Perhaps to a greater extent than within other legal fields of expertise, labour and employment law should adapt and adjust to developments in society. External factors, such as technological advancements and changes in consumer behaviour, rapidly affect and challenge how we work. A consequence of such developments is that the need for certain occupations is reduced, while the need for others increases – as an example, the onset of the internet and the rapid shift to email as the default method of communication have caused the number of postal workers to steadily decrease during the last decades.

In order to remain competitive and cost-effective, businesses must adjust and adapt to both long and short-term changes. For example, since March 2020, the COVID-19 pandemic has had a severe impact on our society: some business sectors have completely shut down, others have had to change their way of conducting business, while some have thrived and experienced massive growth. Many employers have been forced to initiate temporary lay-offs, which is a well-established measure during times when there is a sudden fall in demand for labour. Some effects of the crisis will disappear as our society returns to normality, whereas others may permanently alter the conduct of business and how work is performed. Such developments may once again force employers to rethink the structure, purpose and use of their workforce.

However, labour and employment law imposes legal thresholds and guidance as to which measures employers may initiate as a response to these changes. From a Norwegian employment law perspective, the following recent trends and developments should be noted as employers’ responses, or attempts at adaptation, to new structures and changes in society.

Hybrid Forms of Work and Remote Work

Over time, the COVID-19 crisis and the authorities’ order for home working for employees have triggered discussions related to the workplace of the future, including increased use of hybrid forms of work and remote work. Many larger employers have already informed their employees that they will facilitate employees working from other places than the office in the future. Both employers and employees have had largely positive experiences during the pandemic in terms of efficiency, well-being and flexibility. At the same time, the impression is that most employers also acknowledge the need for physical meeting points for employees in order to maintain the corporate culture, facilitate follow-up and development of the employees, innovation and social conditions.

However, the legislators have waited to make significant changes to already existing regulations related to home working, although many believe that the current regulations are outdated in view of the technological development. As of today, the regulations entail, among other things, that working from home cannot be imposed unilaterally by the employer, but requires a written agreement, with specific content requirements, with the individual employee.

Increased Duties for Employers Related to Gender Equality, Diversity, Harassment, etc

The focus on the importance of equality and diversity in the work place has led to an ever-expanding duty of activity for Norwegian employers.

The Norwegian Supreme Court recently pronounced its first “Me Too” judgment, which contributed important clarifications concerning the lower limits of what is to be regarded as sexual harassment. A female employee at a mechanical workshop accused two of the employer’s customers of sexual harassment, and also believed that the employer had not made its best efforts to prevent such behaviour. After a specific assessment, the Supreme Court concluded that the behaviour of both customers was sexually explicit, unwanted and bothersome for the woman. This type of unwanted and bothersome sexual attention constituted sexual harassment. Both the employer and the customers were ordered to pay compensation to the woman.

In the area of legislation, the development is moving in the same direction. The Equality and Anti-Discrimination Act was recently tightened, and now contains specific requirements for active, targeted and planned work to promote equality and prevent discrimination based on gender, leave in connection with childbirth or adoption, care responsibilities, ethnicity, religion, belief, disability, sexual orientation, gender identity, gender expression or combinations of such, including the duty to prevent sexual harassment. The work shall be documented by the employer and take place in co-operation with the employees’ representatives.

Further, the act sets requirements for public reporting on the work to promote diversity, a so-called reporting obligation. The report shall be included in the company’s annual report, and shall contain information on the company’s work to promote equality and prevent discrimination within a number of areas. The regulations apply to private companies with more than 50 employees and to all public employers.

Pay Conditions According to a Collective Bargaining Agreement (CBA) May Remain as Individual Rights for Employees

A recently pronounced judgment by the Supreme Court (Grefsenhjemmet) may potentially be of substantial significance to many employers. In the case, the Supreme Court concluded that a collective wage increment for nurses had become an integrated part of the individual employment agreements, and that the nurses were entitled to keep the wage increment as an individual wage increment after their employer announced transfer to a new employers’ association and the collective agreement ceased to apply.

