The Employment Law Review: Norway
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 court 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 secure compliance with the WEA and other relevant legislation.
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 was a hot topic in 2019, as it had been in 2018. The Supreme Court pronounced two judgments, among others, on the topic – the Skanska case and the Telenor case (see Section III). The 2019 Telenor case from the Supreme Court is the same as the judgment pronounced by the Court of Appeal in the winter of 2018.
In these cases, the principle of seniority has been relevant in respect of both the selection criteria and the selection pool. The selection criteria are those used to select employees for redundancy. It is undisputed that seniority is a relevant criterion, but the question is how much weight it should carry. The selection pool is the group or groups of employees from which those who are at risk of dismissal are selected. The main rule here is that the entire legal entity is the selection pool, but that it may be narrowed down if done on a justifiable basis.
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), the largest trade union and employers' organisation in Norway, respectively.
There has also been a dispute between the 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 just one. The dispute has been settled with the Skanska case at the Supreme Court (see Section III.i).
ii Amendments to the regulations on whistle-blowing
In March 2018, an expert group delivered a report on the whistle-blowing regulations and suggested amendments in the applicable legislation to strengthen protections under Norwegian law for employees who are whistle-blowers. Changes to the whistle-blower regulation were subsequently enacted by the Norwegian parliament and are effective from 1 January 2020. The changes include that the terms 'censurable conditions' and 'retribution' are defined in Chapter 2A of the WEA. The new regulation also includes guidelines for the correct procedure regarding whistle-blowing, as well as a clearer regulation of employers' obligations in whistle-blowing cases.
i Correct application of seniority
In the Skanska case,2 the main question before the Supreme Court 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 the LO and NHO had been correctly applied in the process. In its judgment, the Supreme Court pronounced that the CBA requires that seniority and length of service shall be the starting point for the selection of redundant employees, but the principle of seniority could not be considered as the main rule. Instead, seniority should be one factor in a holistic assessment, and the weight is relative, differing from case to case.
ii The seniority principle and selection pool
In the Skanska case, the Supreme Court assessed the principle of seniority as a factor in the selection criteria assessment. In the Telenor case,3 on the other hand, the Court assessed the selection pool. In this case as well, the principle of seniority was founded in the CBA between the LO and NHO. The Court concluded that the selection pool cannot be so narrow that the principle of seniority loses most of its effect.
iii Variation dismissal
On 15 May 2019, the Supreme Court pronounced a judgment in the Hurtigruten case regarding variation dismissal (see also Section IV.i regarding variation dismissal).4 The verdict is the first in which the Supreme Court has concluded that the threshold for a variation dismissal is lower than for regular dismissal. The Court concluded that the consequences of the dismissal are somewhat mitigated by offering the employee new employment on revised terms.
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 total 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 agreement. According to Section 14-6 of the WEA, an 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, 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 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 has 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 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' (a formal dismissal with notice according to the WEA, combined with a new offer of employment on revised terms). As a variation dismissal formally is 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 temporarily employed 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.
Maximum periods of temporary employments 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 monthly online5 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 for the company 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 the 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.
Traditionally, three types of restrictive covenants have been used in Norwegian employment agreements: non-competition, 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 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 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.
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, with the exception of 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 seven days. 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.
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 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 in 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.
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 or 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 the 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 Norwegian 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.
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.
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 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 the parental leave with benefits from the National Insurance Scheme, a parent is entitled to up 12 months unpaid leave for 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 employee's regular salary and the parental benefit. Until May 2020, the benefits are capped at approximately 600,000 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.
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.
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. Employees' right to be represented on a board of directors depends on the number of employees in the company, starting with companies with at least 30 employees.
The Public Limited Liability Companies Act also contains rules on gender representation.
Employee representation (protected concerted activity)
i Requirements for registration
The EU 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. 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 personal data on employees that 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 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, 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, prospective employees may be required by law to provide a certificate of good conduct from the police, such as the legal sector and education.
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 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 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 take place in the event of redundancies on a smaller scale as well.
A termination 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 agree.
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.
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, the former and the new employer 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 employer are obliged to inform the employees affected by the transfer of business as early as possible.
With the implementation of a new and clearer regulation on whistle-blowing from 1 January 2020, one can expect discussions and, in time, cases before the courts, regarding the application of the rules. The new regulation has placed specific duties on employers, which will make it easier for an employee to take legal action if an employer is negligent.
Further, several cases regarding bonuses have been heard by the city courts and the Court of Appeal in 2019, and one of the latter, the Semco case, has been admitted to the Supreme Court. It is likely that several of these cases will be appealed and heard in 2020. Different questions regarding bonuses are being tried, for instance the company's degree of discretion regarding the size of the bonus, and non-discrimination of agency workers in bonus schemes.
The Supreme Court has also admitted another case regarding the principle of seniority and the selection pool, again with Telenor as the employer. Because the Supreme Court pronounced a judgment on 29 October 2019 based on similar facts, the latest Telenor case has the potential to be a topic for debate in 2020 as well.