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Employment contracts

An employment contract regulates the most important aspects of the relationship between the employee and the employer. The contract must be agreed in writing. A clearly written, straightforward employment contract can avoid misunderstandings and unnecessary conflict between the parties. The more comprehensive an employment contract is, the less scope your employer will have to change your position and the terms of your employment. This often becomes pertinent in connection with reorganisations and business transfers.

What is an employment contract?

Legal basis for the employment contract

Working environment act, section 14-6: at a minimum, the employment contract must include:

Examples of matters that can be regulated in an individual employment contract beyond those that follow from section 14-6:

Changes in the employment relationship

Other relevant documents regulating employment relationships

About staff regulations

About personnel handbooks and similar documents

 

What is an employment contract?

An employment contract is a mutual agreement between the employer and the employee regulating the employment relationship between them. Along with laws and any collective pay agreements that may apply, the employment contract imposes important limitation on the employer's managerial prerogative.

In other words, how much scope the employer has in the way it manages its employees. The more specific and detailed an employment contract is, the less scope the employer has to change an employee's terms of employment.
Unlike the rights and obligations stated in an enterprise's personnel handbook or other management documents, your rights under the employment contract may not be unilaterally changed to your disadvantage.

Legal basis for the employment contract

The Working Environment Act

The Working Environment Act, section 14-5 states that all employment relationships must be subject to a written contract. In employment relationships with a total duration of more than one month, a written contract of employment must be entered into as early as possible and no later than one month following commencement of the employment relationship.

In employment relationships lasting less than one month or in connection with hiring out of labour, a written contract of employment must be entered into immediately. The employer must draft a written contract of employment in accordance with section 14-6. The provisions stipulate which requirements apply regarding the content of employment contracts.

The employment contract should be signed by both parties before you start your new job. It should also be signed before you resign your current job to avoid unnecessary surprises after you hand in your resignation.
An employment contract will be valid even if it has not been entered into in writing.

However, in cases like this, establishing what was agreed and even whether an employment contract was actually entered into will become a matter of proof.

Working environment act, section 14-6: at a minimum, the employment contract must include:

  • a) the identity of the parties,
  • b) the place of work, If there is no fixed or main place of work, the contract of employment must provide information to the effect that the employee will work at various locations, and must state the registered place of business or, where appropriate, the home address of the employer.
  • c) a description of the work or of the employee's job title, position or job category,
  • d) the date of commencement of employment,
  • e) the expected duration if the employment relationship is temporary,
  • f) any provisions that apply to a trial period of employment; see section 15-3, seventh paragraph, and section 15-6,
  • g) the employee's right to holiday and holiday pay, and the provisions concerning the fixing of dates for holidays,
  • h) the employee's and the employer's periods of notice,
  • i) the applicable or agreed pay on commencement of employment and any supplements or other remunerations that are not included in the pay, such as payment of pension contributions, allowances for meals or accommodation, method of payment, and salary payment intervals,
  • j) the duration and disposition of the agreed daily and weekly working hours,
  • k) length of breaks,
  • l) agreement concerning a special working-hour arrangement; see section 10-2, second, third and fourth paragraphs
  • m) information concerning any collective pay agreements regulating the employment relationship. If an agreement has been concluded by parties outside the enterprise, the contract of employment must state the identities of the parties to the collective pay agreement.

Information referred to in section (1), (g) to (k) may be given in the form of references to laws, regulations and/or collective pay agreements regulating these matters.

Re (a): By place of work is meant the place at which you perform your regular work duties. Where no fixed or main place of work exists, the contract must provide information to the effect that the employee will work at different locations. In such cases, the registered place of business must be stated.

This item is particularly important if the enterprise has operations in multiple locations. If the original employment contract explicitly states that the place of work is Oslo but is subsequently changed to the effect that the employee is "employed in enterprise X but with Oslo as the current place of work," this will give the employer more scope to change the place of work than it did under the original contract.