The effects of the Supreme Court’s conclusions are not yet clear, and there are still questions that remain unanswered, but the judgment may potentially have a major impact on the consequences of terminating a collective agreement, including special agreements, as well as for business transfers.

Increased Legal Review of Employers’ Assessments During Redundancies

Employees generally enjoy extensive employment protection rights under Norwegian law. An employer may only dismiss an employee if this is objectively justified based on circumstances relating to the undertaking, the employer or the employee. Traditionally, the courts have largely accepted workforce reductions based on the employer’s needs as such an objectively justified reason for dismissals, provided that the employer has carefully and objectively considered the need for the workforce reduction and that the assessments and decisions were made by a competent body. Furthermore, the employer must present necessary and sufficient written documentation substantiating an adequate and thorough assessment of the employees who are made redundant.

Redundancies under Norwegian law are generally considered as quite straightforward processes with few formal requirements for the employer. For instance, initiating a redundancy process is not contingent on public permission, but rather subject to the employer’s discretion and decision. Moreover, there is no statutory duty to pay the affected employees any severance pay – the employer is only obliged to pay regular salary and benefits throughout the notice period.

Generally, Norwegian courts have widely recognised the employers’ right to decide on rationalisation measures. The courts are generally reluctant to overrule the employer’s grounds and justifications for such measures. For example, if a manufacturing business initiates a redundancy process due to technological advancements that render physical employees redundant, the courts will generally not overrule the employer’s assessment of the situation or its decision to initiate the redundancy process.

However, while the Norwegian courts are prone to accepting employers’ decisions to downsize, the courts have increased the requirements for documentation and procedure during such redundancy processes. An effect of this is that although the courts recognise the legality of initiating the redundancy process, the courts deem a number of individual dismissals as invalid due to lack of or insufficient documentation of the employer’s assessments of the employees, and in particular the selection of the redundant employees as part of the process. During the last couple of years, the courts have increasingly scrutinised whether the employer has substantiated the evaluations of the redundant employees in order for the evaluations to be verified by the courts.

Non-objective criteria

The above applies in particular if the employer bases its selection of redundant employees on so-called “non-objective” criteria, such as personal traits and capacities. Personal qualifications are relevant and may be applied as one of various selection criteria. However, when applying non-objective criteria, the courts apply stricter requirements for documentation and procedure in the process.

Recent case law indicates that the employer, as a minimum requirement, must make written and thorough assessments of the relevant employees to substantiate the employer’s grounds for the selection. For larger undertakings with many employees, these strict requirements are typically challenging to meet – especially in redundancy processes on a larger scale in which the employer must evaluate and compare multiple employees against each other.

Seniority

The stricter requirements relating to the selection process have also initiated a debate on the weight of seniority as a selection criterion, which was exemplified by a 2019 Supreme Court case concerning the use of seniority as a selection criterion in a redundancy process in a collective bargaining-bound construction company. Employers bound by certain collective bargaining agreements must generally emphasise seniority more than employers who are not bound by these agreements. Employers bound by such collective bargaining agreements are also allowed to place emphasis on selection criteria other than seniority.

The key issue in the mentioned case was to what extent the employer may rely on criteria other than seniority when selecting redundant employees. Recent case law demonstrates an increased focus on seniority as a selection criterion in all undertakings, and that employers that largely rely on selection criteria other than seniority, or rely on them to a greater extent, must document the basis for the selection of the redundant employees. Furthermore, the employer must document the assessment and weighting of the selection criteria for each employee and how the employees are compared to each other.

Employment Disputes and Agreements

Employment protection rights under Norwegian law may entail a long and costly process for the employer if an employee disputes a dismissal, as the employee is entitled to dispute the dismissal, to demand negotiations and initiate court proceedings. In such cases, the main rule is that the employee is entitled to remain in his or her post until the matter is finally resolved – either through an agreement or through a legally enforceable decision. If the court rules the dismissal as invalid, the employee will be entitled to remain employed and to be awarded damages.

