Laying off employees is a temporary measure under which the employee's obligation to work and the employer's obligation to pay wages are suspended. The employment relationship continues to exist, and it is assumed that the work stoppage is temporary. If it becomes clear or highly likely that the situation will be permanent, notice shall be given of dismissal. The right to lay off employees is limited to 49 weeks over an 18-month period.
The employer is required to notify the Norwegian Labour and Welfare Administration (NAV) if more than 10 employees are laid off or given notice of dismissal.
Lay-offs are only to a very limited extent regulated by legislation, with the exception of the Act relating to the obligation to pay wages during temporary lay-off periods. The non-statutory rules are therefore based on a number of collective agreements. The best known of these agreements is the Basic Agreement between the Confederation of Norwegian Enterprise (NHO) and the Norwegian Confederation of Trade Unions (LO).
Employees can only be laid off on reasonable grounds. The grounds must relate to the business and not the employee. Lay-offs may be based on a need to reduce costs, including payroll costs. The precondition is that this need is of a temporary nature.
Examples of reasonable grounds include: a shortage of orders, full warehouses, practical obstacles to work, accidents, loss of tenders, increased competition and other practical obstacles.
According to the Basic Agreement (between LO and NHO), the order in which employees are laid off shall, in principle, be based on seniority. It has been decided, however, that the rules can be deviated from on the basis of the enterprise's reasonable needs.
Enterprises that are not bound by the Basic Agreement are not bound by the seniority principle, but are nevertheless required to carry out the selection based on reasonable grounds.
If an enterprise is considering laying off employees, the employer is obliged to discuss this with the enterprise's employee representatives. Minutes shall be kept of the meeting.
The employee(s) must be given notice of any lay-offs before they can be implemented. The period of notice is normally two weeks.
The layoff takes effect when the period of notice is over. The employer is then required to pay wages for a certain period (the 'employer's period'). The employer's period is ten working days, regardless of layoff degree. The obligation to pay ceases during periods when the employee would have had time off or been absent in any case, and is resumed from the date on which the work would have been resumed had the employee not been laid off. For lay-offs lasting more than 30 weeks the employer is required to pay wages for five working days before the lay-off can be resumed for further 19 weeks.
Unemployment benefits on being laid off
Employees who are laid off may be entitled to unemployment benefits for up to 49 weeks in the course of an 18-month period (52 weeks for layoffs in the fisheries industry). It is conditional on the employee's working hours being reduced by at least 50%.
Not all laid-off employees are entitled to unemployment benefits:
Even if employees are laid off on reasonable grounds, the grounds may not entitle them to unemployment benefits. For the employees to be entitled to unemployment benefits, the layoff must be caused by a lack of work or other circumstances beyond the employer's control.
If it can be documented that there is an agreement between the employer and the employees that the employer has done what could be expected to avoid layoffs, and that the reason for the layoff is outside the employer’s influence, this should generally give the right to unemployment benefits during layoff.
Obligation to return to work after the lay-off period
When the lay-off period is over, the employee is obliged to return to work. If the duration of the lay-off period is not defined, the employer will in principle be obliged to return to work at one to two days' notice from the employer.