The Employment Law Review: Norway

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 that have 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 Ship Labour Act of 2013, 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 courts may be appealed to the Court of Appeal, which in turn may be appealed to the Supreme Court. Judgments by 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 ensure compliance with the WEA and other relevant legislation.

Year in review

i Lay-offs relating to covid-19

The effect of the covid-19 pandemic on the labour market has been the defining aspect of employment law in Norway in 2020. In particular, a large number of companies have been forced to lay-off staff, either permanently or temporarily. In view of the presumed temporary nature of the pandemic, the majority of employers have laid off employees temporarily rather than dismissing them permanently. For more information regarding requirements for the use of temporary lay-offs, see Section XIII.ii.

As in many other countries, Norwegian society was almost completely shut down from mid March 2020. This resulted in a large number of temporary lay-offs more or less overnight. To mitigate the effects the pandemic could have on companies and employees in economic terms, the Norwegian government implemented a number of measures, many of which were concerning temporary lay-offs.

Employers are obliged to pay their employees' salaries during the initial phase of a temporary lay-off, referred to as the employers' period. The covid-19 pandemic led to the the employers' period being reduced from 15 working days to two working days, but it was later extended to 10 working days. The government has also announced a second employers' period, whereby employers are obliged to pay their employees' salaries for five working days. The second employer's period will affect companies that have had employees on temporary furlough for 30 weeks or more. The original implementation date for this rule of 1 January 2021 has been put back to 1 March 2021. Furthermore, Parliament has requested that the government considers further delaying the implementation until 1 July 2021.

Most notably, the maximum duration of temporary lay-offs has been extended from 26 weeks within the past 18 months to 52 weeks within the past 18 months. Furthermore, Parliament has requested that the government extends the applicable period until 1 October 2021, thus extending the maximum duration for temporary lay-offs for employees where the 52 weeks period has been exceeded.

The government has also implemented several measures to mitigate the economic effects on employees. There have been several extensions to the number of days of sick leave and other personal days that may be taken because of the pandemic and that will be compensated by national insurance, in addition to an increase in the contribution from national insurance to employees who have been laid off temporarily.

Significant cases

i Semco

In the Semco case, the Norwegian Supreme Court assessed whether the legislation concerning equal treatment regarding pay and working conditions in connection with the hiring out of workers by agencies for temporary also applies to bonus schemes that are applicable to a group of employees. The Norwegian legislation is based on EU Directive 2008/104/EC on temporary agency work, and states that temporary employees must receive the same salary as permanently employed employees. Pursuant to the Semco case, the term 'salary' also encompasses bonus schemes that are company-wide or applicable to a group of employees, if the bonus scheme is considered as compensation for performed work.

ii ST1

The ST1 case concerned an early retirement scheme that had existed within the company Shell for a number of years, whereby all employees over the age of 57 had been offered an early retirement package as an alternative to being dismissed because of workforce reductions. In connection with a transfer of undertaking, which involved several employees being transferred from Shell to ST1, ST1 promised to uphold employment-related benefits for at least two years. Before the two years had lapsed, ST1 carried out a downsizing process without offering the employees over 57 years of age an early retirement package. The Supreme Court found that it was not sufficiently proven that ST1 had given a binding promise towards the employees, as no written documentation could sufficiently prove that a promise was given. It was also presumed that the employer would not take on an expensive pension scheme like the one in this case without reflecting the changes in the written policy for redundancies. As the transfer of undertaking was handled by professionals, with cooperation from the employee representatives and the unions, it was unlikely that a binding promise regarding the early retirement package would not be reflected in any of the written material. The Supreme Court ruled that a binding promise had not been given.