Many employers are prone to offer termination agreements and severance pay in exchange for a waiver of claims and the right to institute legal proceedings pursuant to the rules of the Employment Act, in order to avoid the risks involved in formally dismissing employees. From an employee’s perspective, accepting a termination agreement will often be considered a better option than being formally dismissed. Termination agreements thus constitute important mechanisms for both the employer and employee during the redundancy process, as they may shorten the process, reduce the number of conflicts and legal proceedings – allowing both parties to move on more quickly. Legal proceedings in Norway may be lengthy affairs, and entering into termination agreements may thus save both the employer and the employee time, money and emotional strain.

New Forms of Contractual Relationships as an Alternative to Permanent Employment

The main rule under Norwegian law is that employees must be permanently employed. Together with employment protection, the principle of permanent employment is considered fundamental in Norwegian employment and labour law, and is acknowledged by all political parties. However, there are political differences as to the conditions that must be met to allow for a deviation from the main rule. Some political parties have opted for wider access to the use of fixed-term employment contracts, while labour organisations have been firm defenders of the principle of permanent employment. According to current legislation, temporary employment is only accepted on certain conditions and if strict requirements are met.

However, developments in social and market structures, as well as increased competition, have put pressure on the main rule of permanent employment. More employers have applied flexible contractual relationships, such as contracts for independent contractors, as an alternative to permanent employment.

The debate in this regard is whether an alternative contractual relationship is to be considered as an unlawful bypassing of the employment protection rights that are granted to employees, or if such constructions are legitimate and necessary due to social and technological developments, and that they may therefore provide opportunities for workers who would otherwise not be employed. Moreover, although the legislation on employment protection rights largely serves the employees’ interests, many employees also actively seek less rigid affiliations, and alternative contractual relationships may thus serve the interests of both parties.

Social dumping

The construction sector has been undergoing public scrutiny for its extensive use of hired-in personnel, and has been criticised for perpetually undermining the fundamental principle of permanent employment, as well as for “social dumping” (an expression referring especially to the situation where foreign employees in Norway receive substantially lower salary and less favourable working conditions compared to Norwegian employees). Strict compliance with the rules on permanent employment has traditionally been considered as crucial for tackling work-related crimes in sectors that are prone to social dumping issues. The above has led to recent legislative amendments, which have narrowed employers’ ability to hire-in workers from temporary work agencies and placed a ban on employment agreements that do not guarantee work for the employee (so-called “zero-hour contracts”). As an effect, the market for temporary work agencies’ services has been considerably reduced.

Independent contractors

A perhaps unintended consequence of the above is an increase in the use of independent contractors, which again has led to an increased number of disputes relating to whether the person in question is de facto an employee or an independent contractor. As opposed to regular employees, such consultants have no rights in terms of, for example, employment protection rights, regulated working hours and overtime payment, or breaks.

In a recent ruling by the Court of Appeal, 22 care workers, who for a number of years had been working for a health enterprise as independent contractors/consultants, were found for in that their contracts had been entered into on an unlawful basis and that they were in fact to be regarded as employees. The health enterprise was ordered to pay salary (especially overtime pay), holiday pay and pension in arrears for the last three years, in addition to paying compensation for non-economic loss. In total, a claim for compensation of NOK24 million was upheld by the Court, and the company was ordered to pay legal costs of more than NOK 17 million. The ruling also established that some of the care workers were still to be regarded as employed by the company.

In the ruling, the elements that, following a specific assessment, will help define whether there is a de facto employment relationship or a lawful consultancy relationship are reviewed. In the ruling, consideration for the need for employee protection, personal duty to work and whether one in practice is subordinate to the management and control of others were highlighted as elements of particular importance to the assessment. The fact that the care workers had been given a choice whether to become employees or to work as consultants, and the fact that many had chosen themselves to work as consultants, were not allowed emphasis due to employment protection considerations.

The case clearly demonstrates the importance of making a thorough consideration before entering into a consultant agreement, especially in cases in which a person is engaged with a personal duty to perform work and a duty to comply with an employer’s instructions. In addition, it shows an example of the recent trend of employers challenging, and seeking alternatives to, permanent employment contracts, as well as the pertinent risk of such alternatives being challenged by the workers, claiming that they are unlawful and that the employers are bypassing the fundamental principle of permanent employment.

