1.1 In what circumstances does the employee transfer law apply?
The employee transfer law in Norway applies to a transfer of an undertaking or part of an undertaking to another owner. The rules apply to all transfers of undertakings, regardless of whether the undertakings are private or public.
In order for the rules to apply, the unit being transferred must represent an independent economic unit. This implies that the transferred entity must have a minimum of organisational independence, and must comprise an organised group of people and assets, enabling the unit to be involved in economic activities. The unit must also retain its identity after transfer.
1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?
(a) Sale of a business
Most forms of transfer are covered by the employee transfer rules, including mergers and acquisitions and renting and leasing agreements. Sales of assets, such as premises, equipment, customers, staff and goodwill may also constitute a transfer based on an assessment.
Outsourcing, where the transfer is the direct or indirect result of a contract, may also be covered by the rules, based on an assessment.
1.3 In outline, what are the implications of the employee transfer law?
If the employee transfer rules apply:
- employees assigned to the undertaking transfer on their existing (pre-transfer) individual terms of employment;
- collective agreements and union recognition arrangements transfer;
- collective pension schemes transfer;
- the transferor and the transferee must provide information on the transfer to employee representatives, in general, to consult them;
- employees have the right to object to transfer (‘right of reservation’);
- an employee has, in exceptional cases, a right to continue working for the transferor (based on case law);
- if employees have claims relating to employment before the transfer date the transferee becomes liable jointly together with the transferor;
- if an employee is dismissed for a reason connected to the transfer, the dismissal is automatically unfair;
- if the employment contract expires because a change of employer involves major changes to working conditions to the detriment of the employee, the termination is deemed a consequence of circumstances relating to the employer.
All employees transfer. An employee is defined as anyone who works in the service of another person or enterprise, including, temporary employees, people on maternity leave etc. There must be an employment relationship and so consultants and subcontractors are not covered. The relationship must be assessed for what it actually is, independently of how it is described.
Where only part of the business is being transferred, there may be a question about which of the employees should transfer. In practice in may be difficult to define which employees belong to the transferring business and should cross over. The general rule is that those employees who are necessary to keep the transferring business operational will transfer. Generally, employees who only perform work intermittently for the transferring business will not transfer.
2.2 Can employees object to transferring?
Employees may object to the transfer (i.e. a ‘right of reservation’). The employee must notify the transferor in writing within the time limit specified by the transferor, which must not be less than 14 days after the transferor provided mandatory minimum information about the transfer to employees. By using the right of reservation the employment will not transfer to the transferee. Use of the right of reservation does not imply a notice of termination from the employee. The employee may also, exceptionally, have the right to continue working for the transferor if the transfer would result in substantial detrimental changes for the employee.
2.3 What happens to terms of employment contracts?
All existing rights and obligations under the employment contract transfer from the old employer to the new. The rights and obligations transfer automatically and require no action to implement them.
2.4 What about other employee benefits?
Employees have the right to employment on the same terms as with the transferor and all benefits arising from the employment relationship are protected. The transferee must replicate all individual benefits. The transferee may of course offer better benefits, but cannot do this in certain areas simply to compensate for worse benefits in others. If it is impossible to transfer the right e.g. profit shares or share options, the question must be solved based on the ordinary law of torts and contract.
Past employment with the transferor may count as ‘continuous employment’ with the transferee based on an assessment.
2.5 What happens to pension rights?
Pension rights arising from an individual agreement are transferred. The same applies to collective pension schemes. The transferee may, however, choose to apply its own collective pension scheme to the transferred workers as well. There is no distinction between defined contribution and defined benefits schemes in relation to transfers. The transferee may choose, for example, to apply its defined contribution scheme, even if the employees have been members of a more favourable defined benefits scheme with the transferor.
Where the pension rights of the transferred employees are impossible to transfer, the new employer must ensure that the employees acquire rights in another collective pension scheme.
2.6 What liabilities transfer?
An employee may, as a starting point, make any claims arising from the conditions of employment prior to the transfer against the new employer as well as the old. The transferee will become jointly liable for claims made at the time of the transfer, including accrued holiday rights and unpaid bonus.
However, there are certain types of claims where it is questionable whether the transferee would be jointly liable for them, for example, harassment that occured before the transfer date.
2.7 Do collective agreements transfer?
Unless the transferee declares to the trade union(s) concerned that it will not uphold the agreement(s), the collective agreements in effect at the time of the transfer automatically bind the transferee. Any such declaration must be in writing, and must be given within three weeks of the transfer.
The transferred employees nevertheless have the right to retain individual working conditions arising from a collective pay agreement that was binding upon the transferor, covering, for example working hours or holiday. This individual right applies until the current collective pay agreement expires or until a new collective pay agreement which is binding upon the new transferee has been concluded.
2.8 How does the transferee obtain information on transferring employees?
Both the transferor and transferee must provide information concerning the transfer and discuss it with the employees’ elected representatives. To do this, the transferee must obtain the information from the transferor. The transferee will need to give notice to the Data Protection Authority that it wishes to process personal data and inform the employees of the purpose of processing. If this is in the early stages of the transfer, it might be difficult, especially if several potential buyers are involved.
A way to avoid the duty to inform employees at this stage is for the transferor only to provide anonymous data, so that data protection law does not apply. Once the transferee has agreed to buy the undertaking, communication should be limited to relevant information, such as information about the employer’s economic commitments and the employees’ qualifications.
