NORWAY: An Introduction to Employment

NORWAY: An Introduction to Employment 

Introduction 

Employment relationships in Norway are characterised by stable and predictable regulatory and legal frameworks. A main distinction between the Norwegian employment market and comparable markets in Northern Europe is that there is less flexibility when hiring workers, as permanent employment is the main rule with few exceptions. Another feature is that the regulatory framework gives the employer flexibility to meet changing needs, including redundancies, as long as procedural provisions are met.

The effects of the COVID-19 outbreak in March 2020 and a significant decrease in oil prices, as well as an extraordinarily weak exchange rate, dramatically changed Norway’s economic outlook. In May 2020, Norway had the highest unemployment rate since the Second World War. However, during the autumn of 2020 Norway’s economic outlook again improved. Although stringent infection control measures were included in November 2020, and slowed the further recovery in the economy, effective vaccines are expected to result in a significant increase of activity in the Norwegian economy from the summer of 2021.

At the outset of the COVID-19 outbreak the Norwegian Government, together with the Parliament, acted swiftly to put in place necessary health-related measures, stricter border controls and financial support to affected companies, organisations and employees. In particular, financial support to employees who are temporarily laid off was strengthened, and significant support schemes were put in place for impacted businesses. The Government has amended the rules for debt restructuring in bankruptcy legislation to help viable businesses affected by loss of income. Throughout 2020, and at the start of 2021, the regulatory framework regarding temporary lay-offs has been prolonged and adjusted based on updated assessments of the effects of the COVID-19 outbreak.

The Norwegian model 

The Norwegian labour relations model is a variant of the Nordic model: it is characterised by strong collective actors, small wage differences, universal welfare arrangements, a relatively large public sector, high employment (for both men and women) and close cooperation between the Government, employers’ associations and trade unions. A main feature of the Norwegian model is also strong co-determination rights for employees and their representatives at company level. Except from what appears to be a temporary increased unemployment rate, all the mentioned features of the Norwegian model have remained unchanged through the COVID-19 pandemic.

Wage bargaining is the responsibility of the employers' associations and the trade unions and is coordinated, with key industries in sectors exposed to international competition being the first to bargain. Based on centrally coordinated wage negotiations, the local parties agree on wage and other important working conditions at the company level. There is no statutory minimum wage in Norway, but wage agreements normally contain minimum pay rates. Further, a Tariff Board appointed by the Government can decide whether the individual provisions of a nationwide collective agreement, in part or in full, shall apply to all employees, either foreign or Norwegian, who work within the scope of the agreement.

Trade union density in Norway has been at a constant level of approximately 50% for more than ten years. The union density numbers vary considerably among sectors and industries, ranging from 80% to 85% in the public sector to 40% in the private sector. Some industries in the private sector have very low density numbers.

Norwegian employment law 

Norwegian employment law is characterised by detailed statutory regulation of employers’ and employees’ rights and obligations, and a high level of employment protection and employee involvement with respect to the information and consultation of workers. Regulation of these issues has traditionally been established through collective agreements between the major employers’ associations and trade unions, and Norwegian legislation has incorporated and further developed these rules.

Employment disputes are either brought before the ordinary courts (claims arising from the individual employment relationship) or the Labour Court in cases regarding the interpretation, validity and existence of collective agreements or other collective employment disputes (including industrial disputes). Some disputes may not be brought before the ordinary courts until it has been tried before a Dispute Resolution Board. 

The Working Environment Act regulates most employment relationships. For employees in the central government sector, the Civil Service Act contains specific rules on, inter alia, protection against dismissals. Other important statutes relating to employment are the Vacation Act, the National Insurance Act, the Personal Data Act, and the Equality and Anti-Discrimination Act. Although Norway is not a member of the EU, most of the EU directives and regulations are incorporated into Norwegian employment law based on the EEA Agreement.

The Main Agreement and the Main Wage Agreement between the Norwegian state and the three main trade unions cover all employees in the central governmental sector. A similar system is in place within the local governmental sector. Within the private sector, different Main Agreements between national employers’ associations and union confederations constitute the central level of collective agreements, with sectoral agreements entered into between affiliated associations covering different sectors such as manufacturing, the health sector, hospitality, oil and gas, media, aviation, etc.

Permanent employment is the main rule in Norway, and fixed-term employment contracts are only permitted under special circumstances. This includes work that deviates from the work normally carried out in the business, work covering the company’s needs during unforeseen peaks and seasonal fluctuations, and replacement staff for employees on leave. The regulations regarding engaging workers from a temp agency are, as the main rule, the same as for employing on fixed-term contracts.

In case of dismissal, there must always be a ‘cause’ under Norwegian employment law. The threshold for dismissals is lower during the trial period (up to the first six months of employment) and in the case of specific circumstances on the employer's side, such as reorganisations etc. As an important part of employment protection in Norway, employees who choose to dispute a termination with notice are, as a main rule, entitled to remain in their position until the dispute is settled, either by agreement or by the courts.

Case law is an important legal source in defining employment law issues. One tendency over the last 20 years has been that the Supreme Court has accepted that the employer has the prerogative to unilaterally decide quite significant changes in conditions under the employment relationship, also changes that can have severe negative consequences for all or some employees. On the other hand, the last couple of years the Supreme Court and other courts have increased the requirements for documentation and procedure in redundancy processes.

The General Data Protection Regulation (GDPR) was incorporated into the new Personal Data Act, which entered into force in May 2018. The GDPR has been widely discussed and has resulted in several fines being issued by the Norwegian Data Protection Agency to employers in both the public and private sectors.

In August 2019 the Government appointed an expert committee that will analyse ”The Future of Work” and propose measures in response to growing diversity in forms of employment. The committee’s White Paper will be finalised by 1 June 2021.