I INTRODUCTION

Norwegian employment law is governed by legislation, statutory regulations and collective bargaining agreements (CBAs), in addition to non-statutory sources of law such as case law and industry practice.

The Norwegian Working Environment Act of 2005 (WEA) is the principal Act within Norwegian employment law. The WEA applies mandatorily to all undertakings with employees and may not be departed from to the detriment of the employee, unless otherwise explicitly provided by the Act.

Other relevant legislation within Norwegian employment law is, in particular, the Civil Servants Act of 2017, the Holidays Act of 1988, the National Insurance Act of 1997, the Act on Mandatory Collective Pension Schemes of 2005, and the Equality and Anti-Discrimination Act of 2017.

Employment disputes are generally heard by the local district courts first. Decisions from the district court may be appealed to the Court of Appeal, which in turn may be appealed to the Supreme Court. Judgments from the Supreme Court are final.

The Labour Court is a special court with limited jurisdiction in certain matters regarding the interpretation, existence, validity and breach of CBAs.

The Labour Inspection Authority is authorised to supervise all employers to secure compliance with the WEA and other relevant legislation.

II YEAR IN REVIEW

i Seniority in dismissals with notice owing to workforce reductions

The importance of seniority in connection with the selection of redundant employees in workforce reductions has been a hot topic in 2018. Among others, the Court of Appeal has pronounced two judgments on the topic, of which one, the Skanska case, has been appealed and admitted by the Supreme Court (see Section III).

There has been a particular focus on the interpretation and understanding of the clause regarding seniority in dismissals with notice owing to workforce reductions – the principle of seniority – in the nationwide CBA between the Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO).

There has also been a dispute between LO and NHO about whether seniority shall be the main selection criterion in connection with the selection of redundant employees, or whether the selection shall be based on an overall assessment of relevant criteria – seniority being one of these. The dispute has been settled, whereby the parties have agreed that seniority shall form the starting point of, and be a relevant factor in, the assessment, but that its relative weight in the assessment is a different matter and will depend on a holistic assessment of all relevant considerations.

ii Amendments to the legislation regarding permanent employment, as well as hiring from staffing enterprises

As of 22 June 2018, the parliament amended the WEA regarding temporary and permanent employment, as well as hiring from staffing enterprises. The new regulations entered into force on 1 January 2019. See Section XIV.

iii Proposed amendments to the regulations on whistle-blowing

In November 2016, an expert group was appointed at the government's initiative to review the whistle-blowing regulations. The group delivered its report on 15 March 2018, and has suggested amendments in the applicable legislation in order to strengthen employees' whistle-blower protections under Norwegian law. The expert group has in this regard also suggested establishing a separate national whistle-blowing ombudsperson, as well as a whistle-blowing dispute resolution board.

iII SIGNIFICANT CASES

i Correct application of seniority

In the Skanska case of 12 February 2018,2 the main question before the Court of Appeal was whether the selection of redundant employees in a redundancy process was objectively justified, and more specifically whether the principle of seniority in the CBA between LO and NHO had been correctly applied in the process. In the judgment, the Court of Appeal pronounced that seniority implies that seniority and length of service shall be the starting point for the selection of redundant employees, and that this starting point may only be departed from in the event that it is deemed to be objectively justified. The Court of Appeal further pronounced that it is not permitted to depart from seniority as the starting point and main rule, which the employer, Skanska, had done. As the Skanska case was appealed and admitted to the Supreme Court, the judgment from the Court of Appeal is not legally binding.

ii Dismissals as part of a redundancy process

In the Bravida case of 14 June 2018,3 the main question before the Court of Appeal was whether dismissals of three employees, who had all been made redundant as part of a larger redundancy process, were objectively justified, and further whether the principle of seniority in the CBA between LO and NHO had been correctly applied in the process. In the judgment, the Court of Appeal decided that the dismissals not were objectively justified, as the employer could not sufficiently produce evidence of the assessments that had been made in connection with the selection of the redundant employees. The Court of Appeal thus did not consider whether or not the selection of redundant employees was in accordance with the principle of seniority in the CBA between LO and NHO. This case demonstrates the importance for an employer to be able to prove that sufficient assessments in connection with a redundancy process have taken place. The Bravida case is legally binding.