Re (c): This implies that the employment contract must be drafted in such a way as to clearly specify the type of work you will be performing for the employer. It can be useful to attach a separate job description to the employment contract. The job description should describe the work duties, responsibilities and qualifications required for the position.

During the employment relationship, the job description should be regularly reviewed with a view to updating it; for example, this can be done in connection with appraisal interviews. The job description will help ensure that you and your employer agree on the expectations you have of each other, and that your position is clearly defined in relation to those of other employees in the enterprise. In the case of engagements of a temporary nature, the job description should state the reason why the engagement is temporary.

Re (d): The employment contract must state the first day on which you either perform work for the employer or on which you are at the disposal of the enterprise. If you commence a new position on the first day of the month and this days falls on a Sunday, the contract should nevertheless state the first day of the month. This also applies if the commencement date falls in the middle of a holiday period.

Re (e): If the employment relationship is temporary, the expected duration must be stated.

Re (h): If the notice period agreed is longer than the minimum periods laid down in the Working Environment Act, it is important that this is stated to avoid any doubt at a later date.

Re (i): The pay agreed on commencement of employment must be stated in the employment contract. Other supplements and remunerations not included in the pay, such as pension contributions, must also be stated. Financial conditions must be adapted to the individual position, but they must be in accordance with any collective pay agreement that may apply.

Re (j): The preparatory works to the Act also state that the disposition of the daily and weekly working hours must be stated. We often find that many agreements fail to specify what time period applies for the normal working hours. If you are employed in a position that follows normal office hours, this should be stated in your employment contract to avoid potential conflict in the future over the possibility to change the disposition of your working hours.

Examples of matters that can be regulated in an individual employment contract beyond those that follow from section 14-6:

Place of work and international placements

It is important to clarify where your normal place of work will be so that your employer cannot require you to transfer to another department, branch office, etc. It is also important to make sure that the place of work is similarly specified in any new employment contract which your employer draws up and asks you to sign.

If the place of work specified in the original contract was given as "main office in Oslo", you must make sure that this is not changed to "in the enterprise and currently in the main office in Oslo". Adding the word "currently" expands the scope of your employer's managerial prerogative to move your place of work to another location if the enterprise has one.

If you are to work abroad for more than one month, a written employment contract must be agreed before you leave. This provision is laid down in the Working Environment Act, section 14-7. In addition to the requirements mentioned above, such contracts must contain additional information regarding currency and remuneration. More specifically, it means that they must state the currency in which your pay and other monetary benefits will be paid, and to what extent cash or benefits in kind (accommodation, fuel, etc.) are associated with your posting abroad. Any conditions that apply to your return journey must be stated, as well as the duration of your posting abroad.

The content of the position

A job title does not always say much about what job you have been engaged to do, so it is often useful to have this clarified in your employment contract. If it is important to you that you perform certain duties, these should be included in your job description. By doing so,
you limit your employer's scope to change your job description by virtue of its managerial prerogative.

Working hours

Under the law, a normal working week lasts 40 hours. Unless shorter working hours are agreed, the rule laid down in law will apply. As well as agreeing on a working week shorter than 40 hours, it is also usual to regulate whether or not meal breaks are counted as working hours. The same applies to whether or not flexitime arrangements apply, and whether or not overtime is compensated by time off in lieu rather than payment of overtime supplement.

Some employment contracts are based on a fixed salary, which means that the employee receives no extra pay for any work performed outside normal working hours. The provisions in the Working Environment Act imply that most of NITO's members should be paid for overtime, and on an hourly basis. Find out more by reading the fact sheet entitled 'Who is entitled to overtime pay?'.

Permanent/temporary positions

The employment contract must state whether the position is permanent, fixed-term, or temporary. If the position is temporary, there are specific rules governing the use of temporary positions (which must generally last for a limited time period and used to replace an employee).