Group companies

Another similar development is that employees of a group company challenge their formal employing entity, and claim that their employment contracts are with another group company. A high-profile case before the Supreme Court concerned such a claim against an airline that had recently undergone a comprehensive reorganisation process that included the transfer of pilots and cabin crew to a different legal entity within the same group. The pilots and cabin crew subsequently claimed that their employment contracts were with another entity than the entity with which they had a formal employment relationship. The Norwegian Supreme Court dismissed the employees’ claim, acknowledging the employer’s right to decide the structure of the group, including where the employees should be employed.

Technological Advancement and Structural Changes in Employment

Norwegian employment legislation is largely a result of a long-term industrialisation process. However, during the last decades, the growth in the service sector, as well as technological advancements, have resulted in new business sectors and types of businesses that did not exist when the Norwegian employment legislation was implemented. This includes businesses like Foodora, Uber, web-based work and other services relating to the sharing economy. As Norwegian employment legislation was generally implemented with traditional industrial or office-based employment in mind, we expect that there will be work-related challenges relating to these new types of businesses as they solidify their presence on the Norwegian market.

During the ongoing COVID-19 crisis, another indication that the current employment legislation may soon be up for review has become evident. Whereas certain business sectors have struggled and thousands of workers have been temporarily or permanently laid off in Norway, other sectors have thrived and experienced massive growth and a dire need for labour for example, food delivery services and online pharmacies. However, as the pandemic is unlike anything previously experienced, there has been considerable uncertainty relating to the extent of this surge in market shares and the related need for labour. Consequently, it has been a challenge for these businesses to arrange for flexible and adaptable arrangements for labour supply, which is not a particularly straightforward process under the current legislation.

The COVID-19 crisis and technological advancements are merely examples of developments that are affecting employment legislation. Other developments, such as changes in demographics, climate change, globalisation, international competition and web-based services will have consequences for our current structures of employment. These change processes will affect how we consider employment.

“Flexicurity”: New Approaches to Employment Regulation

The EU has developed “flexicurity” as an integrated strategy for enhancing flexibility and security in the labour market. The mission of the strategy is to reconcile the employer’s need for a flexible workforce with workers’ need for security, and one of the key elements of the strategy is to develop flexible and reliable contractual arrangements. In Norway, there is no similar concept. Some groups of non-employed workers are granted certain welfare rights as well as rights in terms of whistleblowing, non-discrimination and general requirements regarding the working environment. However, there is no uniform legislation applicable to the various groups of non-employed workers in Norway. It is worth mentioning that the Norwegian Confederation of Trade Unions has arranged for co-operation and membership for freelancers and self-employed persons as a response to the increased number of workers who are not permanently employed.

Proposed Changes to the Working Environment Act

Even if permanent employment is a core principle under Norwegian employment law, social research demonstrates that 11% of workers in Norway are hired employees, employed on a fixed-term contract or independent contractors. As a response to the above-mentioned structural changes in Norwegian working life, and recent case law, the Norwegian government put together an expert committee mandated to consider different contractual relationships and business structures in Norwegian working life. The expert committee has been led by Wiersholm’s partner Jan Fougner, and has recently handed in its conclusions (23 June 2021).

The expert committee bases its assessments and recommendations on the Norwegian working life model. The interaction between the parties forms the basis for the tripartite co-operation with the authorities, which is of crucial importance for the formulation of a joint understanding and approach to the key challenges of the working life as a whole. Among other things, the committee has assessed the development of the use of various forms of contracts for the performance of work, and whether changes to how working life is organised will lead to a need for amendments to employment law regulations. The proposal has been distributed for comments, with the deadline set to 1 November 2021.

In summary, the most important proposals entail a clarification of the concept of employment, strengthening of the position of independent contractors and hired-in employees, removal of the general access to temporary employment for 12 months, a new circumvention rule, as well as preferential rights for employees to other vacant positions within the same group.

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