Temporary lay-offs

Temporary lay-off (Nw. "permittering") is an arrangement where the employee's duties lapse in full or in part, and the employer's duty of remuneration lapses correspondingly. Lay-offs are temporary and the employee maintains his/her status as an employee.

Temporary lay-offs are used when the employer expects the employee to be recalled to return to work as soon as the workflow increases. If it is certain or predominantly certain that the workforce reduction is permanent, termination due to redundancy is the relevant measure.

Non-statutory rules

With the exception of the Act relating to payment during temporary lay-offs (Nw. "permitteringslønnsloven"), the rules related to temporary lay-offs are non-statutory and based on collective agreements, including specifically the Basic Agreement between Norwegian Confederation of Trade Unions (LO) and The Confederation of Norwegian Enterprise (NHO) (Nw. "Hovedavtalen").

Conditions

Temporary lay-offs are permitted only when valid reasons makes it necessary for the employer. Such reasons must be temporary. Required reductions in costs, for instance due to production reduction, reduction in orders, shortage in raw materials, may be considered basis for lay-offs. Accidents, virus outbreaks and other temporary circumstances preventing work are also considered valid reasons.

Full or partial lay-off

The employer may unilaterally decide to implement temporary lay-offs or it can be agreed with the employees individually. Temporary lay-offs can either be implemented for a continuous period (full lay-off) or by way of reduced working hours (partial lay-off).

Procedure

The collective agreements normally obliges the employer to consult the employee representatives if temporary lay-offs are being considered. The need for and the reasons for temporary lay-offs, as well as selection of employees (if relevant) shall be discussed at the meeting and minutes shall be taken and signed by the parties.

For undertakings who are not bound by a collective agreement, an obligation to consult the employee representatives may follow from the Working Environment Act. Pursuant to chapter 8 of that Act, undertakings which regularly employs at least 50 employees are obliged to inform and discuss issues of importance for the employee's working conditions with the employees' representatives. Other undertakings are recommended to hold a consultation meeting. Such consultation may be important in possible subsequent legal proceedings. The employer should in any event inform the employees of temporary lay-offs before sending out notices of lay-off.

Selection process

If the temporary lay-offs shall not apply to all employees, the employer must select the employees to be laid off. Such selection must be based on valid reasons and predetermined criteria. Pursuant to the Basic Agreement, due regard shall be given to the principle of seniority ("last in, first out"), this also applies to temporary lay-offs. The consideration for continued operations is generally given more importance in connection with temporary lay-offs than with permanent workforce reductions.

Notice of temporary lay-off

As a main rule notice of temporary lay-off shall be given 14 days prior to its effective date. When temporary lay-offs are due to unforeseen events, the Basic Agreement sets a notice period of 2 days. The notice shall state the probable length of the temporary lay-off. The notice also serves as documentation to the Norwegian Labour and Welfare Administration (NAV) in connection with their payment of benefits. It follows from the Labour Market Act that an employer planning unpaid temporary lay-offs of at least 10 employees within 30 days, and whose weekly working hours will be reduced by more than 50 percent, shall notify NAV as soon as possible.

Salary and unemployment benefits during temporary lay-off

Pursuant to the Act relating to the obligation to pay salary during lay-offs, the employer is as a main rule obligated to pay salary for a period of 15 days after implementation of temporary lay-offs (employer's period I).1 Following this period the employer is relieved from the obligation to pay salary for 26 weeks during an 18 months' period. During this exemption period daily unemployment benefits are paid by NAV.2

It should be noted that even though the employer initiates temporary lay-offs, the requirements for unemployment benefits to the employees are not necessarily met. NAV makes an individual assessment of whether the conditions for benefits are met. To meet the requirements, temporary lay-offs must be due to circumstances beyond the control of the employer. If the employer and the employee agrees that there is valid basis for temporary lay-offs and such agreement is documented, the conditions for daily benefits are as a main rule met, pursuant to the regulations related to unemployment benefits. The working hours must as a main rule be reduced by at least 50 percent in order for the employee to qualify for unemployment benefits.3

Notice of termination during temporary lay-offs

If an employment relationship is terminated during the temporary lay-off period, the general rules for termination will apply. The length of the period of notice follows from the Working Environment Act unless otherwise agreed in the employment contract. The period of notice runs from the first day of the month following that in which notice is given. An employee may terminate his/her employment with 14 days' notice if the employee has received a notice of temporary lay-off and lay-off has been initiated. The notice period runs as soon as the notice of dismissal has been received by the employer.

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  1. This period is temporarily reduced to 2 days as from 20 March 2020.
  2. Temporary regulations regarding compensation for loss of income from NAV have been set into effect as from 20 March 2020.
  3. The requirement has temporarily been reduced to 40 % as from 20 March 2020.