up for work. The employer would then need to assess whether to give a summary dismissal pursuant to the Working Environment Act Section 15-14. The employee might furthermore be liable for any damages directly caused by failing to work in the period of notice (for instance hired extra help, overtime for other employees etc).

16. Dismissal processes initiated by the employer

16.1 Legal basis

In accordance with the Working Environment Act Section 15-7 an employee may not be dismissed unless this is objectively justified based on circumstances relating to;

• the undertaking;
• the employer; or
• the employee.

The Working Environment Act furthermore has certain procedural rules for a dismissal by the employer to be viewed as justifiable and valid.

17.  Procedural rules when the employer initiate dismissal

17.1 The consolidation meeting pursuant to the Working Environment Act Section 15-1

Before reaching a decision concerning termination of employment an employer is obliged, to the extent that it is practically possible, discuss the matter with the employee and the employee’s workers representative or other adviser, unless the employee does not desire such discussion.

The employer is in other words obliged to hold a so-called consolidation meeting before deciding upon dismissal. If such meeting is not held or has not been held in a proper way, the dismissal can easily be viewed as not justifiable pursuant to the Working Environment Act Section 15-7. The dismissal can then be deemed as invalid and the employer liable for damages.

One of the reasons for the importance of the consolidation meeting is firstly that the employer is obliged clarify the basis for termination. That clarification would be viewed as incomplete if the affected employee has not had the change to give input prior to the decision upon dismissal. In redundancy processes the employer is required to weight the disadvantages of the employee against the undertakings need for redundancy, see the Working Environment Act Section 15-7 (2). Such weighing would be inconclusive if the employee does provide information as to how the dismissal would affect him or her.

Secondly, there is a general principle of contradiction. It is a principle that the affected party, here employee, has a change to utter his or her opinion of the matter, before the employer reaches a decision.

Lastly, the consolidation meeting protects the employer from making erroneous decisions. The employer might for instance have misread a situation or the facts of the case might be different from what the employer thinks. A proper consolidation meeting limits the risks of dismissals based on wrong facts, as the affected party (the employee).

As the employee has a right to assistance from a worker representative or adviser (for instance an attorney), it is advisable that the summon is in writing and given some time (atleast a day) before the consolidation meeting. The summon should state;

• that the meeting is a conciliation meeting pursuant to the Working Environment Act Section 15-1;
• that the employer is considering dismissal (or summary dismissal) after the conciliation meeting is held;
• the basis for the possible dismissal (at minimum if it is based on circumstances relating to the employee, the employer or the undertaking);
• that it is advisable that the employee to give input in the matter;
• the time and place of the meeting; and
• that the employer has the right to assistance from worker representative or other advisor.

It is advisable for the employer to take notes during the meeting and that minutes are drafted from the meeting. It is not uncommon that the parties discuss alternatives to dismissal as a part of the meeting, for instance a severance package.

The decision on dismissal can only be reached after the meeting is finished and the employer has assessed the input and information from the employee.

17.2 The letter of dismissal

The Working Environment Act Section 15-4 states that letter of dismissal must be written and that is must inform of;

• the employee’s right to demand negotiations and to institute legal proceedings,
• the employee’s right to remain in his post pursuant to the Working Environment Act Section17-3, 17-4 and 15-11,
• the time limits applicable for requesting negotiations, instituting legal proceedings and remaining in a post; and
• the name of the employer and the appropriate defendant in the event of legal proceedings.

If the employee has been dismissed owing to cirqumstances relating to the undertaking, the notice shall also contain information concerning preferential rights pursuant to the Working Environment Act Section 14-2.

Notice given by the employer must be delivered in person or be forwarded by registered mail to the address given by the employee.

If the dismissal letter does not contain the information as stated above or is not in writing, it will be deemed as invalid and the employer liable to damages, unless special circumstances make this clearly unreasonable, cf. the Working Environment Act Section 15-5. The precondition is that the employee file for legal proceedings within four months from the date that the notice is given.

17.3 Special rules in cases of mass redundancy

If the notice of dismissal is given to at least 10 employees within a period of 30 days, without being warranted by reasons relating to the employees, the dismissal is viewed as a collective redundancy pursuant to the Working Environment Act Section 15-2.

The provisions of collective redundancies are grounded on EU regulation and the Collective Redundancies Directive (98/59/EC).

An employer contemplating collective redundancy shall, at the earliest opportunity, enter into consultations with the employees’ elected representatives with a view to reaching an agreement to avoid collective redundancies or to reduce the number of persons made redundant, see the Working Environment Act Section 15-2 (2).

