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A layoff (temporary redundancy) is a temporary arrangement under which an employee is relieved of the obligation to work, while the employer is simultaneously relieved of its obligation to pay wages. The employment relationship continues, and it is assumed that the cessation of work is only temporary. If it is clear or highly likely that the layoff will become permanent, dismissal should be used instead.
The rules on temporary layoffs are largely unwritten
Temporary layoffs are only to a very limited extent regulated by statute, with the exception of the Act on the Employer’s Obligation to Pay Wages During Layoffs. The non-statutory rules are therefore primarily based on various collective agreements, such as the Basic Agreement between the Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO). The most important rules relating to temporary layoffs are outlined below.
Full and partial layoffs
A full layoff completely relieves the employee of the obligation to work. A partial layoff means that the employee works part of their normal working hours and is laid off for the remainder.
The employee may be entitled to unemployment benefits for all or part of the layoff period.
Conditions for temporary layoffs
A temporary layoff requires a legitimate and objective reason. The circumstances justifying the layoff must be related to the business, not the individual employee. Necessary cost reductions, including reductions in payroll costs, may justify temporary layoffs, provided that the need is temporary in nature.
Examples of legitimate grounds include lack of orders, excess inventory, practical obstacles to work, and accidents.
An employer considering temporary layoffs should discuss the matter with employee representatives. Although there is no statutory obligation to consult employee representatives regarding temporary layoffs, such an obligation may be established by a collective agreement.
Strikes, lockouts or force majeure
In the event of natural disasters or other force majeure events, strikes, or other labor disputes such as lockouts, work-to-rule actions, or refusals to work overtime, the requirement of a legitimate reason for temporary layoff will normally be satisfied.
Selection of employees for layoff
Under the Basic Agreement between LO and NHO, the principle of seniority should generally be applied. However, it has been established that departures from the seniority principle may be justified by the legitimate needs of the business.
Employers that are not bound by the Basic Agreement are not required to follow the seniority principle, but must nevertheless base their selection on objective and legitimate criteria. Other collective agreements may also contain provisions requiring the application of seniority.
Notice of layoff and reporting obligations to NAV
The employer must provide written notice of a temporary layoff 14 days before it takes effect. The Basic Agreement between LO and NHO contains special notice rules for force majeure events, labor disputes such as strikes and lockouts, and unauthorized absences.
In the case of labor disputes and unauthorized absences, the agreement provides that no notice period is required before implementing a layoff. For unforeseen events such as natural disasters, the Basic Agreement provides for a two-day notice period. Many of the layoff provisions of the Basic Agreement have gradually become customary practice and will therefore likely apply even to employers not formally bound by the agreement. However, other rules may follow from a different collective agreement or company regulations.
During the notice period, employees must continue to work and are entitled to receive their ordinary salary. The notice period is followed by a period during which the employer remains obligated to pay wages. After this period, the employee will normally be entitled to unemployment benefits from NAV.
The employer must also notify NAV of the layoff using NAV’s designated reporting form.
Wage obligations, duration of layoffs, and unemployment benefits
Following the notice period, the employer is required to pay wages for a specified period. Thereafter, the employee may be laid off without pay for a certain period.
An employee who has been laid off may register as a job seeker and apply for unemployment benefits through NAV. It should be noted that the employer must confirm the reason for the layoff.
Employees who participate in a strike, are subject to a lockout, or are involved in another labor dispute are not entitled to unemployment benefits. If an employee is laid off due to a labor dispute at the company where they are employed, they are only entitled to unemployment benefits if the outcome of the dispute cannot affect their wages or working conditions.
The employee’s duty to return to work
When the specified layoff period ends, the employee is required to return to work. Where the duration of the layoff is unspecified, the employee will generally be required to return to work within one to two days after being notified by the employer. This means that any work performed during the layoff period must be temporary in nature and of indefinite duration.
Taking holiday during a layoff
Holiday is taken as normal and does not count as part of the layoff period. In other words, the Norwegian Holiday Act continues to apply while an employee is laid off. Subject to the provisions of the Holiday Act, an employee may be required to take holiday during the layoff period.
During such holiday leave, the employee is entitled to holiday pay accrued during the preceding calendar year.
Resignation by the employee
Once the employer’s statutory wage-payment period has ended, the employee may resign by giving 14 days’ notice. The notice period runs from the date the resignation is received by the employer.
The employee must be prepared to work if work is available at the company. If no work is available, both the obligation to work and the obligation to pay wages cease. The 14-day notice period also applies to employees who are partially laid off.
If the company is bound by the Basic Agreement between LO and NHO or by another collective agreement, different conditions may apply.
Termination by the employer
If the employer dismisses an employee who is laid off, the employer’s obligation to pay wages resumes for the statutory or contractually agreed notice period, in accordance with the ordinary rules governing termination.
The employee will normally be required to work during the notice period. However, if no work is available, the employer will nevertheless remain obligated to pay wages.
If the company is bound by the Basic Agreement between LO and NHO or another collective agreement, different conditions may apply.
Source: Norwegian Labour Inspection Authority (Arbeidstilsynet)