iii Travel time

On 4 July 2018, the Supreme Court pronounced an important judgment on travel time, regarding whether a police officer's travel time to another place of work other than his or her normal place of work was to be regarded as working hours.4 The Supreme Court concluded that the travel time was to be regarded as working hours. The judgment has caused some uncertainty regarding the relationship between travel time and working hours in certain instances.

iv Employees' right of choice in connection with a transfer of business

On 11 October 2018, the Supreme Court pronounced its judgment in a case regarding an employee's 'right of choice' in connection with a transfer of business.5

The main rule under the WEA is that employees have a right of reservation, meaning that they may reserve themselves from being transferred to the new employer in a transfer of business, but their employment with the former employer ceases as of the transfer date. The right of choice, however, implies that an employee, in some instances, has a right to choose to remain with the former employer after a transfer of business. The right of choice applies where the transfer of the employment relationship to the new employer will entail 'not insignificant negative changes' of an 'intrusive nature' for the employee.

The main question before the Supreme Court was whether the employee was entitled to invoke her right of choice, as she would lose her right to AFP (a pension supplement established by collective agreement) if she was transferred to the new employer. The Supreme Court concluded that this triggered the right of choice in the specific instance.

IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP

i Employment relationship

The WEA requires that a written employment contract is entered into between all employers and employees. In all employment relationships with a total duration of more than one month, a written employment contract shall be entered into as early as possible and at least one month following commencement of the employment at the latest. In employment relationships of a shorter duration than one month or in connection with hiring out of labour, a written employment contract shall be entered into immediately. It is the duty of the employer to draft the employment contract.

There are certain minimum requirements regarding the content of the employment agreement. According to Section 14-6 of the WEA, the employment contract must state factors of major significance for the employment relationship, including the identity of the parties, the place of work, a description of the work or the employee's title, post or category of work, commencement date, provisions relating to a probation period (if relevant), the employee's right to holiday and holiday allowance, notice period, salary, duration and disposition of the daily and weekly working hours, length of breaks, information regarding applicable collective bargaining agreements, and, if the employment is of a temporary nature, the expected duration of the employment relationship and the basis for the appointment.

According to Section 14-8 of the WEA, changes in the employment relationship shall, as a main rule, be included in the employment agreement as early as possible and not later than one month after the change entered into force.

Even though a written employment contract, as well as certain minimum requirements to the content of the contract, are required by law, a verbal contract will be binding for both the employer and the employee. However, the exact content of the contract can be difficult to prove, and any uncertainty would be interpreted to the detriment of the employer as the party having failed to secure a written contract.

The employer may make unilateral changes in the employment relationship subject to the management prerogative. However, the management prerogative is not unlimited. According to case law, the scope of the employer's management prerogative will depend on a holistic assessment of, among others, the employment agreement, the employee's job description, the circumstances surrounding the appointment, customs in the industry and practice in the employment relationship in question, in addition to any limitations under applicable legislation, regulations or CBAs.

If changes are considered to be outside the scope of the management prerogative, they may be implemented either based on consent or by giving a so-called 'variation termination' (a formal dismissal with notice according to the WEA combined with a new offer of employment on revised terms).

An employee shall, as a main rule, be hired on a permanent basis. However, a fixed-term contract may be agreed upon in certain circumstances, mainly when the work is of a temporary nature or for work as a temporary replacement for another person or persons.

There is also a general option to employ workers temporarily for a maximum period of 12 months, with no requirement as to a specific basis for the temporary employment. A maximum of 15 per cent of the employees of the undertaking may be temporarily employed under this alternative. If, on expiry of the agreement period, an employee who is temporarily appointed pursuant to this alternative is not offered continued employment, the employer shall be subject to quarantine for 12 months. During this period, the employer may not make new appointments subject to this alternative for work tasks of the same kind.