The employer is furthermore obliged to the employees´ elected representatives all relevant information, including written notification concerning:

• the grounds for any redundancies,
• the number of employees who may be made redundant,
• the categories of workers to which they belong,
• the number of employees normally employed,
• the groups of employees normally employed,
• the period during which such redundancies may be affected,
• proposed criteria for selection of those who may be made redundant,
• proposed criteria for calculation of extraordinary severance pay, if applicable.

If the employer is considering closing its activities or an independent part of them and this will involve collective redundancies, the possibility of further operations shall be discussed, including the possibility of the activities being taken over by the employees.

The employer is obliged to inform the Norwegian Labour and Welfare Organization (NAV) of the collective redundancies at earliest opportunity. Projected collective redundancies will not come into effect earlier than 30 days after such notice have been received.

17.4 The period of notice

The statutory minimum period of notice is according to Working Environment Act Section 15-3 the following:

The Probation (trial) period	14 days, from date to date
Less than five years	One month
Employment of atleast five consecutive years	Two months
Employment of atleast ten consecutive years	Three months
Employment of atleast ten consecutive years and the employee is above 50 years of age	Four months
Employment of atleast ten consecutive years and the employee is above 55 years of age	Five months
Employment of atleast ten consecutive years and the employee is above 60 years of age	Six months

Outside the probation period, the period of notice runs from and including the first day of the month following that in which the notice is given.

The parties can agree upon longer period of notice in the employment agreement, though the above periods constitute the mandatory minimum, except for the CEO. Longer periods of notice can also be laid down in collective agreements.

18. Dismissal process initiated by the employer due to circumstances relating to the undertaking

18.1 Justifiable grounds for dismissal due to circumstances relating to the undertaking

An employer has the obligation to run the business in a financially sound way. If costs are not in compliance with income of the undertaking, the board and the CEO might have an obligation to reduce costs and cut staff.

It has furthermore been established that the Working Environment Act Section 15-7 demand that the employer must make sure there is a commercial, justified need that implies that terminations are necessary. The courts are nevertheless reluctant to overrule the employer’s assessment concerning commercial matters, given that the employer can prove to have done a conscientious and thorough assessment. If so, the employer would have a margin of appreciation, as this is considered a business decision.

For the employer to prove that such conscientious and thorough assessments have been made, it is advisable to have it put down in writing, for instance in minutes from board meeting and to have worker representatives give input before the employer decides upon whether to initiate the redundancy process.

The employer has the duty to assess whether other means than redundancies can address the commercial needs in the undertaking, for instance other cost-cutting measures, temporary lay-offs, rearrangement of employees etc. Such assessments should also be included in the employers written documentation.

Examples of instance which might be considered objectively reasonable, are:

• Declining sales
• Loss of business or contract
• Rearrangements in the undertakings areas of focus
• Technology or efficiency improvements have made certain positions unnecessary

18.2 The selection of employees for redundancy

The selection of employees for redundancy must be justifiable. Furthermore, there cannot be other suitable work within the undertaking for the employee being made redundant.

The main rule is that the undertaking constitutes the area of selection of employees for redundancies.

The Supreme Court have nevertheless in some instances accepted that the area of selection is reduced to parts of the undertaking. Whether the area of selection can be limited to a certain part of the undertaking, depends on an overall assessment. Relevant criteria are:

• whether the undertaking is in a financially difficult position;
• whether reduction of area of selection have been discussed and agreed upon by worker representatives;
• whether the reduced area for selection constitute an independent entity and geographical separated (for instance a store within a store chain); and
• if the employer has established a practice in which the area of selection has been limited and if the limitation in the current redundancy process follows such practice.

After the area of selection has been established, the company must decide upon criteria for selection of redundancy. Relevant criteria might be

• length of service
• formal and non-formal qualifications
• special social needs for certain employees
• competence
• applicability or usefulness of the employee for the undertaking going forward

If the employer is bound by a collective agreement, it has been established that length of service must be given weight. Furthermore, the employer must substantiate that it is justifiable grounds for deviation of the principle of seniority.

If the employer is not bound by the collective agreement, the same principle of seniority does not apply. The employer must nevertheless give weight if an employee has had a very long term of employment in the company.

Pursuant to the Working Environment Act Section 15-7 (2) the employer is obliged to give weight to the disadvantages caused by dismissal and the needs of the undertaking. If there are certain circumstances which might cause special disadvantages (for instance age, lack of formal education, sickness, loss of right to AFP etc) the employer is obliged to take these matters into account. This is one of the reasons why the employer is obliged to hold a consolidation meeting before decision concerning dismissal have been reached, see 17.1 above.