Basics of entering into 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 duration of more than one month, a written employment contract shall be entered into as early as possible and no more than one month following commencement of the employment. In employment relationships of a shorter duration than one month or in connection with the 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 an employment contract. According to Section 14-6 of the WEA, it 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, the commencement date, provisions relating to a probationary period (if relevant), the employee's right to holiday and holiday allowance, the notice period, salary, duration and disposition of the daily and weekly working hours, the length of breaks, information regarding applicable collective bargaining agreements and, if the employment is temporary, 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 contract as early as possible and not later than one month after the change has entered into force.

Even though a written employment contract, as well as certain minimum requirements as 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 to the employment relationship subject to the management prerogative; however, this prerogative is not unlimited. According to case law, the scope of the employer's management prerogative will depend on a holistic assessment of, among other things, the employment agreement, the employee's job description, the circumstances surrounding the appointment, customs within the industry and practice in the employment relationship in question, in addition to any limitations under applicable legislation, regulations or CBAs. The management prerogative is also limited by principles of objectivity, as well as procedure.

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 variation dismissal (i.e., a formal dismissal with notice according to the WEA, combined with a new offer of employment on revised terms). As a variation dismissal is formally an ordinary dismissal, all the procedural rules and formal requirements for dismissal in Chapter 15 of the WEA must be followed.

An employee shall, as a main rule, be hired on a permanent basis. However, a fixed-term contract may be agreed 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 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 employed temporarily under this provision. If, on expiry of the agreement period, an employee who is temporarily appointed pursuant to this provision is not offered continued employment, the employer shall be subject to quarantine for 12 months, whereby the employer may not make new appointments subject to this provision. However, the quarantine only applies to work tasks of the same kind as those performed by the former employee.

The maximum possible periods of temporary employment are three or four years, depending on the basis for the temporary employment.

There are alternative provisions that may be made applicable only for the chief executive of an undertaking. A chief executive may always be appointed for a fixed term. Furthermore, a chief executive may relinquish the protection against unfair dismissal in exchange for severance pay on termination of employment.

ii Probationary periods

The employer and the employee may agree on a probationary period of a maximum of six months from the commencement of the employment relationship. The probationary period may be extended, however, 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 during a probationary period is 14 days and commences on the first day after notice is given, unless otherwise agreed in writing or in applicable CBAs. The notice period during a probationary period is substantially shorter than the ordinary notice period (see Section XIII).

iii Establishing a presence

All foreign companies that have employees in Norway are required to register with 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 online2 once a month and shall, among other things, contain information regarding employment, salary, tax withholding and the employer's national insurance contributions.

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 that the company is to be regarded as a permanent establishment, this will, as a main rule, trigger tax liability to Norway.

To comply with the aforementioned obligations, foreign companies have a right to register with the Central Coordinating Register for Legal Entities to obtain a Norwegian organisation number. Foreign companies that are carrying out business operations in Norway are also obliged to register with 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 and hire employees through an agency or another third party. As a main rule, there are no registration requirements, nor will it be necessary for the foreign company to submit an a-melding. However, as stated above, the company is required to register with the Register of Business Enterprises if it is conducting business operations in Norway, and to report assignments in Norway to the SFU. Employees hired from agencies are entitled to the same 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 a foreign company operating in Norway. If the foreign company is to be regarded as an employer, it will be subject to the reporting liabilities and registration obligations for an employer 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.

Restrictive covenants

Traditionally, three types of restrictive covenants have been used in Norwegian employment agreements: non-compete, non-solicitation of customers and non-solicitation of employees. New and stricter regulations regarding non-competition and non-solicitation of customers came into full effect in January 2017. These regulations are provided in Chapter 14A of the WEA.

The regulations set out specific requirements in relation to restrictive covenants when employment is terminated. 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-compete clause. Further, a non-compete clause may be invoked only as far as is necessary to safeguard the employer's particular need for protection against competition.

Non-solicitation of employee clauses may be censored or deemed invalid under contract law.