Maximum periods of temporary employment of three or four years, depending on the basis for the temporary employment, also apply.

The chief executive of the undertaking may always be appointed for a fixed term.

ii Probationary periods

The employer and the employee may agree on a probationary period of a maximum duration of six months from the commencement of the employment relationship. The probationary period may, however, be extended by a period corresponding to an employee's absence from work during the probationary period, subject to certain criteria.

During the probationary period, the employee may be dismissed with notice on the grounds of lack of suitability for the work, or lack of proficiency or reliability.

The notice period in the probationary period is 14 days and commences the first day after notice is given, unless otherwise agreed in writing or in applicable CBAs.

iii Establishing a presence

All foreign companies that have employees in Norway are required to register in the State Register of Employers and Employees (the AA Register).

Foreign employers with assignments in Norway are further required to report to the AA Register through the 'a-melding' scheme. The Norwegian authorities, including the Norwegian Tax Administration and the Labour and Welfare Service, have access to the 'a-melding'. The a-melding is submitted monthly online6 and shall, among other things, contain information regarding employment, salary, tax withholding and the employer's national insurance contributions.

Further, assignments in Norway carried out by a foreign company must also be reported to the Central Tax Office – Foreign Tax Affairs (SFU). The SFU makes an individual assessment of whether the activity is of such a character that it creates a permanent establishment. In the event the company is to be regarded as a permanent establishment, this will, as a main rule, trigger tax liability for the company to Norway.

In order to comply with the above-mentioned obligations, foreign companies have a right to register with the Central Coordinating Register for Legal Entities to obtain a Norwegian organisation number. The organisation number is unique to each company and is used to identify the company in most public contexts, including when submitting the a-melding. Foreign companies that are carrying out business operations in Norway are also obliged to register in the Register of Business Enterprises. All foreign enterprises that are required to have a Norwegian organisation number will be registered as a Norwegian-registered foreign business.

Foreign companies may engage independent contractors in Norway, as well as hire employees through an agency or another third party. As a main rule, it is not necessary to register in any registers to do so, nor will it be necessary for the foreign company to submit the a-melding. However, as stated above, the company is required to register in the Register of Business Enterprises if the company is conducting business operations in Norway, as well as reporting the assignments in Norway to the SFU. Employees hired from agencies are entitled to equal pay and working conditions as if they had been employed directly to perform the same work.

There is a risk that a consultant or hired employee may claim employment with the foreign company operating in Norway. If the foreign company is to be regarded as an employer, it will have the employer's reporting liabilities and registration obligations as described above.

Employees working in Norway are covered by the Norwegian working environment legislation and regulations. Thus, foreign companies with employees in Norway must comply with these regulations.

v RESTRICTIVE COVENANTS

New and stricter regulations regarding non-competition and non-solicitation of customers (restrictive covenants) came into full effect in January 2017. The regulations are provided in Chapter 14A of the WEA.

The regulations set out specific requirements in relation to restrictive covenants upon termination of employment. The requirements imply, inter alia, a maximum duration of restrictive covenants of 12 months from cessation of employment, a duty to provide a written statement and a duty to pay compensation to the employee when invoking a non-competition clause. Further, a non-competition clause may only be invoked as far as is necessary in order to safeguard the employer's particular need for protection against competition.

VI WAGES

i Minimum wage requirements

There is no minimum wage by law in Norway. However, for some industry sectors, collective agreements have been given general applicability, which means that they apply to all employers and employees in that industry sector, even if they are not party to the relevant CBAs. These generally applicable collective agreements may include minimum wage regulations.

ii Working time

Provisions on working hours are provided in Chapter 10 of the WEA. These provisions apply to all employees, with the exception of employees who have 'leading' or 'particularly independent' positions. Industry-specific rules, such as for offshore work, also apply according to separate regulations. According to the WEA, normal working hours must not exceed nine hours per 24 hours or 40 hours per seven days. However, the WEA allows for the employer and the employee to agree in writing upon calculation of average working hours, within certain limits.

