This country-specific Q&A provides an overview to employment laws and regulations that may occur in Norway.
This Q&A is part of the global guide to Employment & Labour Law. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/employment-and-labour-law-3rd-edition/
Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful in your jurisdiction?
According to the Norwegian Working Environment Act (“WEA”), an employee is protected against unjustified termination of the employment relationship. The employer therefore cannot terminate the employee’s contract unless there are justifiable reasons for such termination based on circumstances relating to the enterprise, the employer or the employee.
Termination of employment due to circumstances relating to the enterprise (redundancy) will in most cases be considered justifiable if it can be established that there is a long-term need for the enterprise to curtail operations, rationalise, restructure, or something similar. Before implementing redundancies, an employer is obliged to consider whether they can be avoided. Further, a termination of employment will not be justifiable if the employer has other suitable work in the enterprise to offer the employee. If there is a vacant position, a transfer must be offered to the employee even though he/she may need some training, provided such training will not cause unreasonable expense or inconvenience to the employer.
The specific situations when an employee can be dismissed with – or without - notice are not described in the WEA. In short, termination of employment due to the employee's circumstances must be based on the employee’s breach of contract or duties. In essence, the applicable provisions are meant to ensure that each individual employee’s situation is considered and weighed against the employer's situation. The threshold for termination is high and the employer must show objectively justifiable reasons. There is also a requirement of proportionality between the breach and the reaction.
Summary dismissal (i.e. the employee must leave the workplace immediately) is only permitted if the employee has committed a gross breach of contract. Examples of breaches that may constitute grounds for summary dismissal are severe insubordination, the flouting of safety requirements, embezzlement or any similar serious situation.
A termination of employment that lacks justifiable reason may be ruled invalid by a court if requested by the employee, with the effect that the employment relationship continues.
What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?
The WEA does not make any distinction between different kinds of redundancies. The threshold for having justifiable reason to terminate an employment contract is the same regardless of the number of employees being made redundant.
If the employer terminates the contracts of 10 or more employees within 30 days, this is deemed to be “collective redundancies” pursuant to the WEA. The number of employees leaving the company as a result of severance agreements within the 30-day period is considered and included in the number of relevant terminations in relation to this statutory provision. Projected collective redundancies cannot take effect earlier than 30 days after the Norwegian Labour and Welfare Organisation has been notified.
What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?
The WEA provisions regarding the rights of employees in the event of a transfer of a business activity or part of a business activity comply with the provisions set forth in the relevant Transfers of Undertakings Directive. A transfer of business as defined in the directive does not constitute justifiable reason for terminating an employment contract. The statutory provisions therefore prohibit the employer from terminating the employment solely due to a transfer of business.
What, if any, is the minimum notice period to terminate employment?
The minimum length of notice for both the employer and employee is one month. For employees employed for a trial period, the minimum notice period is 14 days.
The minimum notice period is further specified in the WEA:
- Employees employed for at least five consecutive years – at least two months’ notice.
- Employees employed for at least 10 consecutive years – at least three months’ notice.
- Employees who have been employed for at least 10 consecutive years and are over 50 years of age – at least four months’ notice,
- Employees who have been employed for at least 10 consecutive years and are over 55 years of age – at least five months’ notice, and
- Employees who have been employed for at least 10 consecutive years and are over 60 years of age – at least six months’ notice.
Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?
Norwegian statutory law does not state any rules regarding the payment of compensation as a basis for terminating the employment contract. However, the employer may enter into an agreement with an employee according to which the employment contract is severed in return for the payment of compensation to the employee. The employee will always be entitled to payment for the contractual termination period. This is not considered to be a severance payment.
The agreement can only be entered into in connection with a possible termination of employment. It cannot be agreed in advance in the employment contract that the employee is obliged to waive his/her rights under the WEA. However, this does not apply to the general manager position. A general manager may relinquish his/her rights against severance in the employment contract.
Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to say at home and not participate in any work?
