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07. Termination of Employment Contracts

Grounds for Termination

Grounds for termination include: i) dismissal of an employee due to business related reasons; ii) dismissal of an employee due to reasons related to the individual employee; iii) collective dismissal based on objective grounds; iv) resignation by the employee; v) expiration of the contract term or end of the specific job; and vi) employer’s death, retirement or permanent illness.

Collective Dismissals

Terminations based on economic, technical, organisational or productivity grounds are deemed collective when at least 10 employees have been given notice of dismissal within a period of 30 days. Other forms of termination that are not warranted by reasons related to the individual employee shall be included in the calculation, provided that at least 5 employees are made redundant.

When an employer considers dismissing a number of employees at the same time, the employer must follow a strict procedure; the most important regulations are found in the Working Environment Act. The employer must hold information and discussion meetings with the employees’ representatives and inform NAV (the Norwegian Labour and Welfare Administration) about the mass redundancy. The employer must define the selection group and criteria for the selection of employees, which may receive notice of termination. After the employees are informed, individual meetings must be held with the employees who might be dismissed.

Individual Dismissals

The Working Environment Act provides that a dismissal must be objectively justified due to circumstances relating to the operation of the business, the employer or the employee. This applies to both individual and collective dismissals.

Norwegian employment legislation does not specify or indicate by way of example what kind of conduct on the part of the employee is sufficient to justify dismissal. This must be determined on the basis of a consideration of all of the circumstances of the case. An employer can assert different reasons for dismissals based on the employee’s breach of contractual terms and conditions, such as poor performance, misconduct, lack of attendance to work, lack of discipline, insubordination, etc.

In cases of individual dismissals based on the conduct of the employee, there is no statutory obligation to give a written warning or to consider other suitable available work for the employee, but these are circumstances that are often taken into account in considering whether the dismissal was justified.

Before making a decision regarding dismissal with notice, the employer shall discuss the matter with the employee and an elected representative of the employee, unless the employee himself does not desire this. The notice of termination itself needs to be in writing and shall fulfill certain minimum requirements.

In case of severe breach of obligation, either party can also terminate the employment for cause with immediate effect without observing a notice period. Among the valid reasons for immediate termination are crimes against the employer.

Is Severance Pay Required?

There is no statutory right to severance pay in Norway. The only payment that the employee is entitled to is ordinary salary payment and additional contractual benefits during the period of notice in accordance with the terms of employment. Many undertakings are immediately bound by different collective agreements to offer employees severance pay. In addition, employers who are not bound by any collective agreement may choose to offer some kind of severance package including, for instance, job-training, education, release from the duty to work, severance pay, etc. The right to such benefits is normally conditional upon the employee entering into a termination agreement whereby the employee, inter alia, waives the right to institute legal proceedings pursuant to the Employment Act. Termination agreements may be entered into before the employee receives notice or after notice is given.

Separation Agreements

It is not required for the parties to enter into a settlement agreement. However, to obtain clarity between the parties, it is considered best practice.

What are the standard provisions of a Separation Agreement?

Two key points in a standard settlement agreement are provisions on termination date and on payments from the employer. The latter includes provisions on salary during the period of notice, any severance pay or damages the parties agree on, holiday pay, pensions, and any financial contributions for outplacement or coverage of legal assistance. Furthermore, a settlement agreement should include provisions on the employer’s duty to delete the employees e-mail account and any personal data stored with the employer, and the employee’s duty to return assets belonging to the employer. Finally, a settlement agreement should provide for any confidentiality clauses or competition clauses common to the relevant industry.

Does the age of the employee make a difference?

No, there is no formal difference between entering into a settlement agreement with either a young or old employee. The employee’s age may however be a factor in determining any severance pay, damages etc. In addition, age may call for a longer period of notice period.

Are there additional provisions to consider?

When framing a settlement agreement, the parties should keep in mind the consequences the agreement might have on the employee’s future rights to social benefits and pensions.

Remedies for Employee Seeking to Challenge Wrongful Termination

An employee is entitled to a negotiation meeting with the employer, but only if the employee has been notified within two weeks after the dismissal. The employee can accept or challenge the termination decision within eight weeks from the conclusion of negotiations, or if a negotiation meeting was not held, within eight weeks from the date when notice of dismissal was received.

If the employee challenges the notice of termination, the employee will be entitled to remain in his or her position until a court has settled the case, provided that the employee has finished his or her trial period. This, in worst-case scenario, may take two to three years. During this period, the employee has the right to keep working as usual and to keep receiving a salary as usual.

Whistleblower Laws

The Working Environment Act regulates the employee’s right to notify the employer, public authorities, the media or others in whistleblowing cases. According to Section 2-A-1 an employee has a right to notify of censurable conditions at the employer’s undertaking. The same applies to workers hired from temporary-work agencies. The employee shall proceed responsibly when making such notification, notwithstanding the right to notify in accordance with the duty to notify or the undertaking’s routines for notification. The same applies to notification to supervisory authorities or other public authorities.

Retaliation against an employee who notifies pursuant to Section 2A-4 is prohibited. The same applies for workers hired from temporary-work agencies. The prohibition applies for both employers and hirers. Anyone who has been subject to unlawful retaliation may claim compensation without regard to the fault of the employer or hirer. It is recommended for the employee to seek counselling before notifying of censurable conditions. The Norwegian Labour Inspection Authority, an employee representative, or a lawyer may consult in such matters.

On 1 January 2020, new rules on whistleblowing at the workplace came into effect. The changes in the relevant chapter in the Working Environment Act mainly contribute to clarification on current law, but also include some material changes. Among the changes, the personnel sphere covered by the whistleblowing regulations is expanded to include students and prisoners among others, when these persons are performing work. Further the employer’s obligation to follow-up a notification on censurable conditions is now stipulated in the law. In addition, the notion of censurable conditions, in which is the scope of the rules, is exemplified in the law so as the prohibition of retaliation is defined in the law. For employers in the day-to-day work, an important practical change is related to the requirement to the undertakings notification procedures.

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