Night work between 21.00 and 06.00 is generally prohibited, unless the nature of the work necessitates it.

iii Overtime

Work in excess of the agreed working hours must not take place unless there is an exceptional and time-limited need for it.

If the working hours exceed the limits for normal working hours according to the WEA, the work is considered as overtime, and the employee shall receive an overtime supplement of at least 40 per cent of his or her salary in addition to the salary received by the employee him or her for corresponding work during normal working hours.

As a main rule, overtime work must not exceed 10 hours in seven days, 25 hours in four consecutive weeks or 200 hours in 52 weeks.

VII FOREIGN WORKERS

There are no limits on the number of foreign employees a workplace or a company may employ, and the employer does not have to keep a register of its foreign employees. Further, there are no restrictions on the length of a foreign employee's assignment.

Employees from countries inside the European Union or the European Economic Area (EEA) do not need a residence permit in order to work in Norway, but they have to register with the police no later than three months after arriving in Norway. Swedish, Danish, Icelandic and Finnish citizens can work in Norway without registering with the police, but they have to report a move to the National Registry.

Employees from countries outside the European Union or the EEA who wish to work in Norway, however, need a residence permit for work. An employee cannot start working before he or she has been granted the residence permit. The residence permit will have an expiry date, but most residence permits are renewable. Employers who employ foreign employees who do not have the right type of residence permit, may be subject to fines or imprisonment.

Business travellers may, however, be allowed to work in Norway for up to three months without a residence permit.

Foreign employees are, as a main rule, protected under the Norwegian employment laws and have the same rights as Norwegian employees, including under any generally applicable collective agreements.

The employer is obliged to report wages to the Norwegian tax authorities, and to withhold and pay tax on behalf of its employees. This also applies to foreign employees, unless exceptions are made pursuant to social security agreements between Norway and other countries. Foreign employees must visit the tax office in person in order to get a tax deduction card. It is a condition for receiving a tax deduction card that the Norwegian Tax Administration has checked the employee's identity and that the employee has been given a Norwegian identification number.

VIII GLOBAL POLICIES

Industrial and commercial undertakings, as well as undertakings with office activities, employing more than 10 persons are required under the WEA to have staff rules. Otherwise, there is no general requirement for employers to have particular policies in place. However, it is normal and considered best practice for larger employers to have certain policies in place, including ethical guidelines, anti-corruption rules and IT policies.

IX TRANSLATION

It is not required to translate the employment documents into Norwegian, nor into the employee's native language. However, the employer should ensure that the employment documents are written in a language the employee understands.

X EMPLOYEE REPRESENTATION

In undertakings that regularly employ at least 50 employees, the employer is obliged to provide information concerning issues of importance for the employees' working conditions and consult upon such issues with employee representatives. The WEA also includes several provisions on information and consultation with employee representatives irrespective of the size of the undertaking, including with respect to potential workforce reductions involving 10 or more employees and transfers of business.

In addition, the Private Limited Liability Companies Act and the Public Limited Liability Companies Act provide rules on employee representation on boards of directors.

The employees' right to be represented on the board of directors depends on the number of employees in the company. In companies with more than 30 employees and with no corporate assembly (see below), a majority of the employees may demand that up to one member of the board of directors and one observer (both with deputies) are chosen by and among the employees. In companies with more than 50 employees and no corporate assembly, a majority of the employees may demand that up to one-third and at least two employee representatives, with deputies, are chosen by and among the employees. In companies with more than 200 employees, and where it has been agreed that the company shall not have a corporate assembly, the employees shall elect one board member (with deputy) or two observers (with deputies) in addition to the representation described for companies with 50 to 200 employees.