If employer builds upon assessments of the employee performance, the employer must be able to substantiate that in the redundancy process. If the assessments depend on subjective assessments by the employer (interpersonal skills, applicability and competence), it might be of importance whether those circumstances have been taken up with the employee for instance in appraisal interviews or development discussions.

18.3 The employer’s obligation to offer suitable (vacant) work within the company

Pursuant to the Working Environment Act Section 15-7 (2) a dismissal, due to grounds relating to the undertaking, is not objectively justified, if the employer har other work to offer the employee.

The work must be vacant and within the undertaking. An employer is thus not obliged to offer prospective work in other companies within the corporation (sister-companies, parent companies or subsidiary companies). The exception is if the employer is viewed as co-employed in other companies within the corporation.

The employer would need to offer work which would be viewed as worse or lower in terms of position and salary. The employer would furthermore also as main rule need to offer work in other geographical locations as the undertaking, and not certain parts of it, marks the boundaries for the employer’s duty to offer other work. Though there are exceptions to that rule, as the employer in some instances also can limit the obligation to offer other suitable work to certain part of the enterprise. The condition on whether the obligation to offer other suitable work can be limited is mainly the same as is the case for limitation of the area of selection, see 18.2 above. There is nevertheless reason to believe that the threshold for limitation of obligation to offer other suitable work is higher, as is the case in limiting the area of selection.

Other work does not necessary mean that there need to be a vacant position that needs to be filled. The provision uses the term “work” and not position, which mean that the employer might in some instances be obliged to create a position given that there is enough vacant work to fill such a position.

18.4 Preferential right to new appointment

An employee who has been dismissed owing to circumstances relating to the undertaking, have a preferential right to new appointment at the same undertaking unless the vacant position is on for which the employee is not qualified. The preferential right applies from the date on which the notice is given and for one year after expiry of the period of notice, see the Working Environment Act Section 14-2 (1) and (3).

The preferential right lapse if the employee fails to accept an offer of employment for a suitable post not later than 14 days after offer is received. If two or more persons have a preferential claim to a post, the employer is obliged to follow the same rules for selection, as apply in the event of dismissal due to circumstances relating to the undertaking.

18.5 Severance packages

Unlike what is the case in other countries, there is no direct obligation to pay severance packages in redundancy processes in Norway. It may nevertheless in some instances be advisable to offer severance packages.

An employee has for instance, as a main rule, the right to stay at his or her post, thus receiving wages and the right to perform work, until the case comes up, given that legal proceedings are initiated within certain deadlines, see 21.2 below. Lack of redundancy packages could thus heighten the risk for legal proceeding, which in turn could delay the redundancy and adjustment process in the undertaking.

The amount of severance packages would most often be based on the soundness of the dismissal and the outlook for the employee in finding new work.  It is quite common with severance packages in redundancy processes in Norway.

19. Dismissal processes initiated by the employer due to circumstances relating to the employee

19.1 Legal basis and conditions

The employer has a right to dismiss an employee with notice if such objectively justified due to circumstances relating to the employee.

If an employee is guilty of gross breach of duty or other serious breach of contract, the employer may summary dismiss the employee, see the Working Environment Act Section 15-14 and Section 20 below.

In the probation period an employee can furthermore be dismissed with notice on the grounds of the employee’s lack of suitability for the work, lack of proficiency or reliability, see the Working Environment Act Section 15-6 and Section 19.4 below

19.2 Circumstances which might constitute grounds for dismissal with notice

The following circumstances might give grounds for dismissal with notice. Though whether or not there are sufficient grounds for dismissal with notice, must be assessed on a case-to-case basis:

