Temporary layoffs can be a challenging situation for both employers and employees. When your business faces temporary difficulties, layoffs can be a necessary step to reduce costs without resorting to employee terminations. But what do the regulations say? What rights and obligations do both employers and employees have? In this blog, you’ll get an overview of the key rules for temporary layoffs, from notification deadlines to unemployment benefits and special rules for general managers in their own company.
Non-statutory rules for temporary layoffs
In Norway, the rules surrounding temporary layoffs are not heavily regulated by law. The most important law is the "Act on the Obligation to Pay Wages During Layoffs," which outlines the employer's obligation to pay wages and the employee's rights.
Other rules can be found in:
- Legal practice
- Collective agreements
- The main agreement between LO and NHO
Objective grounds for layoff
A business must have a legitimate reason for implementing a layoff, and this reason must be related to the business itself, not the employee. Furthermore, the situation must be temporary in nature. Some valid reasons for layoffs include:
- Decline in orders
- Market downturn
- Delivery issues
- Strike
- Natural disasters
- Practical work obstacles
While there is no statutory requirement to consult employees or employee representatives before implementing layoffs, this may be covered in collective agreements. The company has the option to lay off employees either completely or partially.
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Who can be laid off?
For businesses bound by the General Agreement between LO and NHO, the seniority principle must be applied, though exceptions can be made if there is a legitimate business need.
Practical procedure for layoffs
Duty of notification
The main rule is that employers must notify employees at least 14 days before a layoff takes effect. Exceptions to this are:
- Force majeure or natural disasters: 2-day notification period
- Strike: No notification period
During the notice period, employees must continue to work and receive their usual salary.
Content of the layoff notice
The layoff notice should include the following information:
- Layoff start date
- Notification period
- Reason for the layoff
- Layoff degree (full or partial)
- Expected duration of the layoff
- Overview of days the employer has a statutory obligation to pay wages
Act on salary obligation during layoffs
After the notification period, the employer has a 15-day salary obligation. After that, the employee may receive unemployment benefits from NAV, provided they meet the usual requirements. If a layoff lasts for more than 26 weeks within 18 months, the employer's salary obligation resumes.
Exceptions for cross-border workers
Cross-border workers are not required to reside in Norway to qualify for unemployment benefits during a layoff.
Layoffs during holidays
If the layoff period is less than six weeks, unemployment benefits will not be paid during the following periods:
- Palm Sunday to Easter Monday
- December 20 to January 1
These days are also not counted as waiting days.
Layoff of general manager in own limited company
When you work for your own limited company as the general manager, you are considered an employee. Therefore, you can be laid off and may be entitled to unemployment benefits, even if you own the company and are the only employee. In this case, you are both the laid-off employee applying for unemployment benefits and the employer who must document the situation in the company.
You must explain to NAV what steps they, as the employer, have taken to limit the need for layoffs.
If you, as the sole employee of the company, lays yourself off at a rate exceeding 80%, doubts may arise as to whether your company is making reasonable efforts to secure future work and reduce the need for layoffs. If all activities cease, it may appear that your business is being closed rather than temporarily suspended. All activities carried out in the company, regardless of whether they are in the capacity of an employee, general manager, working chairman, or other role, are relevant.
Rules for layoffs – in summary
- Ensure a valid reason: Layoffs must be due to circumstances within the company, not the employee.
- Follow the notification deadlines: Typically 14 days, but shorter for strikes or force majeure.
- Remember the employer’s salary obligation: The employer must pay wages for the first 15 days after the notice period.
- Be aware of the unemployment benefit rules: After 26 weeks of temporary layoffs within 18 months, the employer’s salary obligation resumes.
- General manager in a limited company: The general manager can be laid off, but must provide documentation that the layoff is genuine.
For companies, understanding rules and regulations in the Working Environment Act, and managing layoffs correctly can be a complex process, but with a clear understanding of the rules, both employers and employees can manage the situation in an orderly manner. Do you have questions about layoffs? Contact us for a no-obligation chat.
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Our lawyers are experts in Norwegian labor law. Contact us today.