Companies with over 200 employees must have a corporate assembly, unless otherwise agreed upon between the company and a majority of the employees or a union that represents at least two-thirds of the employees. A corporate assembly is primarily a supervisory body that supervises the board of directors' management of company business, but that also has certain decision-making powers. One-third of the members of the corporate assembly shall be elected by the employees.

The Public Limited Liability Companies Act also contains rules on gender representation.

XI DATA PROTECTION

i Requirements for registration

The General Data Protection Regulation is implemented in Norway through the Personal Data Act of 2018. The new rules strengthen the rights of persons that have personal data registered.

The processing of personal data concerning employees must comply with the Personal Data Act. The employer is not required to register with the data protection authority or any other governmental body, but it must identify the information being processed concerning employees, and keep an overview of personal data on employees. The employees must be informed of what personal data the employer is processing. The employer is not allowed to process personal data on employees that is not necessary to achieve a legitimate purpose. Further, the employer must take all necessary measures to protect the personal data against unauthorised access and ensure that staff are sufficiently aware of data protection obligations.

Consent is highly unlikely to be a legal basis for processing personal data on employees, unless employees can refuse without adverse consequence. Employers will have to rely on another legal basis than consent, such as legitimate interest.

Any transfer of personal data on employees from the employer (controller) to a third party (processor) must be regulated by a data processing agreement. No data processor may process personal data in any other way than what is agreed in writing with the data controller.

ii Cross-border data transfers

Any international transfer of personal data concerning employees shall take place only where an adequate level of protection is ensured, such as countries within the European Union or the EEA.

Transfer of personal data concerning employees to third countries or an international organisation may take place where the European Commission has decided that the third country, a territory or one or more specified sectors within that third country, or the international organisation in question, ensures an adequate level of protection. Such transfers do not then require any specific authorisation. Transfer of personal data to other countries or international organisations is only allowed if the employer or the processor has provided appropriate safeguards, and on condition that enforceable data subject rights and effective legal remedies for data subjects are available. A data processing agreement must be in place.

Employee notification is necessary.

iii Sensitive data

Sensitive data is defined as information relating to a person's racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, sex life or sexual orientation, health, or genetic or biometric data. Social security numbers are not regarded as sensitive data.

There are restrictions on processing sensitive data. Processing sensitive data on employees is only allowed when the processing is necessary for the purpose of carrying out the obligations and exercising specific rights of the controller or of the data subject in the field of employment, social security and social protection law, in so far as it is authorised by Norwegian law or a collective agreement.

iv Background checks

The employer may only perform background checks (e.g., credit checks and criminal record checks) if it is objectively justified. This will depend on the employee's position and the employer's business.

During recruitment of staff, the employer can only review information about a candidate on social media if this is necessary for the job, and the candidate is correctly informed. The candidate may be informed in the job advertisement.

XII DISCONTINUING EMPLOYMENT

i Dismissal and redundancies

Section 15-7 of the WEA provides that a dismissal with notice from the employer must be objectively justified owing to circumstances relating to the undertaking, the employer or the employee.

Necessary workforce reductions owing to the company's financial or operational situation will usually be objectively justified. The employer is required to first consider less drastic measures than redundancy, for instance temporary lay-offs. When selecting redundant employees, the selection area and selection criteria must also be objectively justified, and must be applied in a just manner. Furthermore, there is a duty to consider whether suitable alternative work for the employee is available within the company, in addition to carrying out a weighing of the respective interests of the employer and the employee. Many collective bargaining agreements have provisions applicable to redundancy processes, including on the principles of selection.

The WEA distinguishes between collective redundancies and dismissals with notice involving individuals or only a few employees, and establishes specific procedures for collective redundancies. Redundancies are collective when notice of dismissal is given to at least 10 employees within 30 days without being warranted by reasons related to the individual employees. In the event of collective redundancies, the employer must inform and consult with the employees' representatives regarding specific topics that must be covered before a final decision on redundancies is made. In addition, the employer must notify the Norwegian Tax Administration and the Labour and Welfare Service of the impending redundancy. Applicable CBAs or Chapter 8 of the WEA may require that consultations with employee representatives shall take place in the event of smaller redundancies as well.