Circumstances that provide grounds for dismissal with notice	Threshold	Examples
Unsatisfactory work performance	The employer must accept that the employee’s performance may vary over time and that the employee can make mistakes. The employer is obliged to train and provide guidance for its employees. It might be of importance if warnings have been issued or satisfactory performance improvement plans (PIPs) have carried through, see Section 19.3 below.	·         Errors made in the line of work ·         Inability to perform tasks satisfactorily or within set deadlines ·         Lack of understanding or knowledge, which are deemed basic for the position
Disobedience or negligence of orders	The employee is obliged to follow the employer’s orders, given that they are within the managerial prerogative and not unjustifiable.  Willful breach might constitute grounds for dismissal with notice.	·         Non-compliance with working hours ·         Non-compliance with direct orders ·         Non-fulfillment of the set tasks for the position
Disloyalty	The employee is obliged to loyally support the legitimate interest of the employer and to abstain from any undue infringement or undermining of these interests for the benefits for his or her own or others. Loyalty in the employment relationship goes both ways.	·         Breach of confidentiality or disclosure of confidential business interests ·         Competing business or participation in other enterprises harmful for the employer ·         Public expressions incompatible with the position and not protected under the constitutional protection of freedom of speech
Financial fraud or misconduct	Most cases of financial fraud or misconduct constitute are enough grounds for dismissal with notice, maybe also summary dismissal There is a higher standard of proof in cases where the employee is accused of circumstances which might provide grounds for criminal prosecution.	·         Theft ·         Embezzlement ·         Fraud
Uncooperativeness and harassment	It must be proven that blame is to be put on the employee and that the uncooperativeness is of such character that it is sufficient grounds for dismissal with notice. Due to difficulty in the question of evidence and the threshold for dismissal with notice, it might be advisable to	·         Harassment of co-workers (sexual harassment / “Me too” ·         Protracted cooperative problems ·         Prolonged violation of general rules of behavior ·         Violence towards co-workers
Drug addiction or influence of alcohol during working hours	Drug addiction or influence of alcohol during working hours are generally viewed as forbidden. Many undertakings participate in the so-called AKAN-system. If so the guidelines of the AKAN-agreement must be followed	·         Influence of alcohol or drugs during working hours
Improper behavior	Depends on circumstances of the case. The threshold is lower if the behavior takes place during working hours than if they during the employee’s free time.	·         Unauthorized use of the employer’s data, email or social media platform ·         Violation of ethical standards necessary for the position ·

 

Depending on the facts of the case there might not be sufficient grounds for dismissal with notice. If so, a written warning might be the sufficient and correct disciplinary measure. In some cases there might be grounds for summary dismissal.

19.3 Warnings, reprimands, performance improvement plans (PIPs) etc.

Warning, written or oral, is not a statutory requirement for dismissal. Though, pursuant to case law, it is viewed as of significance if the employee has been alerted or otherwise informed believes that the employer is in breach of his or her obligations in the employment relationship.

In cases where the employer’s objections do not relate to circumstances which materialize in an outward or visible way, it might be especially important if the employee has been given warnings or in any other way made the employers expectations visible for the employee.

An employer can establish a formal evaluation period, in which a so-called performance improvement plan (PIP) is put in place. Such plan would help establish a common understanding of what is expected with regards to performance standards and it will give the employee a change to adjust his or her performance. A PIP should be in writing and include the following:

• Information on expected standards and why those currently have not been met by the employee.
• Explanation, preferably an agreement between the employer and employee, on what improvements are to be expected by the employee. Those improvements should be measurable and reasonable.
• A defined timeframe in which improvement are to be made.
• Involvement of the employer, for instance through training or corrections, on reaching these improvements
• Review of the improvements, both during the improvement period and thereafter.
• Post-PIP reviews with possible dismissal with notice, given that improvements have not been made to the extent that there are sufficient grounds for such dismissal.

19.4 Dismissal during trial period

Pursuant to the Working Environment Act Section 15-6 an employee, can during his or her trial period, be dismissed with notice due to;

• Lack of suitability for the work;
• Lack of proficiency; or
• Lack of reliability.

It has been established that the threshold is somewhat – though not insignificant lower – than what is the case outside the trial period and pursuant to the Working Environment Act Section 15-7. The employer can demand that the performance is an average, though the employer is obliged to provide for sufficient training and instructions.

The courts are wary of overruling the employer’s assessment of lack of suitability, proficiency or reliability, given that the employee has been given sufficient training and instruction.

If the dismissal is grounded on other matters than lack of suitability, proficiency or reliability, the normal rules of dismissal with notice will apply, see the Working Environment Act Section 15-7.

19.5 Protection from dismissal in the event of sickness,

In according to the Working Environment Act Section 15-8 (1) an employee has a special protection from dismissal during sickness. Pursuant to the provision an employer, who is wholly or partly absent from work owing to accident or illness, may not be dismissed for that reason during the first 12 months after becoming unable to work.

If a dismissal of the employee takes place during absence of work, due to illness or accident, the illness or accident shall be deemed as the reason for the dismissal, unless other grounds are shown to be highly probable. The employer has thus a higher burden of proof, as they need to make the case that it is highly probable that other reasons than absence due to illness or accident, is the reason for the dismissal.

After the proception period of 12 months have expired, the normal rules for dismissal pursuant to the Working Environment Act Section 15-7 apply. The employer must nevertheless prove that it is justifiable cause for dismissal of the absent employee in accordance with the Working Environment Act Section 15-7.

