The key practical issues in workforce restructuring include:
- Legal justification
- Works council and employee representatives’ process
- Labor administration process
- Costs and timing
- Litigation risk
Collective redundancies are governed by Sec. 15-2 of the Working Environment Act (WEA) in Norway. Collective redundancies are redundancies in which notice of redundancy is given to at least 10 employees within a period of 30 days for reasons related to the employer or the employer undertaking (enterprise).
Required legal justification
The employer is entitled to decide how to organize its business, but cannot dismiss employees at will. Redundancies, including collective redundancies, must be objectively justified for sound reasons associated with the employer of the undertaking.
The Working Environment Act does not specify or indicate by way of example what constitutes sound reasons sufficient to justify a collective redundancy. This must be determined based on all circumstances of the case. However, in practice, business considerations such as market changes, loss of important contracts and/or customers, lower commodity prices and technological development, demands for efficiency and increased profit can constitute sound reasons sufficient to justify redundancy. According to jurisprudence, the employer must be able to document that it has thoroughly analyzed the need for redundancy in order to meet its commercial objectives and considered all other options.
Contracting out of an undertaking’s ordinary operations to a third party will not constitute justifiable grounds for redundancy unless contracting out is absolutely essential to maintain the continued operation of the undertaking.
Works council/unions or other employee consultation requirements
Consultation requirements with works council/unions
Unions: The employer is required to provide the elected representatives with all relevant information to enable them to enter into a real discussion with the employer on ways of mitigating the negative effects of the collective redundancy. The term “elected representative” is defined broadly and, in addition to trade union representatives, includes other elected representatives. If the company does not have elected representatives, employees can be elected in order to conduct the required consultation.
As a minimum, the employer must provide the elected representatives (employees’ representatives) with the following information in writing:
- Grounds for the redundancies
- Number of employees who may be impacted
- Proposed selection criteria
- Categories of workers to which they belong (specific group, full time or part time)
- Number of employees at the undertaking
- Groups of employees normally employed
- Time schedule for implementing redundancies
- Criteria for calculating extraordinary severance pay (if applicable)
How and when: The employer must give the employees’ representatives a written statement with the relevant information as soon as possible and at the latest at the same time as the employer calls a consultation meeting. The employees’ representatives may comment on the notification directly to the labor authorities.
Consultation requirements with other employee representatives
If there is a working environment committee at the workplace, the redundancy plans must also be submitted to the working environment committee by the employer.
Consultation requirements with employees
There are no legal barriers to open communication with employees collectively or individually on a collective redundancy, provided the formal requirements of consultation with and information to the employees’ representatives are observed. The information can be provided in writing or at a “town hall” meeting, but after the consultation process with the employee representatives. The employer is required to hold individual discussion meetings (as far as it is feasible) with each of the impacted employees prior to deciding on the contemplated redundancy.
Approval/notification of the labor authorities or other government authorities
Approval of the Labor and Welfare Service is not required to implement the collective redundancy; however, the employer must provide a copy of the written statement submitted to the employee representatives to the Labor and Welfare Service as soon as possible or at least at the same time as the employer calls a consultation meeting with the employee representatives.
A collective redundancy will be effective no earlier than 30 days after the Labor and Welfare Service has been notified. The Labor and Welfare Service may extend the period of notice.
Employee selection criteria
There are no statutory selection criteria, but the selection criteria that are applied must be objective and reasonable. Further, applicable collective agreements may specify employee selection criteria in the event of any collective redundancy. Common selection criteria are a combination of employee’s:
- Skills/suitability for the position
- Age/years of service
- Social/personal relationships
Certain employees are afforded special protection against dismissal, particularly pregnant employees, employees on sick leave and employees who are serving military service.
Actions required to limit the negative impact and social plan
The employer is required to weigh the needs of the undertaking against the disadvantage of redundancy for the individual employee when deciding whether to dismiss on the grounds of redundancy and when determining which employees to make redundant. The employer must take the following measures in order to limit the negative impact of redundancy:
Internal alternative employment/redeployment
The employer is obligated to consider whether there is any suitable alternative work within the undertaking, and such alternative work must be offered to the impacted employees if they are qualified for the position. However, the employer is not obliged to search for alternative work outside the undertaking/organization.
