Norway: Handling Collective Dismissals In Norway

Norway is known in general as a country where the employees have substantial rights covered by national law, and where dismissals and redundancies are specially challenging for employers. In many ways, this is correct. However, if the employer work out the correct procedures established by law, handling dismissals in Norway is not more challenging than in most other European countries.

All employment relationships in the Norwegian private and municipal sector are covered by the Norwegian 1977 Workers Protection Act (WPA). This article will give an outline on how to handle collective dismissals and redundancies in Norway.

Dismissals on grounds of redundancy must be «warranted ... by reasons related to the employer», cf the 1977 WPA section 60. This is our notion similar to i.e the requirement for a "fair" dismissal in English law, cf their Employment Rights Act section 94. It is, however, important to notice that 1977 WPA section 60 applies for all employees in the private sector without any requirements for a qualifying period.

A dismissal may be «warranted ... by» redundancy if it is necessary for the company to reorganise or restructure the business, and if these changes make employees redundant.

However, if there is any vacant positions in the enterprise, the employer is obligated to offer redundant employees relocation or redeployment. The act also requires a fair selection process with valid selection criteria’s.

The employer is obligated to offer redundant employees redeployment or other alternative employment in his enterprise if this exist, cf WPA section 60 part 2. The employer must within reason do everything he can to try to locate other positions. The employer should offer alternative employment also if the free positions are lesser paid or of a lower rank than the employees current position. A dismissal may be seen as not «warranted ...» both if it is clear that the employer has not done enough, or if it afterwards is possible to specify positions that would have been suitable for the employee. If there exists possibilities for alternative employment, a dismissal is only «warranted» if the employee does not accept any offer of alternative employment.

This duty to offer alternative employment is as good as absolute, which means that the employer must make all efforts possible to find alternative employment for the employee.

The employer is obligated to offer alternative employment in his enterprise. Today this does not, as a main rule, include other companies within the group to which the employer belongs. This question is, however, up for debate in the Norwegian legislation.

An employee who has not done what is required to seek relocation for redundant employees, risk that a Norwegian Court will find dismissal invalid due to important procedural errors. Especially in an undertaking with a larger number of employees, where the employer has not made much effort at all to find alternative employment and it must be considered possible to find vacant work tasks, there is a great risk that the Court will find a dismissal "unwarranted" and invalid, even if they can not find specific positions the employee should have been offered.

In such cases, the economic risk will be the costs regarding the employees right to stay in his position while the case is pending, the risk that the Court permanently will give the employee the right to stay in the company or the risk that he will get a large compensation for an "unwarranted" dismissal, cf section 5 below.

If the Court finds it probable that the employer would not have found any vacant work tasks even if he had fulfilled his obligation to look for it, the Court does not give any kind of special penalty for not seeking redeployment. However, it is important to note that the fact that the employer has not fulfilled his obligation will give employees a big incentive to take the dismissal to court.

A «warranted ...» and fair dismissal also requires that the selection of which employees to make redundant is done by fair selection criteria. By Norwegian law the fair and valid selection criteria’s are the employees qualifications, their seniority and their "social conditions" - the employees social situation and specific need for keeping his job. The fairness of the selection process depends on how these criteria apply in the specific case, due to a balanced comparison of the employer and the employees needs.

In many cases the employers want to base their selection process solely on the employees "performance". In several cases the Norwegian Court may consider this "fair" and valid if other employees who will loose their job do not have very long seniority. However, in many cases a selection based solely on performance will make invalid dismissals. The principle of seniority is just as highly respected by Norwegian law as by i.e. English law or Swedish law. Secondly, the employers burden of proof and the requirements for documentation regarding differences in "performance" is considerable.

Before dismissals on grounds of redundancy, the 1977 WPA requires both collective consultations with the employees representatives and individual consultations with every single employee the employer consider to dismiss.

3.1.1 The procedure

Just like all states who are members of the EEC, Norway has implemented the EEC directives 75/129/EEC and 92/56/EEC regarding the procedure for handling redundancies as part of the national legislation. The directives are implemented in the Norwegian legislation by our 1977 Workers Protection Act (WPA) section 56 A.

The WPA defines «collective redundancies» as «notice of dismissal given to at least 10 employees within a period of 30 days, without being warranted by reasons related to the individual employee», cf the WPA section 56 A no.1. This is the first alternative definition in directive 75/129/EEC article 1. This difference between this definition and other options like i.e. in Great Britain, may of course have effects regarding the applicability of the rules and regarding the appropriate timetable for consultations.

