Is the government's ban on hiring from staffing companies in violation of EEA law?

As a result of the government's target to limit the scope and role of the staffing industry in Norway, there have been significant tightening of regulations in the staffing sector recently. In essence, the new changes narrow down the access to hire temporary labor from staffing companies, and all staffing companies must be approved to provide labor. Particularly, the construction industry has faced restrictions on their ability to use hired labor from staffing companies. A ban on hiring workers from staffing companies for construction work on building sites in Oslo, Akershus, Buskerud, Østfold, and Vestfold has been implemented.

ESA, which is the surveillance authority of the EFTA, was quick to express that the new rules, in their view, were in violation of directives, as well as the right to the free movement of services. The tightening has hit staffing companies hard. Recently, 11 Norwegian and one Polish staffing company joined forces to sue the state for compensation. These companies claim that the rules are in violation of EEA law and that the regulations have caused losses of tens of millions of Norwegian kroners.

In autumn 2023, the Oslo District Court decided that the case should go to the EFTA Court, with a hearing scheduled for late June 2024. A decision from the court is expected during autumn 2024. Recently, all involved parties have submitted their written contributions.

Norwegian authorities disagree with the staffing companies that the restrictions are in violation of EEA law. The authorities have stated that the restrictions do not have cross-border elements concerning EEA law, as they only apply to businesses operating in the Norwegian market.

This view is also supported by the European Commission, which claims that there are no cross-border elements under the principle of the free movement of services for the Norwegian staffing companies participating in the lawsuit.

On the other hand, the Commission emphasizes that since one of the plaintiffs is a Polish company, it gives the case a clear cross-border effect. The Commission believes that the case also raises questions about the freedom of establishment in the EEA Agreement and claims that the absolute ban "appears to go beyond what is necessary." The case has also attracted the interest of the German government, which has expressed support for the Norwegian government.

The decision of the EFTA Court could have implications for whether Norwegian authorities allow the rules to remain as they are now or if they find it necessary to amend the regulations to avoid legal conflicts with EEA law.

If you have questions about how the hiring rules affect your business, whether you are a hirer or a staffing company, we can assist in ensuring that your business complies with current regulations.