When the need for downsizing arises, it is crucial that the downsizing process follows a correct and thorough procedure. In this blog, we'll take you through the a downsizing process under Norwegian Labor Law, providing employers with advice and recommendations on what's important in such a process.
1. Preparation and risk assessment for downsizing
The first step in a downsizing process begins during the preparations.
It is a requirement that any downsizing is based on a just cause. You therefore need to conduct thorough assessments of the need for downsizing during preparations.
In this phase, you need to identify the reasons why downsizing is being considered, carry out financial analyses and assess possible consequences for the company's future. It is often an advantage to draw up a project plan that clarifies progress, responsibilities and measures. It's also important to document all assessments and analyses that are carried out.
Options for steps in a project plan can be:
- Identifying the need for downsizing
- Conduct a risk assessment of possible outcomes
- Consider alternative solutions (e.g. relocation of employees)
For downsizing to be justified, the need must be real. Most often, it's a matter of financial challenges or rationalization measures to ensure sound operations. At an early stage, you should document which measures have been considered and why other alternatives are not feasible.
Also read: Workforce reductions in Norway — Be aware of employee rights
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2. The selection process for downsizing
Choosing who to let go is often the most demanding step in the process.
If the downsizing does not include all employees, this step must be divided into two. First, the group of employees to be considered for redundancy (selection group) must be discussed, and then objective selection criteria must be chosen from among the employees within the group.
The starting point is that the entire company should be assessed. However, if you want to limit the circle of affected employees, this limitation must be based on objective reasons. A typical example is that a company wants to close a branch that is geographically separated from other branches.
Furthermore, the selection of employees within the group being reviewed must be based on objective criteria.
Seniority, expertise and the possibility of redeployment are often considered. Make sure that these assessments are in writing and justified:
Tips for the selection process
- Define selection criteria in advance
- Make sure the process is verifiable
- Keep a running record of decisions
If your company is bound by a collective agreement, there may also be specific requirements for the selection process that you should be aware of.
3. Make sure to communicate with your employees
Open and honest communication is a key element in a successful downsizing process.
Good dialogue strengthens trust and can prevent unnecessary conflicts. Inform employees as early as possible and facilitate meetings where everyone can ask questions.
For companies that regularly employ more than 50 employees, the employer must inform and discuss issues of importance to the employees' working conditions with the employees' union representatives. A possible downsizing process will fall within this duty to discuss.
Employees who are being considered for redundancy because of downsizing must be invited to individual discussion meetings. Both the basis for the potential dismissal and any selection between several employees must be discussed. It is important that the employees receive notice of the meeting well in advance and are given the opportunity to bring a representative if they wish to.
4. Termination of employment: Assessment and requirements
If it is decided, after the above-mentioned assessments have been carried out, to dismiss an employee, the requirements for dismissal must be followed. This includes, among other things, requirements for formal notice, requirements for notice period and correct delivery of the notice letter.
A special requirement for dismissals due to downsizing is that you as an employer are obliged to consider whether there is other suitable work to offer the employee. Other suitable work means other vacant positions in the organization that the employee is considered qualified for. You are not obliged to create a new position or offer the employee a position for which he or she is not qualified.
In addition, you are required to weigh up the interests of the company's need for downsizing against the disadvantages a dismissal entails for the employee, before making a final decision.
These specific assessments are important for the dismissal not to be considered unfair. There are several examples from case law where dismissals are not upheld because the employer has failed to document these assessments.
Also read: When terminating an employee becomes necessary
5. Preferential rights in the event of downsizing
Employees who are made redundant because of downsizing will have a preferential right to new employment in the same company for positions they are qualified for.
The preferential right only applies to employees who have been employed by the company for a total of 12 months over the past two years and is applicable from the date of termination and for 12 months from the expiry of the notice period.
If the employee does not accept an offer of employment within 14 days of receiving the offer, the preferential right lapses. In a company group, the preferential right also applies to other companies within the group for which the employee is qualified. The preferential right to new employment in the same company does not lapse if the employee declines an offer in another part of the group.
If there are several people who have preferential rights to the same position, you are obliged to follow the same rules for selection as for downsizing processes.
6. Downsizing process – summary
A downsizing process requires solid case management from A to Z, where both legal requirements and human considerations are ensured. Through thorough preparation, dialogue and clear selection criteria, you lay the foundation for a smoother process that meets the needs of both the company and the employees affected by the downsizing.
Do you have questions about case management in downsizing and want professional advice? Feel free to get in touch for a closer chat - so we can find the best solutions together.
NEED HELP WITH THE DOWNSIZING PROCESS?
Our labor law experts knows what it takes. Contact us today and get expert help.