A termination based on circumstances related to the employee will in general be objectively justified if there is a breach of duty or if the employee has neglected his or her obligations as stated in the employment agreement. However, breach of the employment agreement or the employee's duties will not necessarily constitute sufficient grounds for dismissal, as the threshold for dismissal is high.

Pursuant to Section 15-14 of the WEA, the employer may summarily dismiss an employee if he or she is guilty of a gross breach of duty or other serious breach of the contract. Summary dismissal implies that the employment relationship is terminated with immediate effect.

The employer is obligated to consult the relevant employee before deciding whether to give notice of dismissal or a summary dismissal. The employee is entitled to bring an adviser to the meeting.

A decision on termination of employment shall be made only after the consultation meeting with the employee. Requirements as to the form, content and delivery of the notice of dismissal or summary dismissal also apply.

The WEA sets out requirements as to the length of the notice period if an employment contract is terminated. The notice period will be a minimum of one month calculated from and including the first day of the month following that in which notice was given. A longer notice period may apply, however, depending on an employee's age and seniority in the company, or according to the employment contract. The employee is both entitled and required to work during the notice period. Pay in lieu of notice is not allowed, unless both parties agree.

Employees are not entitled to severance pay or other termination indemnities. However, such clauses may be included in settlement agreements, which may be entered into as an alternative to a dismissal with notice.

Employees who have been employed for a total of at least 12 months during the previous two years and who are being dismissed with notice due to workforce reductions have a preferential right to new employment with the same company for a period of one year after expiry of the notice period, unless the employee is considered not to be suited for the vacant position.

The chief executive of the undertaking may waive his or her employment protection in return for severance pay, in which case the material and procedural requirements outlined above do not apply.

XIII TRANSFER OF BUSINESS

The rules on transfers of business are derived from two European Union Council Directives (77/187/EEC and 98/50/EC), which Norway, as a member of the EEA, has implemented in Chapter 16 of the WEA. Section 16-1 of the WEA states that Chapter 16 applies to a 'transfer of an undertaking or part of an undertaking to another employer'. The same section defines a transfer as a 'transfer of an autonomous unit that retains its identity after the transfer'.

Pursuant to Section 16-2 of the WEA, if the transaction constitutes a transfer of business, the rights and obligations of the former employer ensuing from the contract of employment or the employment relationship in force on the date of transfer will be transferred to the new employer. This implies that, as a general rule, the new employer must maintain the transferred employees' salary and other contractual working conditions that ensue from the employment relationship with the former employer. Exceptions apply with respect to pension obligations and CBAs.

Pursuant to Section 16-5 of the WEA, the former and the new employer must inform and consult with the employees' representatives regarding the prospective transfer and certain specific topics. The consultation and information obligation has to be carried out as early as possible.

In addition, according to Section 16-6 of the WEA, both the new and former employer are also obliged to inform the employees affected by the transfer of business as early as possible.

With respect to the right of reservation and possible right of choice, see Section III.ii.

XIV OUTLOOK

As mentioned in Section II.ii, legislative changes with respect to permanent employment, as well as hiring from staffing enterprises, have entered into force as of 1 January 2019. These changes are expected to be a hot topic in the year to come. The proposed amendments to the whistle-blowing regulations are also expected to be a hot topic, as discussed in Section II.iii.

With respect to case law, we would not be surprised to see some cases pertaining to Chapter 14A of the WEA on restrictive covenants start to make their way through the courts, and we expect the seniority principle in redundancies to remain an important issue.


Footnotes

1 Magnus Lütken is a partner and Andrea Cecilie Rakvaag is an associate at Advokatfirmaet Schjødt AS.

2 LB-2017-75155.

3 LG-2018-7314.

4 HR-2018-1036-A.

5 HR-2018-1944-A.