Wages

i Minimum wage requirements

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

The industry sectors in which CBAs have been given general applicability are usually those in which social dumping is an issue, for instance for construction workers and cleaners.

ii Working time

Provisions on working hours are provided in Chapter 10 of the WEA. These provisions apply to all employees, except those 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 week. However, the WEA allows for the employer and the employee to agree in writing to a calculation of average working hours, within certain limits.

Working between 9pm and 6am 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.

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 the salary in addition to the salary received for corresponding work during normal working hours.

As a main rule, overtime work must not exceed 10 hours during the course of seven days, 25 hours in four consecutive weeks or 200 hours in 52 weeks. These limits may be expanded through written agreements with employee representatives in companies that have CBAs.

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 duration 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 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.

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

Notwithstanding the foregoing, business travellers may be allowed to work in Norway for up to three months without a residence permit.

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

Employers are obliged to report wages to the tax authorities, and to withhold and pay tax on behalf of their 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 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.

Global policies

Industrial and commercial undertakings, and undertakings with office activities, that employ more than 10 people 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.

Parental leave

The provisions in the WEA regarding parental leave are closely linked to the Norwegian National Insurance Act. In Chapter 12 of the WEA, it is stated that an employee is entitled to leave of absence for at least 12 months, but at least for as long as parental benefits are paid by the National Insurance Scheme. The period for which parental benefits are paid by the National Insurance Scheme is a much-debated topic in politics, and the length of the period is subject to frequent change: it is currently up to 59 weeks in total for both parents.

The same rules apply for adoption, although the maximum period is three weeks shorter. For births or adoptions of multiple children, the period extends up to 56 weeks.

In addition to parental leave with benefits from the National Insurance Scheme, a parent is entitled to up 12 months' unpaid leave following each birth.

An employee has a duty to provide notification to her or his employer within given deadlines, but there are no other requirements for parental leave entitlement.

As an employee is entitled to parental benefits from the National Insurance Scheme, the employer is not obliged to pay any salary to the employee during parental leave. However, because the parental benefits are capped at a particular sum, some employers voluntarily take on the obligation to pay the difference between the parental benefit and the employee's regular salary. Until May 2021, the benefits are capped at just under 610,000 kroner.

An employee cannot be dismissed on the basis of being pregnant or on parental leave, according to Section 15-9 of the WEA, and the onus is on the employer to prove that dismissals at these times are not in violation of this provision. Beyond that, there is not any particular protection against dismissal of employees on parental leave. However, if an employee is dismissed while on parental leave, the notice period will not commence until the employee returns from parental leave.

Translation

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

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 employee representatives about these issues. 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.

The aforementioned undertakings are also obliged to have a working environment committee, with the aim of establishing a fully satisfactory working environment.

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 right of employees to be represented on a board of directors depends on the size of the payroll, starting with companies with at least 30 employees.

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

Data protection

i Requirements for registration

The EU General Data Protection Regulation is implemented in Norway through the Personal Data Act of 2018. These 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. An employer is not required to register with the data protection authority or any other government body, but it must identify the information being processed concerning employees, and keep an overview of personal data on employees. Employees must be informed of what personal data the employer is processing. An employer is not allowed to process employees' personal data if it is not necessary to achieve a legitimate purpose. Further, an employer must take all necessary measures to protect employees' personal data against unauthorised access and ensure that employees are sufficiently aware of the relevant data protection obligations.

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

Any transfer of employees' personal data from an 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 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 in countries within the European Union or the EEA.

Transfers of personal data concerning employees to third countries or an international organisation may take place provided 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. A transfer does not then require any specific authorisation. Transfers of personal data to other countries or international organisations is only allowed if the employer or the processor has provided appropriate safeguards, and on the 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 strict limits on the processing of sensitive data about employees. It is only allowed when the processing is necessary for the purpose of carrying out the obligations, or 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

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

During recruitment of staff, an 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 by an appropriate statement in the job advertisement.

In several sectors, such as the legal sector and education, prospective employees may be required by law to provide a certificate of good conduct from the police.