Temporary positions are largely used to cover manpower needs, for example in the event of sickness absence or leaves of absence. Similarly, there may be a need for temporary positions in connection with project work that differs from the work that is ordinarily performed in the enterprise or with other types of work of a limited duration. The provisions in the Working Environment Act impose restrictions on the use of temporary engagements. The general rule favours permanent engagement.

There are two main areas in which temporary engagements may be used. The first area concerns work that will last for a specific period; these are typically temporary replacements for a specific employee. However, the employer may not enter into successive contracts for short-term, temporary replacement to cover a constant need for manpower. This will normally be regarded as evasion of the prohibition against temporary engagements. Correspondingly, a temporary replacement that is not linked to a specific person or position would most likely be regarded as evasion of the same prohibition.

The other area in which temporary engagements are permitted is in connection with work of a temporary nature. The premise here is that it is warranted by the nature of the work, and that the work differs from that which is ordinarily performed in the enterprise. Seasonal work and project work are typical examples.

Deductions from pay

If your employer wants to make a deduction in your pay because you received too much pay or for similar reasons, this must be agreed in your employment contract.

Additional benefits

The employment contract should specify any supplements you are entitled to in addition to your ordinary pay. These may take the form of a company car, telephone, newspaper, loans, and so forth. If these are specified in your employment contract or letter of appointment, they are deemed separately agreed working conditions that cannot be unilaterally changed by your employer at a later date.

Trial periods

Section 15-6 of the Working Environment Act states that the maximum total duration of a trial period is six months. This means that if you are sick or take maternity leave for a significant portion of the trial period, your employer may extend the trial period by a corresponding length of time. It is not permitted to agree on a trial period of more than six months. If a trial period of more than six months is agreed, it is invalid, and the employment relationship will be deemed permanent.

Section 15-3 (7) of the Working Environment Act states that if you are engaged on a trial period agreed in writing, either party must give 14 days' notice unless otherwise agreed in writing or in a collective pay agreement. Notice must be given in writing. During a trial period, a notice period runs from one given date to another given date.

The provisions regarding trial periods apply when an employee is engaged in a new enterprise. For example, if you move jobs within the same enterprise or if your job description is amended, in principle you are not required to undergo a new trial period. The reason for this is that the company has already had the opportunity to assess the qualities which should normally come to light during a trial period.

However, you may commence a new trial period if you are engaged in a very different position and if you retain your right to return to your previous position during that period.

Trial periods are often perceived as a time of uncertainty for new employees. Most people think they can easily be dismissed from their job if they fail to behave 'properly', and that they can only relax once they are finally permanently employed. This is partly due to the fact that other rules apply for dismissal of permanent employees than for employees on trial period.

Section 15-6 (1) is the key provision in this connection:

"If an employee engaged by written contract for a given trial period is dismissed, such dismissal must be on the grounds of the employee's lack of suitability for the work, or lack of proficiency or reliability."

This provision cannot be read in isolation, but must instead be compared with the criteria set by the courts for dismissals during trial periods. These criteria will often require the employer to follow up the employee, give the employee feedback on what needs to be improved, and give the employee time to make improvements before a dismissal can be deemed fair. A trial period is a two-way process that imposes requirements on both parties, but emphasis is placed on the employer's efforts to provide training and follow-up.

Non-compete clauses

Some employers add a clause in employment contracts that prevents you from taking up employment with a competitor or customer or to start your own business in the same industry for a certain period after the employment relationship is terminated by either party. This is usually legitimised by the fact that you have had access to sensitive information and to protect the enterprise with respect to competition.

Financial compensation should be given, and NITO's view is that this should be based on full pay. Such clauses must be limited in time, and should also be specific in terms of which industry/industries or businesses the prohibition applies to. If you are expected to agree to a non-compete clause, we recommend that you read our fact sheet entitled 'Non-compete clauses'.

