Historically, the unions and employees in Norway have a strong position. This is particularly evident in the strict procedures that must be followed, and in the numerous rights employees in Norway enjoy in situations of workforce reductions. Even if the employer’s economic situation is critical, it is important to follow the correct procedures in order to avoid potential claims.
Planning is crucial
In cases of workforce reductions, carefully planning ahead is crucial. This will help to avoid costly litigation and claims from employees afterwards. According to Norwegian law, there is no legal right to any redundancy payment. During the period of notice, the employee is entitled to his or her ordinary salary and other benefits, according to the employment contract.
However, it is quite common for the employee to challenge the dismissal and claim that the dismissal was unfair. Generally, this is based on the following allegations:
- that the employer has not followed a fair procedure according to Norwegian law
- that the selection criteria are unfair, not well founded or has not been followed
- that the employee has not been consulted with prior to the dismissal
The employee has the right to demand negotiations within two weeks after receiving the notice. The right to remain in position means that the employee’s right and obligation to work continues. This right is maintained until the case has been decided by a final judgement from the court. The employer must also pay the salary to the employee for the whole period.
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The selection process
To prove that a dismissal is objectively justified, the employer must document the process regarding both the reasons behind the downsizing and the selection pool.
The selection of which employees to dismiss and the criteria that the employer uses to reach this decision, must be objectively justified in accordance with section 15.7 of the Working Environment Act.
Selection pool and criteria
In order to determine which employees to dismiss in a downsizing process, the employer must establish a selection pool and several selection criteria. The selection criteria are measurable factors that are used to compare employees within the selection pool. It helps to determine who will remain in the organization.
The selection pool is the group of employees that should be compared using the selection criteria.
Legal disputes of the legality of a dismissal often concern whether the established selection criteria have been applied fairly and led to the correct result.
Composition of a selection pool
The main rule in Norway is that the selection pool consists of the entire legal entity. In most situations this proves impossible. International organizations often have different branches, locations counties etc. In such cases, the company can downsize using more narrowly defined selection pools. This could be for example location, department or function. It is important to document this process and preferably by minutes from the board meeting.
In order to determine who may be considered redundant within the selection pool, the employer must establish a set of narrowly defined selection criteria. These selection criteria could include
- seniority (length of service)
- social issues
- health situation
The criteria must be objectively justified and possible to measure. If the criteria are too subjective for example “reputation” it will not be considered objectively justified. If the employer choose competence as the selection criteria, they often consider formal education, work experience, in house experience, feedback from superiors and colleagues etc. The trouble with competence as a selection criteria, is that it is difficult to measure and objectively verify.
When the selection process is completed and the employees that fall within the selection pools and the selection criteria are pointed out, the employer must arrange a discussion meeting with each employee before the final decision is made.
The discussion meeting allows the employees to highlight their view on their situation. The workforce reduction process should not have gone so far that it is impossible for the employee to influence the outcome of the situation. The employees are entitled to bring an advisor with them to this meeting. This could be a union representative, a lawyer or similar.
Notice of dismissal
After the discussion meeting, the employer can make the final decision to dismiss the employee. The employer must then give a formal notice of dismissal. There are strict formal requirements for the notice letter.
The notice must be given in writing and be delivered in person or by registered mail. The notice period does not start until the employee has received the notice letter. The notice period normally starts the first day in the month, following the month the notice letter is received by the employee.
Minimum requirements for the notice of dismissal
To be considered valid, the notice shall inform of:
- the employee’s right to demand negotiations and to institute legal proceedings
- the employee’s right to remain in his or her post pursuant to the provisions of sections 17.3, 17.4 and 15.11 of the Working Environment Act
- the time limits applicable for requesting negotiations, instituting legal proceedings and remaining in a post
- the name of the employer and the appropriate defendant in the event of legal proceedings
If the employee has been dismissed owing to circumstances relating to the undertaking, the notice shall also contain information concerning preferential rights pursuant to section 14.2 of the Working Environment Act.
If the notice contains formal errors, the consequences are that the notice is invalid and the employee will be entitled to compensation.
After the employee receives the notice letter, he or she can request negotiations within two weeks.
After receiving such request, the employer is obligated to hold a negotiation meeting as soon as possible, and no later than two weeks of having received the request.
In the negotiation meeting both the employee and the employer are usually assisted by lawyers.
Normally, at the negotiation meeting, the employee will question the selection process. The employer will then need to outline the process, the selection criteria, and defend the dismissal decision. In many cases, the parties reach a settlement in the negotiation meeting or continue the negotiations after the meeting. A settlement will typically be a financial compensation and/or relief of duties for a period, sometimes also a garden leave period.
If the parties do not reach an agreement, the employee may initiate legal proceedings and bring the case to court. Normally, the employee will claim that the dismissal is invalid and also claim compensation for both economic and non-economic damage.
We highly recommend contacting a lawyer before starting a workforce reduction or a process of dismissal. The lawyers in Magnus Legal are experienced in these processes and can help you to do it right from the start. It is much more difficult to correct the errors afterwards. Find out more about how we can assist with questions related to labour law in Norway.
Article first published in May 2019, updated February 2021.