An employer who considers to make employees redundant shall «as soon as possible» enter into consultations with the employees representatives, cf WPA section 56 A no. 2. To provide for genuine consultations, these should start in reasonable time before the employer has made any final decisions. Before the consultations, the employer must , however, give the representatives a written notification regarding i.e. the grounds on which possible redundan-cies are based, how many employees that might be dismissed and the period of time during which such redundancies may be effected.

The employer should also send this notification to the Employment Service Division, cf WPA section 56 A no. 4 and the 1947 Employment Act section 14. The Employment Service Division is the employees local job centre, and not a central state office.

Dismissals on grounds of redundancy may not take effect earlier than 30 days after the Employment Service Division has been notified, cf WPA section 56 A no. 6. If it is required in order to secure an agreement between the employer and the employees representatives, the Employment Service Division may prolong the 30 days period by up to 30 days.

3.1.2 Enforcement

Norwegian legislation has no provisions on economic remuneration paid to the employees for non-compliance with WPA section 56 A. The employer may, however, be liable to fines, cf WPA section 86, even if this is not common.

Non-compliance with the obligations according to WPA section 56 A may have an effect on the court’s judgement if the each specific dismissal was «warranted» - which is our criteria comparable to your criteria «unfair» - and valid, cf WPA section 60 and 62. The non-compliance does not itself, however, make the dismissals invalid.

3.2.1 The procedure

In addition to the obligations regarding collective consultations, the employer is also obligated to consult each employee before he decides to dismiss him, cf WPA section 57 no.1. This obligation is not fulfilled by consultations according to section 56 A.

The consultation with each employee should take place before making a decision concerning dismissal of the specific must include the reason for redundancies, but most important how the selection criteria’s apply to the employee and the possibility of finding the employee other employment in the enterprise. The employee will then get his chance to give his opinion, and at the same time give the employer new information that may be relevant to his decision.

3.2.2 Enforcement

If the employer does not consult each employee before he decides on dismissal, this may result in a judgement that the dismissal was «unwarranted» and invalid, just like a non-compliance of the regulations in WPA section 56 A, cf no. 5 above.

Notice of dismissal shall be given in writing, cf WPA section 57 no. 1. This written dismissal shall be delivered to the employee in person or be forwarded by registered mail to the address given by the employee, cf WPA section 57 no. 2.

The WPA have specific demands on what information such a written notice must include. The written notice must state:

If this obligation is not fulfilled and the employee institute legal proceedings within 4 months, the dismissal is automatically invalid. If the employee wants to institute legal proceedings for unwarranted dismissal on other grounds, the non-compliance of the written notice obligations result that there are no time-limit for instituting such proceedings.

Norwegian legislation has no procedures or requirements for «redundancy payments» to employees who receives a dismissal on grounds of redundancy. Some of the main collective agreements have some regulations regarding severance payments for older employees, but as a main rule, dismissed employees are only entitled to their usual salary during the period of notice. The 1977 WPA requires one month period of notice for all employees, and a longer period of notice for employees above 50 years with 10 years seniority in the company. The most common period of notice is three months.

If a court finds that a dismissal is not «warranted ...» on grounds of redundancy, the employee may be entitled to stay in his former position with the employer. If not, he will be entitled to an economic compensation, cf the 1977 WPA section 62.

The economic compensation is based on the employees economic and non-economic losses caused by the dismissal. Compensation for economic losses consists of the losses suffered up until the time of the courts decision, and the economic losses that might be expected in the near future. Compensation for non-economic losses is commonin cases where the dismissal has caused a special psychological burden for the employee. The amount of this non-economic compensation is normally between NOK 20.000 and NOK 100.000.

There is no cap on the liability the employer may incur. Every dismissal on grounds of redundancy is evaluated individually by the court. Consequently, when the court estimates the compensation in one case, the court will find it relevant that the employer may have several compensations to pay.

The risk of legal disputes in a redundancy process depends on many factors, such as how the consultation procedures are handled, which selection criteria’s you choose and how many employees you decide to dismiss. In our experience, the risk for disputes are higher if you dismiss a few employees than in larger collective dismissals.

Just as in many European countries, settlements or "redundancy packages" to avoid disputes are more and more common, even if they are not a part of Norwegian law. Such "packages" may include some months salary, in some cases punitive damages, financial support for outplacement or pension benefits. If a redundant employee has accepted a "redundancy package" as an alternative to a legal dispute regarding dismissals, the Norwegian court will as a main rule consider such an agreement binding, provided that the employee did not enter into the agreement under duress and that he understood what he was doing.

Similar to i.e. Swedish law, Norwegian law also give redundant employees priority rights to new positions. An employee dismissed because of redundancy has a priority right to be reemployed in the company, if there is a need for a recruitment for new employees the first 12 months after the end of the notice period.

However, former employees may only claim priority if they have sufficient qualifications for such new employment.