According to statutory provisions in the WEA, an employee has a right to work during the notice period. In connection with the issuance of the notice of dismissal, employees can agree to relinquish their right to remain in their post throughout the notice period.
Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, describe the requirements of that procedure or procedures.
The procedure differs depending on whether the termination is based on circumstances relating to the employer (redundancies) or the employee.
Through case law and major collective agreements, a requirement has developed for there to be an information and consultation process involving elected employee representatives prior to the decision to reorganize a company being made by the board of directors. There is no mandatory requirement to inform and consult with employee representatives unless 10 employees or more are to have their employment terminated. However, the court will always intensify the test of the “objectively justifiable reasons” if a redundancy process was not subject to consultations before the decision was made.
The selection of each employee to be dismissed must be based on a selection process where objectively justifiable criteria are applied. The selection criteria must – amongst others - be the subject of consultations with the employees' elected representatives. There is no mandatory rule stating that seniority is to be the sole selection criterion. In most cases, there will be an overall assessment based on seniority, education, experience and social circumstances.
Prior to any termination of employment due to circumstances relating to the employee or redundancies, the employer is obliged to discuss any impending dismissal with the employee before the decision to terminate his/her employment is finally made. The employee is entitled to receive assistance in such discussions from an elected employee representative or another advisor.
The notice of dismissal must be in writing. It must be handed over to the employee personally or sent by registered mail. The notice must include information about the right to dispute the validity of the termination of employment, and additional information regarding:
- the right to demand a negotiation meeting with the employer,
- the right to remain in one's post after the end of the notice period until a final ruling is made by the court,
- the right to claim compensation for damages,
- any preferential right if made redundant, and
- within what time period the various claims must be made against the employer or lodged in court by the employee.
If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?
If the employer does not comply with the procedural rules, there is a high risk that the court will find that the process conducted by the employer was not justifiable and that the decision to terminate employment would not have been made if a fair and due process had taken place. In addition to continuing to be employed, the employee may claim compensation for their loss and compensation for damage of non-pecuniary nature.
How, if at all, are collective agreements relevant to the termination of employment?
Collective agreements will mainly be relevant to the obligation to inform and consult with elected employee representatives as “soon as possible” and before any decisions affecting the employees are made. Further, some collective agreements stipulate a stricter use of the seniority criterion and/or an extension of the preferential right when employees are made redundant.
Does the employer have to obtain the permission of or inform a third party (e.g local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?
No approval from a government agency is required when terminating employment. However, the Norwegian Labour and Welfare Organisation has to be notified if 10 or more employees are affected by a redundancy process, see question 2 above.
If an enterprise is to be shut down resulting in the termination of all employee contracts, the owner of the entity is obliged to notify the county authorities.
What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?
The Norwegian Equality and Anti-Discrimination Act stipulates prohibitions against discrimination based on gender, pregnancy, leave of absence in connection with the adoption of a child, care responsibilities, ethnicity, religion, beliefs, sexual orientation, gender identity or gender expression.
According to the WEA chapter 13, employees are also protected against discrimination based on political views, membership of a trade union or age.
Discrimination is prohibited at all stages - during the recruitment, course of employment and when terminating the employment.
What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?
The dismissal may be found invalid. Anyone that has been discriminated against may claim redress and compensation regardless of whether the employer can be blamed for the discrimination. The employee may also be entitled to non-pecuniary damages.
Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?
Employees on fixed-term contracts for more than a year are entitled to a written notification from the employer about the end date of their employment. Such information must be provided to the employee at least one month prior to the expiry of the agreed fixed-term period. If the employee is on a temporary contract for more than three years (as a substitute) or more than four years as a temporary employee (for instance project-based), he/she is considered as a permanent employee with all the protection against unfair dismissal.
Employees on family leave or sick leave are protected against termination of employment on grounds related to such leave.
Employees who are elected employee representatives have additional protection against termination when employees are made redundant.
Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?