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 resulting from the company's financial or operational situation will usually be objectively justified. An employer is required first to consider less drastic measures than redundancy, such as temporary lay-offs. When selecting redundant employees, the selection pool and 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 an employee is available within the company, in addition to carrying out a weighing of the respective interests of the employer and the employee. Many CBAs 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 relating to the individual employees. In the event of collective redundancies, an employer must inform and consult the employee representatives regarding specific topics that must be covered before a final decision on redundancies is made. In addition, an 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 also take place in the event of redundancies on a smaller scale.

A dismissal based on circumstances relating to an employee will in general be objectively justified if there is a breach of duty or if the employee has neglected the obligations 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 generally high. If an employee has been given a formal warning, the threshold for dismissal may be lowered if there are further breaches of the employment agreement.

Pursuant to Section 15-14 of the WEA, an employer may summarily dismiss an employee who is guilty of a gross breach of duty or other serious breach of the employment contract. Summary dismissal implies that the employment relationship is terminated with immediate effect. The employer is obliged to consult the relevant employee before deciding whether to give notice of dismissal or a summary dismissal. The employee is entitled to have an adviser at that consultation meeting.

A decision regarding termination of employment shall be made only after a 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 to be 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 have so agreed.

Employees are not entitled to severance pay or other termination indemnities. However, clauses in this respect 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 because of workforce reductions have a preferential right to new employment with the same company for 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 an undertaking may waive employment protection in return for severance pay, in which case the material and procedural requirements outlined above do not apply.

ii Temporary lay-offs

Permanent dismissal is regulated by the WEA but temporary lay-offs are not. However, almost all CBAs contain regulations regarding temporary lay-offs, which are binding for companies bound by those CBAs. For companies that are not bound by any CBAs, non-statutory rules apply. Pursuant to legal practice, the CBA between the Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO) (respectively, the largest trade union and employers' organisation in Norway) is applicable as far as is appropriate. The CBA between the LO and NHO is thus the main source of law for temporary lay-offs in companies that are not bound by CBAs.

Chapter 7 of this CBA contains rules regarding when temporary lay-offs are possible and procedural rules. Temporary lay-offs are permissible only if there is a temporary shortage of work in the undertaking. Thus, temporary and permanent dismissals are mutually exclusive and an employer cannot choose whether to dismiss employees temporarily or permanently, but must assess which is correct for the situation.

The procedure prior to temporary lay-offs differs from the procedure prior to permanent dismissals in many aspects. Instead of individual consultations, collective consultations are held. Both the selection area and the selection criteria must be objectively justified when identifying employees for temporary lay-offs. Finally, the notice period for temporary lay-offs is much shorter than for permanent lay-offs, usually 14 days from the day after the notice was received.

Employers are obliged to pay their employees' salaries during temporary lay-offs, as discussed in Section II.

Transfer of business

The rules on transfers of business are derived from two EU 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'. The transfer of business rules do not apply to share sales.

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, both the former and new employers must inform and consult the employees' representatives regarding the prospective transfer and certain specific topics. The consultation and information obligations have to be carried out as early as possible.

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

Outlook

As most of the legislation that has been passed in 2020 in connection with the covid-19 pandemic has been made applicable for only a limited time, we expect several changes in the legislation relating to covid-19 measures. This includes most of the legislation mentioned in Section II.

There are several employment-related cases set to be tried in 2021. Most notably, the Grefsenhjemmet case will be tried by the Supreme Court. This case concerns whether clauses in an expired CBA can nevertheless have individual effect for the employees. Even though the specific question is whether an addition to the salary for employees with a certain length of service has become an individual right pursuant to the expired CBA, the case potentially has a wider application. This is the first court case regarding what may constitute a wider principle regarding the after-effects of CBAs.

Footnotes

1 Magnus Lütken is a partner and Fredrik Øie Brekke is an associate at Advokatfirmaet Schjødt AS.

Get unlimited access to all The Law Reviews content