19.6 Protection from dismissal following birth or adoption of a child

An employee, who is pregnant may not be dismissed on the grounds of pregnancy, see the Working Environment Act Section 15-9 (1). Pregnancy shall be deemed the reason for dismissal of a pregnant employee, unless other grounds are shown to be highly probable. The employer would thus have a higher burden of proof in the same way as in the event of sickness, see 19.4 above.

Furthermore an employee who has leave of absence following birth or adoption of child, for up to one year, shall not be given notice of dismissal that becomes effective during the period of absence, if the employer is aware that the absence is due to such reasons or the employee notifies without undue delay that the absence is due to such reasons,  see the Working Environment Act Section 15-9 (2). The provision does not limit dismissal – it only suspends the effect until the employee returns to work following the period of absence.

In addition to the above the rules against discrimination will apply in dismissal processes due to pregnancy or absence following birth of a child. If a father for instance is dismissed because his wife is to give birth, the dismissal would most likely be invalid pursuant to the Working Environment Act Section 15-7 and in defiance of the protection against discrimination pursuant to the Gender Equality Act.

20. Summary dismissal

20.1 Legal basis

An employer may summary dismiss an employee if he or she is guilty of;

• Gross breach of duty; or
• other serious breach of the contract of employment.

The conditions for summary dismissal are laid down in the Working Environment Act Section 15-14. The effect of the summary dismissal is that the employment relationship ceases to exist with immediate effect.

20.2 Conditions for summary dismissal

The employee must be guilty of gross breach of duty or other serious breach of the employment contract, for the employer to able to summary dismiss the employee. It has been established that the threshold is high and that other disciplinary measures, such as dismissal with notice, must be deemed as insufficient.

It also follows from the wording of the provision that the employee must exhibit guilt. The employee must be guilty in gross breach of duty or other serious breach of the employment contract. It also a prerequisite that the summary dismissal is viewed as a reasonable reaction. Whether a warning has been issued, might be of significance on whether the summary dismissal is viewed as reasonable.

The employer has in many cases a higher burden of proof in cases of summary dismissal. Often the summary dismissal is grounded upon matters, which could form the basis for criminal proceedings. In other cases the employee is, due to the grounds for the summary dismissal, de-facto accused of circumstances of inflammatory nature, which also could be influence the standard of proof.

If the facts have not been fully mapped out, and the employer suspect the employee of being guilty of breach that can constitute grounds for summary dismissal, it might be advisable to suspend the employee until the facts have been mapped out, see Section 20 below.

The employer would also have an obligation to react within reasonable time after the employer fully learns of the circumstances that constitutes the basis for the summary dismissal. If a summary dismissal comes at later point, it might be deemed as unreasonable and not unnecessary since the employer did chose to wait.

20.3 Examples of instances that might form the basis for a summary dismissal

Circumstances that might constitute reasons for summary dismissal are;

• financial misconduct (fraud, embezzlement, theft);
• serious breach of the duty of loyalty; (participation in competing enterprises, harmful and serious undermining of the employer’s interests etc)
• illegal activities;
• absenteeism; and
• drug or alcoholic use.

20.4 Procedural rules in cases of summary dismissal

The same rules as procedural rules as mentioned in Section 17 above, apply in cases of summary dismissal, see the Working Environment Act Section 15-14 (2).

The exception is the Working Environment Act Section 15-5 does not apply, though a letter of summary dismissal that does not fulfill the requirement as to form, pursuant to the Working Environment Act Section 15-4, would as a main rule be viewed as unlawful. It has after all been established that the requirement for thorough procedure are stricter in cases of summary dismissal.

20.5 The effect of a summary dismissal

A summary dismissal causes the employment relationship to end with immediate effect. There is thus no notice period, and the obligation to pay wages and to work cease immediately.

The employee can initiate legal proceeding, but is, as a main rule, not entitled to stay at his or her post until the case comes up before the court.

21. Suspension

21.1 Legal basis and conditions for suspension

If there is reason to assume that an employee is guilty of an offence that may constitute grounds for summary dismissal, and the needs of the undertaking so indicate, the employer may suspend the employee while the matter is investigated, see the Working Environment Act Section 15-13.

An employer can thus suspend an employee, given that;

• there is reason to assume that the employee is guilty of an offence that may constitute grounds for dismissal; and
• the need of the undertaking call for suspension of the employee.

The suspension can only last until the matter has been investigated. It is thus first and foremost use in cases where the employer has sufficient reason to believe the that the employee is guilty of gross breach of duty or other serious breach of the contract of employment, but where the facts of the case still needs to be investigated.