There is no legal obligation to provide social benefits but, in collective redundancies, the consultations with trade unions shall cover possible social welfare measures. These may typically include outplacement services, job-seeker courses, financial support for re-training, etc.
Preparation of any specific documentation required for the information and consultation process and for the contemplated negotiation may take four to eight weeks.
The time required to fully implement a large-scale redundancy will vary considerably depending, among other things, on the professionalism of the employer in rationalization processes, the number of employees involved, the relationship with the trade unions, and the notice period to which the employees are entitled. It is possible, with careful planning, to carry out a collective redundancy within one month plus the notice period for each employee. However, the period could be longer.
There is no statutory right to redundancy pay. The only compensation to which an employee is entitled according to statute is salary (and other contractual benefits) during the notice period.
Customary additional costs
Voluntary severance packages may include, for example, support for retraining and education, exemption from duties during the notice period, and severance pay. The right to such benefits is usually conditional on signing of a severance agreement where the employee waives his or her right to bring court proceedings pursuant to the Working Environment Act.
A severance agreement may be entered into before the employee receives the redundancy notice, or the parties can reach an agreement after the notice is given. In practice, severance packages are usually offered when it is clear which employees will be impacted.
Hiring restrictions post-redundancy
There is no statutory “hiring freeze period” following a workforce reduction or collective redundancy.
An employee who is dismissed due to a workforce reduction or rationalization has a preferential right to reemployment with the company if a position becomes vacant, unless the employee is not qualified for the vacant post. The preferential right applies to employees who have been employed by the company for a total of at least 12 months during the previous 2 years. The preferential right applies from the date when notice is given and for one year after the expiry of the period of notice.
The following interested parties can bring lawsuits related to the redundancy process:
- Trade union/employees: An employee or a trade union can bring legal proceedings at any time alleging that the provisions of the Working Environment Act relating to redundancy are breached and can apply for an injunction. This would effectively stop or slow down the collective redundancy process. However, such proceedings are rare.
- Impacted employees: Impacted employees can initiate court proceedings on the grounds that the redundancy was unlawful and could seek reinstatement and/or compensation. If the employee is only claiming compensation, the time limit for filing a claim is six months. If the redundancy notice does not comply with the statutory requirements as to form and content, there is no limitation period.
An employee who alleges that the redundancy is unlawful is entitled to demand negotiations with the employer in writing no later than two weeks after the redundancy notice is received. Negotiations shall then be initiated as soon as possible and no later than two weeks after the request was made.
If an employee initiates court proceedings or informs the employer that he or she will file court proceedings without demanding negotiations, the employer may demand negotiations within two weeks from the date when the employee informed the employer that court proceedings have or will be filed.
The employee will normally be entitled to remain in his or her post pending the outcome of the case. The employer may apply for a court order requiring the employee to vacate his or her post after the notice period has expired, but an order to this effect is at the discretion of the court.
The right of an employee to remain in his or her post pending the outcome of legal proceedings means that a collective redundancy process can be dragged out, particularly if there are numerous legal claims.
Damages and other remedies
Challenges could lead to two types of remedies.
Damages for unfair dismissal
The court may order the employer to pay damages for economic and non-economic loss (alternatively and in addition to reinstatement). If the employee’s claim is successful, the employer must normally pay the employee’s legal costs. If the employee’s claim is not successful, the employee is rarely ordered to pay the employer’s legal costs.
If the employee’s claim is successful, the employee will normally be granted an order of reinstatement. Since an employee who disputes the lawfulness of a redundancy will normally remain in his or her post pending the outcome of the case, reinstatement normally means continuation of employment.
There are no criminal sanctions.
There are no other issues specific to Norway.
Primary Contact for Norway Labor and Employment Law
Ernst & Young Advokatfirma AS
+47 24 00 24 00