Pursuant to chapter 2 A of the WEA, an employee who has proceeded responsibly when notifying censurable conditions at the employer’s undertaking is protected against retaliation. If the employee submits information that gives reason to believe that retaliation has taken place, it shall be assumed that such retaliation has taken place unless the employer proves otherwise.
What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?
There are no statutory provisions regarding severance pay. In larger redundancy processes, many employers offer severance packages. The value of such packages is normally calculated based on the employee's monthly salary. The number of months paid for is normally based on length of service (for instance one month’s severance pay for each year of service) and/or type of job.
If an employee disputes a dismissal the level of severance pay is in many cases decided by the employer based on the strength of the case. The employee may also claim a statutory right to remain in employment (in his/her post) until the question of the validity of the termination has been decided by a final court judgment. This tends to increase the level of severance paid to an employee.
Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.
If a dispute has arisen regarding the validity of a termination of employment, an employee may waive his/her protection against unlawful dismissal by entering into an agreement. Employers tend to enter into such agreements as an alternative to starting a termination of employment process. This is not regulated in the WEA. It is assumed in legal theory that employees may waive their rights in return for a severance agreement even though no dismissal notice has been issued.
Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.
Under the WEA, it is possible to restrict or limit an employee’s freedom to take up a post with a new employer or to commence, operate or participate in other undertakings following the termination of employment. A non-compete clause may only be invoked in so far as it is necessary to safeguard the employer’s particular need for protection against competition. A non-compete clause may not be invoked for a longer period than 12 months following the termination of employment. A non-compete clause must be entered into in writing in order to be valid.
Such a post-termination restriction covenant can only be invoked if the employee resigns or is summarily dismissed or if the dismissal of the employee is objectively justified on the basis of circumstances relating to the employee. A non-compete clause cannot be invoked if the employee is made redundant.
The employer is obliged to give a written statement to the employee regarding whether and to what extent the non-compete clause will be invoked. The employer’s particular need for protection shall be explained in the statement.
A written statement must be provided within the following time limits:
- Within four weeks if the employee requests a written statement during the employment.
- Within four weeks if the employee resigns.
- Within two weeks if the employee is summary dismissed
- If dismissed due to circumstances relating to the employee, at the same time as the dismissal with notice is issued.
If the non-compete clause is invoked, the employee is entitled to his/her salary for the duration of the non-compete period. The employer may reduce the salary by up to 50% if the employee receives other remuneration during the non-compete period.
Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?
An employer may include a post termination confidentiality clause in the employment contract or in a severance agreement.
According to the Norwegian Marketing Practices Act, an employee who has obtained knowledge of a trade secret in connection with his/her employment shall not exploit the secret unlawfully in the course of trade.
Are employers obliged to provide references to new employers if these are requested?
If the employee leaves the employer following a lawful dismissal, the employee is entitled to a written reference from the employer. The reference shall as a minimum state the employee’s name and date of birth, the nature of the work and the duration of the employment.
What, in your opinion, are the most common difficulties faced by employers in your jurisdiction when terminating employment and how do you consider employers can mitigate these?
Any termination of employment due to circumstances relating to the enterprise may be contested by the employee, who can then claim a statutory right to remain in employment (in his/her post) until the question of the validity of the termination has been decided by a final court judgment.
The employer may request an interim ruling stating that the employee should leave immediately, but unless a company is to cease all activities and wind up the entire business, the courts will normally rule that the employee is entitled to remain in employment.
The result of this statutory right is that many employees claim the right to remain in their post, which basically means that employees are entitled to continue working for the employer for a period of at least six to eight months after the expiry of the notice period. If a judgment in a lower court is appealed against, the “extended period of employment” imposed by this legislation may be substantially longer.
This causes employers to agree to severance packages in order to obtain efficient closure of the employment relationship even in cases where it is obvious that the employer had objectively justifiable grounds to dismiss the employee due to circumstances relating to the enterprise.
Are any legal changes planned that are likely to impact on the way employers in your jurisdiction approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?