In milder cases, an alternative to suspension might be temporary transfer of the employee to a different department. The employee can also consent to being temporary relieved of duty, though retaining pay

During suspend the employee’s right and duty to work would cease, though the employee would have ordinary obligation to pay salary.

21.2 Procedural rules

Pursuant to the Working Environment Act Section15-13 (3) the procedural provisions in Sections 15-1, 15-4 and 15-12 apply, in so far as the are appropriate, see Section 17 above.

22. Consequences of unfair dismissals etc. (Negotiation, legal proceedings and damages)

In the event of a dismissal, summary dismissal or suspension the employee has the option to;

• accept the decision;
• demand negotiations pursuant to the Working Environment Act Section 17-3; or
• instigate legal proceedings directly.

22.1 The right to demand negotiations

An employee has in a case of dismissal with notice or summary dismissal right to demand negotiations in accordance with the Working Environment Act Section 17-3. The employee can also demand negotiations in cases where the employee claim that there is unlawful;

• suspension;
• temporary employment;
• substantive hire;
• breach of preferential rights.

An employee who wishes to demand negotiations must notify the employer in writing within two weeks, counting from the date;

• of the dismissal or summary dismissal;
• the employer rejected the claim from an employee concerning preferential right to a new post;
• an employee terminated employment in the case of a dispute as to the lawfulness of a hiring or temporary appointment; or
• a suspension is revoked.

The employee does not need to claim that the decision is invalid. It is sufficient that the employee claim compensation and that the employer is liable for damages.

Even though the deadline for negotiation is two weeks, an employer often comply with a demand for negotiation, if the claim is put for in reasonable time after the expired deadline.

Pursuant to Working Environment Act Section 17-3 (3) the employer shall ensure that a meeting for negotiations is held as early as possible, and, at latest within two weeks of receiving the request. In the same way as is the case for consolidation meetings (see Section 17.1 above) the employee is entitled to assistance from worker representative or other advisor in the negotiation meeting. It is advisable that the employer writes down a protocol from the meeting.

During a negotiation meeting discussion concerning severance pay, can arise, see Section 22 below.

22.2 Legal proceedings

An employee may instigate legal proceeding to dispute the lawfulness of the dismissal, summary dismissal, suspension, temporary employment etc. The employee would then have the option to;

• dispute the validity of the decision; or
• to confine the claim to compensation.

If a decision is viewed as invalid, it is deemed as not in effect. For a dismissal or summary dismissal that would mean that the employment relationship continues. The employee would furthermore have the right to claim compensation for damages caused by the decision as well as for non-economic loss.

If a temporary employment contract is viewed as unlawful, the employee would be deemed as permanently employed. If the proceedings are initiated in connection with termination of the temporary employment relationship due to expiry, the unlawfulness of the temporary employment, would cause the termination to by deemed as an invalid dismissal. The employee would also here have the choice to dispute the validity or to confine the legal proceedings to a claim for compensation.

The deadlines for initiating of legal proceeding are laid down in the Working Environment Act Section 17-4.

The main time limit for instituting legal proceedings are eight weeks in cases of dismissal with notice, summary dismissals, breach of rights concerning preferential right, unlawfulness of temporary appointment, hiring and suspension. If the employee claims compensation only, the time limit is six months. The deadline may be extended in some cases as referred to in the Working Environment Act Section 17-5.

If negotiations have been held, the time limit runs from the conclusion of negotiations. If negotiations have not be conducted the time limit runs from the dates as set in the Working Environment Section 17-3 (2), see Section 21.2 above.

If a dismissal with notice does not fulfill the requirements set in the Working Environment Act Section 15-4, no time limit apply. If an employee initiates legal proceeding within four months, the notice shall be ruled invalid unless special circumstances make this clearly unreasonable. The same apply if the employee only seek compensation, see the Working Environment Act Section 15-5 (1) and (2).

If an employee initiates legal proceeding without negotiation meeting pursuant to the Working Environment Act Section 17-3 being held, the employer may demand such negotiations.

Claims concerning dismissal with notice, summary dismissal, temporary employment etc. is not subject to mediation by the conciliation board, see the Working Environment Act Section 17-1. There are special rules that apply with regards to the appointment of the court, see the Working Environment Act Section 17-6 and 17-7.

22.3 The right to the stay at the post during legal proceedings

In cases of dismissal with notice, pursuant to the Working Environment Act Section 15-7, an employee is entitled to remain in his or her post until the case comes up before the court, see the Working Environment Act Section 15-11 and 17-4. This means that the employee has the right to;

• work; and
• receive salary and other benefits pursuant to the employment relationship.

