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Temporary lay-offs

Temporary lay-offs

Regulations regarding temporary lay-offs – amendments from January 2012.

Temporary lay-offs are considered to be a less dramatic measure than dismissal, and may be used as an alternative when it is clear that the company will need the workforce again following a period of reduced need.

During a temporary lay-off the employment relationship continues, but is temporarily suspended. The employee is obliged to resume his or her work when the lay-off period has ended. The advantages of using lay-offs over the termination of employment are that (i) the notice period is shorter for lay-offs so that cost reductions can be achieved sooner, and (ii) the employer need recruit no new employees once the activity recovers, but can again take on the laid-off employees.

Although Norwegian legislation does not directly regulate the employer`s right to lay off employees, certain rules has arisen from practice and the Main Agreement between LO and NHO. Case law recognizes that lay-offs may also be used when the employer is not covered by a collective bargaining agreement.

Even if an employer must also show good cause in the event of a lay-off, the burden is not as heavy as it is for dismissal. Still, the employer must act reasonably in evaluating who should be laid off. An obligation to notify the Labour and Welfare Service may also apply.

Notice of the lay-off should be given to employees in writing. The notice period is 14 days, except in ‘exceptional’ cases (ie, natural disasters and ‘acts of God’). The notice letter shall state the reason for the lay-off and the assumed duration. If it is not possible to predict the duration of the lay-off, the continuation of the lay-off must be discussed within a month, and each month thereafter unless otherwise agreed. If the employees have no representative the discussions should take place with the affected employees. The employer must continually evaluate whether the conditions for lay-off are still present.

Main changes
In addition to the notice period, employees are entitled to uphold their pay for a period after the lay-off takes effect. According to the Act On the Obligation to Pay Wages During Lay-Offs, the employer earlier was entitled to pay full salary only for the first 5 days of a lay off. The act has been amended on this point from 2012. If the lay-off affects less that 40% of normal working hours, the employee at present is entitled to receive his or her salary from the employer for 10 days.

Further, the maximum duration for a layoff is from 2012 reduced from 52 weeks to 30 weeks, regardless of whether the employees are laid off part time or full time.

Subsequent to the maximum period during laid-offs which the employer is obliged to pay its employees’ salaries, the employee will receive daily unemployment benefits from the national insurance. Employees are from 2012 entitled to unemployment benefits provided that the working hours are reduced by more than 50 % (earlier a reduction by 40% was enough).

Heidi Grette

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