Inventions

Occasionally, engineers or technicians make an invention or design, and conflict arises over who has the right to the product. In principle, employees have the same right to their patentable inventions as do other inventors. However, depending on how close the connection is between your employment relationship and the invention, your employer may claim the right either to acquire ownership of the invention in full or in part or to make use of it.

If the invention was made outside the employment relationship, your employer has the preferential right to make an agreement with you to acquire the right in full or in part. The condition is that use of the invention falls within the field of activity of the employer's enterprise. In such a case, you are entitled to reasonable compensation, even if this was not agreed prior to the invention being made. This applies if the value of the right to which your employer acquires access does not exceed what you could reasonably be expected to produce in return for your normal pay and other benefits.

Particular consideration is given to the value of the invention, the scope of the right your employer has acquired, your terms of employment, and the significance your employment may have had to the development of the invention. We recommend that you read our fact sheet entitled 'Employee inventions' to find out more about inventions.

Changes in the employment relationship

Changes in the employment relationship as referred to in section 14-6 must be reflected in the employment contract as soon as possible and no later than one month after they come into effect. This generally does not apply if changes in the employment relationship are due to amendments to acts, regulations or collective pay agreements.

Other relevant documents regulating employment relationships

A number of documents, letters and other conditions are taken into account to determine what was agreed between you and your employer. Employers have often prepared a number of procedures and other administrative provisions, such as a personnel handbook. One feature these all have in common is the fact that your employer can unilaterally change the content and scope of their provisions. This issue is discussed in more detail below.

About the content of the position

Employment contracts often lack specific details about the content of a position. It is often the case that a job title, such as 'engineer', is given but without further details about the specific duties involved.

In order to determine the content of a position, consideration must be given to what was stated about your work duties in the job advertisement, the job description, the agreements or orders regulating areas of responsibility issued at appraisal interviews, and any significant areas of responsibility that were assigned to the position in the course of the employment relationship.

Your employer may remove or add new duties to your main work duties and areas of responsibility provided there are reasonable grounds to do so. However, your employer may not unilaterally amend the basic character/main duties of your position, even if it continues to be that of 'engineer'. For example, your employer may not move your work duties from project management to a position in the enterprise's purchasing department, even if that position also requires engineering qualifications.

The employer's managerial prerogative is subject to other and more stringent limitations than those stated in the employment contract. The limits as to what an employer may unilaterally change must be determined on an individual basis.

About staff regulations

Traditionally, considerable significance has been attached to staff regulations. Staff regulations contain rules for the workplace concerning issues such as breaks, attendance times, dismissal with or without notice, smoking, control measures, and so forth. However, such regulations now have less significance because the same matters are often regulated in employment contracts, collective pay agreements or legislation. If a conflict arises between a provision in a staff regulation and a corresponding provision in a law, collective pay agreement or employment agreement, the provision in the staff regulation is disregarded.
For workplace rules, etc. to be deemed as given in the staff regulations, the regulations must be agreed. The content of staff regulations must either be agreed with an employee representative who represents the majority of the employees in the enterprise or approved by the Directorate of Labour Inspection following discussions with the employee representatives. If your employer fails to follow the correct procedure, the provisions will be deemed not to have been given in the form of regulations.

About personnel handbooks and similar documents

Personnel handbooks often regulate important aspects of the employment relationship, such as rules for taking holiday, reduced working hours during Easter and the week between Christmas and new year, compensation for travel, entitlement to full pay during sickness, and so forth. In general, provisions in personnel handbooks and similar documents are unilaterally set by employers, sometimes following discussion with employee representatives. This means that employers may unilaterally change the content of those provisions. This type of provision is called an administrative provision.

Rights that are established by administrative provisions afford less protection than do rights established through collective pay agreements or employment contracts. All the same, employers may not change such rights retroactively. They are also required to announce any changes that have significance for employees' rights, and to allow a reasonable time period before such changes are put into effect.

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