If demanded by the employer, the court may decide that the employee shall leave his post while the case is in progress, given that the court finds it unreasonable that employment should continue while

the case is in progress. The threshold is quite high if the dismissal is due to circumstances relating to the undertaking and the employer and somewhat lower if it is due to circumstances relating to the employee.

The right to remain at the post does not apply in disputes concerning;

• summary dismissals;
• dismissals during a trial period;
• workers hired from temporary work agencies or other companies; or
• other temporary employees.

If so demanded by the employee, the court may nevertheless decide that the employment shall continue until the matter has been legally decided.

The precondition for the employee’s right to remain at the post or to demand to be reinstated at the post, is that legal proceedings are initiated within the time frame set in the Working Environment Act Section 17-4 (5).  Legal proceeding must then be initiated;

• within eight weeks of the conclusion of the negotiations or date of dismissal; and
• within the expiry of the notice period.

The same applies if the employee, before the expiry of the notice period, notifies the employer in writing that legal proceedings will be instituted within eight weeks. The time limits due not apply for dismissals which due not fulfill the requirements laid down in the Working Environment Act Section 15-4. See the Working Environment Act Section 17-4 for complete information.

22.4 Compensation and damages

An employee may demand compensation either in combination with a claim that the dismissal etc. is invalid or by itself.  In any case the right to compensation is regulated in the Working Environment Act Section 15-12.

Pursuant to the provision the compensation shall be fixed to the amount the court deems as reasonable in view of;

• the financial loss,
• circumstances relating to the employer;
• circumstances relating to the employee; and
• other facts in the case.

The compensation assessment is thus discretionary and based on an overall assessment on the above-named factors.

It has been established that the employee’s financial loss until the court proceedings must be covered. This will mainly constitute of lost salary up until the court case comes up.

If the employee has had other income before the court case comes up, that income, will, as main rule, not come to deduction in the compensation. The exception is if the employee has been absent from the position for a fairly long time and in a fixed and arranged employment position in large part of the period.

If the employee has received unemployment benefits or work assessment allowance, this will not come to deduction in the compensation. The employee is instead obliged to repay unemployment benefits or work assessment allowance, see the National Insurance Act Section 22-15(3) and (4).

Additionally, compensation will include future economic loss. This is mainly future loss of salary until the court finds it probable that the employee finds new employment.

For how long it is deemed reasonable that the employee is without work, must be reviewed on a case-to-case basis. The court have accepted up until two years. Relevant factors in the assessment is the age of the employee, formal qualifications of the employee and the general outlook for new employment.

Lastly, the employer is liable for non-economic loss. It is not a condition for non-economic loss that the employer is to be blamed. The dismissal can itself constitute grounds for non-economic loss.

The amount is set by the court in a discretionary assessment on a case-to-case basis. Relevant factors are;

• the strain the dismissal or summary dismissal has caused on the employee;
• the amount of blame that can be based (on both sides);
• if procedural errors have been made; and
• circumstances of the case.

The amount is seldom above 100 000 NOK. Compensation for non-economic loss is is not subject to tax.

23. Severance packages, severance pay, redundancy packages etc.

Even though an employer is not obliged to offer severance package in cases of dismissal, it is not uncommon for the parties to enter agreements with such packages.

For the employer, the advantages are among other things:

• a swifter and more efficient process;
• reduced time spent by management on the process;
• reduction in the likelihood of legal proceedings and court cases, which in turn might prolong and make the process more expensive; and
• maintain the moral of employees, hence reducing the risks of needed employees resigning from their posts.

The disadvantage is first and foremost the costs. It might also give employees expectations of severance packages in future redundancy processes, where the financial state of the company cannot defend such packages.

For the employee, the advantages are;

• financial safety in a period of readjustment; and
• avert a difficult choice between accepting a dismissal and initiating costly legal proceedings.

The main disadvantage is that collective severance packages often have a lower compensation level, than what is the case if a court find the dismissal unjustifiable. Even though it is voluntary to enter such agreements, severance pay packages offered on a collective basis, might pressure employees into entering them. Lastly severance agreements often have confidentiality clauses, disclaimer clauses of preferential rights etc. which are a drawback for the employee.

