Layoffs

The employer's right to lay off employees is not laid down in law. The grounds on which an employer can lay off employees generally follow from non-statutory rules or collective agreements. For example, there are no provisions regarding layoffs in NITO's basic collective agreements with the Confederation of Norwegian Enterprise (NHO), the Employers' Association Spekter or the Norwegian Association of Local and Regional Authorities (KS).

This is also regarded as a general principle in employment relationships that are not regulated by a collective agreement.

What constitutes objective grounds is a matter of concrete assessment, but it must be related to the employer's temporary difficulty in providing its employees with enough work.

The lack of work may be due to, for example, shortage of orders, full warehouses, shortage of raw materials, repair or maintenance work in the enterprise, an accident, a strike in the enterprise or in another enterprise or other events that prevent normal operations.

The requirement of objectivity applies to the entire layoff period, though the reason for the layoff may change. For example, a layoff may begin due to an accident but may be extended due to a shortage of orders. Such an extension would probably be acceptable as long as the requirement of objective grounds was met.

But objective grounds alone will not suffice; it must also be necessary for the enterprise to lay off employees. Moreover, the requirement of objectivity implies that selection between employees must be objectively justified.

Layoffs may only be used in cases of a temporary shortage of work. Real prospects of improvement must exist. Layoffs cannot be used if in fact there are grounds for implementing dismissals.

If it is clear that the situation will not change in the near future and that layoffs will probably be followed by dismissals, no grounds exist for laying off employees first. The employer must terminate the employment relationship by means of normal dismissal based on the enterprise's circumstances (workforce reductions).

The obligation to consult with union representatives only applies to enterprises that are bound by collective agreements. However, it is recommended that enterprises that are not bound by collective agreements or that have no employee representatives appoint someone to represent the employees (such as a health and safety representative) to fill this role to ensure that the layoff procedure is conducted properly.

Issues that must be discussed: the need for layoff, the reason for layoff, and selection criteria. Minutes of the meeting must be kept.

As a general rule, selection of who should be laid off should be based on the seniority principle.

There must be objective grounds for deviating from the seniority principle. This must be decided after a concrete assessment of each individual case.

When deciding which employees to lay off, weight shall be attached to the special tasks the union representatives have to perform in the enterprise.

Once the consultation meeting has been held, employees to be laid off must normally be given 14 days' notice, effective from the end of their working hours on the day on which notice is given. A notice period of two days applies in the case of unforeseen events such as accidents, natural disasters, etc.

• Unless the local parties agree otherwise, notice must be given in writing to each employee.
• As a general rule the notice must be unconditional and must inform the employee of the reason for layoff and when it will be implemented.
• The notice must also state how long the layoff is expected to last.
• If the duration of the layoff cannot be stated, extension of the layoff period must be discussed with the union representatives within one month and thereafter every month unless the parties agree otherwise.

The notice of layoff must serve as documentation of layoff with respect to the Norwegian Labour and Welfare Administration (NAV).

Under the Act concerning the obligation to pay wages during layoffs (in Norwegian onlys)  the employer is required to pay full wages for 15 days after a layoff is implemented (the employer's period). This period has however been reduced to two days during the korona crisis.

These rules apply only to layoffs due to cutbacks or a shutdown of operations and not to, for example, layoffs due to events such as a fire, accident, or strike resulting from industrial action.

The employer's period runs from the first working day after a layoff is implemented. This period is 15 working days (or two days in connection with the coronavirus pandemic) for both full and partial layoffs (not consecutive calendar days).

The maximum period you can be laid off for without pay is 26 weeks in a consecutive 18-month period.

It is important to understand that a valid layoff does not automatically entitle employees to unemployment benefit.

Pursuant to the National Insurance Act, section 4-7 (in Norwegian only), employees are only entitled to unemployment benefit if the layoff is caused by circumstances beyond the employer's control. The national insurance authorities have adopted an increasingly stricter interpretation of this condition in recent years, and our experience is that employees who are laid off are sometimes denied unemployment benefit. NITO is working actively to bring this issue to the attention of politicians.

When NAV assesses whether or not individuals who have been laid off are entitled to unemployment benefit, weight is attached to the opinion of employee representatives as to whether the need for the layoff was due to circumstances which the employer could have controlled.

• One condition for entitlement to unemployment benefit is that an employee's working hours must be reduced by at least 40 per cent. This condition was previously 50 per cent but has been reduced in connection with the coronavirus pandemic.
• Unemployment benefit during a period of layoff is calculated in the same way as for unemployment benefit during a period of unemployment. You are advised that unemployment benefit is calculated on the basis of your annual income up to a maximum of six times the national insurance basic amount (6G).

If your employer asks you to return to work during the layoff period, you are obliged to do so. This may be to, for example, perform work in your own position or to work as a temporary replacement for others. If the reason for the layoff no longer applies, you must be asked to return to work. The Norwegian Labour Inspection Authority says that two days' notice must be sufficient.

As a recipient of unemployment benefit, however, you are also obliged to take on suitable alternative employment, so if you have taken on other temporary employment during the layoff period, it is important that you can terminate it at short notice.

The layoff period is deemed to be uninterrupted as long as the period you work for your employer does not exceed six weeks. If the period you work exceeds six weeks, further layoff shall be regarded as a new lay-off period, in which case your employer must issue a new notice, and a new employer’s period with an obligation to pay wages, etc. will begin.

Other aspects of taking holiday are regulated by the Act relating to holidays. Both the employer and the employee are obliged to ensure that statutory holiday is taken.

Essentially, the parties can agree on when holiday is taken. The employer may, within certain limits, determine when holiday should be taken after conferring with the employee or with employee representatives.

The employee will be entitled to holiday pay while taking holiday. Many enterprises disburse holiday pay in the final payroll run in June or July and simultaneously make wage deductions for four or five weeks' holiday.

The employer will therefore be entitled to pay if holiday is taken later in the year. The employer may not avoid its obligation to pay holiday pay by implementing a layoff. Payment of unemployment benefit will stop during the period when holiday is taken.

If you resign before the notice of layoff is given, the agreed or statutory period of notice will apply. You have an obligation and right to work throughout your notice period. Your employer is obliged to pay full wages throughout the period of notice.

If you resign your job after notice of layoff is given and after the employer's period, i.e. the period in which your employer is obliged to pay your wages, you may do so with 14 days' notice. The notice period will begin as soon as your resignation is received by your employer, not from the first day in the following month, which is the normal period of notice.

NITO's basic collective agreements give employees the right to resign without notice if they have been laid off for more than three months and wish to find other employment. This applies to NITO members who are covered by agreements with the Confederation of Norwegian Enterprise (NHO), the Enterprise Federation of Norway (Virke) and the Employers' Association Spekter. Most of NITO's direct agreements contain similar provisions.

Employees who resign after a notice of layoff is given but before the layoff is implemented have an obligation and right to work during the period not covered by the layoff. The employer is obliged to pay wages during those parts of the notice period that fall prior to and after the layoff period. In other words, as an employee you are not entitled to pay during the actual layoff period if you resign after the notice is given.

If the employer dismisses an employee who has been laid off, the normal rules for dismissal apply.

The length of the notice period will follow from the employment contract or from the provisions in the Working Environment Act, and the notice period will run from the first day in the month after which notice is received.

The employer is obliged to pay the employee full wages, even if it cannot provide any work. However, the employer's obligation to pay wages is contingent on the employee being at the employer's disposal. In other words, the employee must be available during the notice period in order to be entitled to pay.

The general rules set out in the Working Environment Act governing conditions, procedure, and selection for dismissal will otherwise apply.