As an employer in Norway, you are obliged to draw up a written employment contract in all employment relationships, and there are specific legal requirements for drafting employment contracts. Our experience is that many companies do not spend enough time and resources preparing good employment contracts adapted to the company's needs and the type of position. This can lead to little flexibility and unnecessary conflicts and costs. In this blog, we take a closer look at what you as an employer must include in an employment contract, what can be included in the employee handbook, and how to avoid the most common mistakes.
When should an employment contract be in place?
If an employment lasts more than one month, the contract must be finalized as soon as possible but no later than seven days after the start date. A written contract must be signed immediately for employment lasting less than one month.
New rules in 2024
Some of the information described below is new because of a legislative change that came into force on 1 July 2024. Employment contracts signed after July 1, 2024, must include all the information listed below. Contracts signed before this date must be updated upon the employee's request.
Also read: New rules 2024 - Employment contracts, what do you need to include?
QUESTIONS ABOUT YOUR EMPLOYMENT CONTRACTS?
If you are uncertain if your employment contracts are valid according the Norwegian Employment Law, let us take a look.
What should the employment contract contain?
It is beneficial for you as an employer that the employment contract contains more than the minimum requirements under the Working Environment Act, including conditions that protect you as an employer.
Non-competition clause
If the nature of the employment relationship indicates a need for it, then a non-competition clause should be included in the employment contract. A non-competition clause is an agreement in employment relationships that restricts what your employee can do after the end of the employment relationship. This will typically prevent the employee from starting up or taking a job at a directly competing company or influencing your clientele. You decide whether you want to use the non-competition clause or not if the employment relationship is terminated. If the non-competition clause is used, the employee must be compensated financially.
Working from home
If working from a home is applicable, the details of the home office should be specified in writing. In some instances, a separate agreement regarding the home office will be required.
Duty of loyalty and confidentiality
You should consider including the duty of loyalty and confidentiality in an employment contract if the nature of the employment relationship requires it. Such clauses prevent the employee from sharing confidential information about the company or its products and services if the employee later wishes to run his or her own business or work for a competitor. The agreement may also regulate the consequences of a breach of such clauses.
Rights to the work results
It may be important to agree on who is entitled to work results if the employee is working to create or produce something in connection with the employment relationship. This will typically be inventions, trademarks, domain names, business concepts, and know-how.
Other work during the employment
Suppose you do not want the employee to take on other work or assignments during the employment relationship that may conflict or compete with the work the employee will perform for you. In that case, it is typically agreed that such work will not be accepted without your written consent.
Average calculation of working hours
You, as the employer, and the employee can agree in writing to arrange ordinary working hours differently from the standard 8 hours per day and 40 hours per week. The easiest approach is to include this flexibility in the employment contract from the beginning, as it must be agreed upon in writing. This allows you to decide later whether to implement it.
Also read: Norwegian employment contracts: Do's and don'ts
Checklist: What to Include in an Employment Contract
The employment contract must contain information about matters of significant importance in the employment relationship, including:
- Identity of the parties
- Workplace
- A description of the work or the employee's title, position, or work category
- The time of the beginning of the employment relationship
- Expected duration if the employment is temporary, as well as the basis for the employment
- Any probationary period provisions
- The right to holiday and holiday pay, the rules for determining the time of a holiday, and any right to other absences paid by the employer
- The employee's and employer's notice periods and procedure for termination of employment
- Salary, any supplements, and other allowances that are not included in the salary
- Length and location of the daily and weekly working hours
- Length of breaks
- Agreement on special working hours arrangements, if applicable
- Arrangements for roster changes, as well as arrangements for work beyond agreed working hours, including payment for such work
- The identity of the hirer if the employee is hired out from a staffing company
- The right to competence development that the employer may offer
- Social security benefits under the auspices of the employer and names of institutions that receive payments from the employer in this connection
- Information about any collective agreements that regulate the employment relationship
Some information can be provided by referring to laws or collective agreements that regulate these matters.
How much freedom do you have to change the terms of your employment contract unilaterally?
Sometimes, you may need to change an employment contract, but the employee might not always agree. As an employer, you have managerial prerogatives, granting you the right to manage, assign, and organize work. However, these prerogatives are restricted by laws, employment contracts, agreements, established practices, and case law.
One limitation is that you cannot unilaterally alter contract provisions that define, characterize, or are essential to the employment relationship. Each case requires a specific assessment to determine whether the change falls within the scope of managerial prerogative.
Typical changes that can often be implemented within the framework of the managerial prerogative include adjustments to routines and organization and minor changes to work tasks. It is also important to be aware of the wording in the employment contract to avoid unnecessarily restricting the managerial prerogative.
If the change falls outside your management prerogative, you must either agree to it with your employee or use a change notice if there are grounds for this.
Changes in the employment relationship that affect matters that the employment contract must contain must be included in the employment contract as early as possible and no later than the same day the change enters into force.
What should be regulated in the employee handbook?
The implementation of EU Directive 2019/1152 in Norway, combined with recent case law in Europe, indicates that terms in employment contracts will increasingly be interpreted as fixed and binding and thus cannot be changed unilaterally by the employer. To ensure flexibility and avoid complications with the employee, it is recommended that you supplement employment contracts with an employee handbook, where you can make unilateral changes and discontinue internal arrangements.
Therefore, it is important to be aware of which provisions should be included in employment contracts and what can be regulated in the employee handbook. It is recommended that the content of the employment contract be limited to statutory requirements while other terms of employment are regulated in the employee handbook.
Avoid these common mistakes in the employment contract
Waiver of managerial prerogatives: make sure you have flexibility
One of the most common mistakes in employment contracts is a lack of flexibility when changing the terms. In some cases, the possibility of changes to legislation or the wording of the agreement, which is often interpreted in favor of the employee, is limited. To ensure the necessary flexibility, you may, where possible, use phrases such as "the current arrangement" or "the currently applicable" arrangement in the agreement.
Be aware of the use of "managerial" and "particularly independent" positions
In a managerial or particularly independent position, you are exempt from the rules on working hours, including rights such as overtime pay, working hours, and rest periods. The legality of these positions is strictly assessed based on an overall assessment of the nature of the position, salary, responsibilities, and independence.
Lack of agreement on the probationary period
Until an employee has started working for you, you cannot be sure that everything will work and that you have found the right person for the job. A probationary period provision is important because it is easier to dismiss an employee during the probationary period than after the end of the probationary period.
Excessive use of standard contracts
Standardized agreements not adapted to the position or industry can lead to important conditions not being covered from your point of view. Make sure that the agreement is tailored to the specific situation.
Do you need help drafting employment contracts?
Many businesses often rely on outdated standard contracts without considering whether they should be updated. Standard templates available online are typically brief and rarely account for your specific needs.
Magnus Legal has extensive experience in employment law and has assisted numerous Norwegian and international companies with employment-related matters. If you need help with employment contracts, we offer templates for various types of contracts as well as tailored solutions to meet your specific needs and the requirements of the position. Contact us for a no-obligation consultation.
QUESTIONS ABOUT YOUR EMPLOYMENT CONTRACTS?
If you are uncertain if your employment contracts are valid according the Norwegian Employment Law, let us take a look.