An agreement of severance usually has the following provisions:

• Provisions of duty and exemptions of work until the discontinuance of the employment relationship.
• Provisions of severance pay, disbursement of payment and how its structured.
• Provisions of Holiday and holiday pay
• Provisions of return of property of the employer, which the employee has in his or her possession (computer, company car, keys etc.)
• Provisions of refund of possible expenses pursuant to the employment relationship.
• Provisions of handover of work assignments, email etc.
• Provisions of discontinuance of the employment relationship, including withdrawal of the employee from the employers’ pension and insurance schemes.
• Provision of tax deductions and placement of tax risk.
• Provision that an employee disclaims the right to initiate legal proceedings concerning the employment relationship, including its termination, and disclamation of possible preferential right to new employment in the undertaking.

An agreement of severance can also have non-compete clauses, non-poaching clauses and costumer clauses. Though non-compete clauses have become less common due to the fact the employer must pay wages during the non-compete period, see 4.3 above.

24. Transfer of undertakings

24.1 Legal basis

The Working Environment Act has provisions which regulate the transfer of undertakings. The provisions are laid down in the Working Environment Act chapter 16 and they are grounded on EU regulation, namely the Directive of the Transfer of Undertakings (2001/23/EC).

With a transfer of undertaking means that there is a change of employer for the employees, as the undertaking changes hands. It must be restricted against change of ownership of the undertaking in which the employer is the same, as only the ownership (for instance shares in the company) changes hands.

During transfer of undertaking, eg. change of the employer, special provisions protecting the employees apply. It is therefore of importance whether a transfer is viewed as a transfer of undertaking, or not.

24.2 When do provisions concerning transfer of undertakings apply?

Pursuant to the Working Environment Act Section 16-1, chapter 16 concerning transfer of undertaking, apply when;

• The undertaking or parts of the undertaking is transferred to another employer.

For the purpose of the Working Environment Act Section 16-1, a “transfer” furthermore means;

• a transfer of an autonomous unit that retains its identity after the transfer.

According to the provision three sets of conditions must be met for a transfer to be deemed a transfer of undertaking pursuant to chapter 16 of the Working Environment Act:

• The provision concerns the undertaking or parts of the undertaking and the transferred entity must be deemed as an independent economic entity.
• The transfer is required to be based on an agreement or merging of business.
• The continuing business must essentially be the same as before the transfer – its identity must be preserved.

The interpretation and the details of conditions for the transfer of undertakings has been determined by the EU court, which in turn Norwegian courts usually will follow.

According to the Spijkers-ruling (C-24/85) by the EU-court, whether it is a transfer of undertaking pursuant to the directive, depends on an overall assessment, which, among other things, are based on seven criteria:

• Whether tangible assets (buildings, moveable property, machinery, inventory) has been transferred
• What kind of business the transfer concerns
• The value of intangible assets at the time of the transfer
• Whether most of the employees are transferred.
• If costumers are transferred
• The degree of similarity between the economic activity, before and after the transfer has occurred.
• Whether there is a period of suspension, if any, in the activities.

As parts of the undertaking can be subject to the regulation of transfer of undertaking, it must furthermore be decided whether the parts are viewed as an independent entity.

It has in that regard been decided that one employee can constitute an independent part of the undertaking, pursuant to the directive and the Working Environment Act chapter 16. The term central condition is that the entity constitutes an organized grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective.

24.3 The rights of the employees during the transfer

In connection with transfer of undertakings an employee has certain rights in connection with the transfer, namely:

• Protection against dismissal due to transfer, see the Working Environment Act Section 16-4.
• Entitlement to the same rights and obligations that the transferred employee has against the former employer, see the Working Environment Act Section 16-2. There are nevertheless some exceptions such as collective pension schemes etc, as laid down in Section 16-2 (3).
• The right to object to transfer of employment relationship to the new employer, see the Working Environment Act Section 16-3. The employees who object to transfer have a preferential right to new employment at the former employer, pursuant to the Working Environment Act Section 16-3 (3).

If a transfer would cause radical and negative changes in the employment relationship, it has been established that the employee has a right a choose to remain in the transferor undertaking. If so the employment relationship will remain.

24.4 Procedural rules in connection with transfer of undertakings

Pursuant to the Working Environment Act Section 16-5 the former and new employer, must, as early as possible provide information concerning the transfer and discuss the transfer with the employees’ elected representatives.

Information shall particularly be given concerning;

• the reason for the transfer;
• the agreed or proposed date for the transfer;
• the legal, economic and social implications of the transfer for the employees;
• changes in circumstances relating to collective pay agreements;
• measures planned in relation to the employees; and
• rights of reservation or preference and the time limit for exercising such rights.

The consultation with the elected representatives must be of the view on reaching an agreement with regards to the transfer. There is nevertheless no obligation to reach an agreement, though it might be advisable to reach agreements for instance with collective severance packages, see 22 above.