3.1 Can employers make changes to employment contracts?
The transfer itself is not justification for material changes in working conditions. Changes in terms and conditions of employment not directly connected to the contract of employment, such as company health benefits and company policies, do not contravene the rules. The new employer can introduce the kind of changes that are commonly made by the management of an employer to the same extent as the old employer could within its management prerogative. This has to be considered on a case by case basis. Changes that can be made within the management prerogative can normally be made at any time. Terms cannot be harmonised by the transferee based on the transfer itself.
3.2 When can employers safely dismiss employees before or after a transfer?
The transfer of an undertaking in itself is not justification for dismissal. Note that if the employee terminates his or her employment agreement because of significant and detrimental changes to his or her conditions of employment, it will be deemed that it was the employer that terminated the employment.
However, employers might have justifiable grounds for dismissal, as they are entitled to dismiss for economic, technical or organisational reasons (i.e. redundancy).The transfer does not prevent the employer from deciding to conduct a redundancy process, for example, if there is a surplus of employees with the new employer after the transfer.
In any dispute in connection with a redundancy process or any of the other Norwegian employment protection rules, the general rules and procedures for dismissal will apply. These rules allow an employee, for example, to invoke his or her right to remain or to be reinstated in his or her position until the dispute is settled (i.e. to continue to go to work and receive salary and other agreed remuneration until a final court decision has been made for a minimum of six to eight months after the date of dismissal). An employee may also seek economic and non-economic compensation for unjustifiable dismissal.
Following a dismissal because the undertaking is downsizing, employees who have been employed by the undertaking for a total of at least 12 months during the previous two years will have a preferential right to a new appointment in the undertaking.
4.1 Who must employers consult?
Both the transferor and transferee have a duty to inform and discuss the transfer and its implications with the employee representatives as soon as possible and always before the final decision to transfer is taken. They also have a duty to inform the affected employees as soon as possible.
Elected representatives are normally informed first as employers are required to consult representatives regarding any planned measures affecting employees. If there are no representatives, the employer should initiate an election.
If the employer is part of any collective agreement(s), these agreements will normally contain additional rules and procedures to be followed.
4.2 What information must they provide?
The employers must provide information concerning:
- the reason for transfer;
- the agreed or proposed date of the transfer;
- the legal, economic and social implications of the transfer for the employees;
- changes in circumstances relating to collective pay agreements;
- measures planned in relation to the employees;
- rights of reservation or preference and the time limit for exercising those rights.
The parties must consult as soon as possible on the measures with a view to reaching an agreement.
4.3 What does consultation involve?
Employers have a duty to consult the employee representatives if any measures are planned in relation to their employees, with a view to reaching an agreement. The information given must be sufficient to enable the representatives to affect the employers’ decision.
The obligation is limited to consultation. The parties do not have to reach a settlement and the employer may decide the outcome if there is no agreement.
4.4 How long does consultation last?
There are no mandatory requirements for the number of meetings or the duration of consultation. The consultation could be finalised within a day or a couple of weeks. The employer should expect that consultations will last for about one to two weeks.
4.5 What happens if an employer fails properly to inform or consult?
The employer could be fined for breaches of the rules, if it fails to inform or consult. This could result in an administrative sanction and/or criminal sanctions. The transfer will not be ineffective or suspended in such a case, but the employees can use the failure to inform or consult to say the transfer should be postponed. For example, the time limit for exercising the right to object (i.e. right of reservation) does not start to run before the employees have received certain mandatory information.
If the employer is part of any collective agreements, those agreements will normally contain additional economic sanctions.
5.1 Identify up to three issues in this country of which employers should be aware?
Collective agreements are transferred, unless the new employer declares in writing within three weeks after the date of transfer that it will not uphold the collective agreement.
Collective pension rights are also transferred. The transferee may, however, choose to apply its own collective pension scheme to the transferred workers as well.
The employee’s right to reject the transfer, and in some circumstances to maintain his or her employment with the old employer is based on national case law, and not simply the Directive, but the extent of this right is unclear.
5.2 Would the employee transfer law apply on a cross-border transfer into or out of this country?
Norwegian law applies, in general, to all work performed in Norway. If a transfer of an undertaking is made into Norway, the employees would be entitled to protection under Norwegian law as soon as the undertaking has relocated to Norway. The Norwegian transferee will be governed by Norwegian legislation.
If the transfer of undertaking is made out of Norway, Norwegian rules will also apply.
Norwegian law may in certain cases also apply to work performed abroad by employees posted abroad. The decisive factor is whether the employment relationship falls within the scope of Norwegian law and the location of the enterprise is irrelevant. This may give employees working in a Norwegian-registered branch abroad different rights, depending on whether they are employed abroad or posted from Norway. Whether Norwegian law applies depends on the ordinary choice of law rules, which must be considered on a case by case basis.
6.1 What are the main national laws protecting employees upon transfers of businesses?
Under Norwegian law, the Working Environment, Working Hours and Employment Protection etc. Act of 17 June 2005 (‘WEA’), Chapter 16 applies in the event of the transfer of an undertaking or part of one to a new owner. Chapter 16 implements the EC Acquired Rights Directive 77/187 as amended by Directive 98/50, both of which are replaced by Directive 2001/23, concerning employees’ rights in the event of transfers of undertakings.
An English translation of the Act can be found at: