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As a result of the corona virus outbreak, many businesses have seen themselves having to temporary lay-off all or part of their workforce. Other businesses are continuously assessing whether the decrease in workload will be so extensive that lay-offs must be effectuated. In this newsletter, we briefly describe the procedure and conditions that apply in the event of lay-offs, as well as the new amendments to the regulations on unemployment benefits during temporary lay-offs that came into force 20 March 2020.
Published the 23rd of March 2020
Temporary lay-off is an instrument for businesses that experience temporary operational difficulties. In the event of temporary lay-offs, the employee's obligation to perform work and the employer’s obligation to pay wages temporarily ceases.
The employer’s right to temporary lay off the employees is based on non-statutory law. However, regulations regarding lay-offs are generally laid down in collective bargaining agreements.
Temporary laying-off employees is permitted when valid reasons make this necessary for the company. Disruptions in operations that imply that employees cannot be employed in a financially sound manner, will generally give valid reason for laying off employees.
Companies that need to temporary downscale or shut down its operations due to operational problems caused by the corona virus outbreak may have valid reason for temporary laying off employees. The reason for downscaling or shutting down operations could be a result of, for example, orders by the authorities, delays in deliveries or decrease in orders and assignments. Temporary lay-offs may also be used if employees fall ill or are quarantined if this implies that other employees cannot be put to work in a financially sound manner.
The employer may lay off all or some of the employees of the company. In the event that only some of the employees are laid off, the selection must be based on objectively justified selection criteria. The Basic Agreement NHO-LO states that the selection shall be based on seniority, unless there is a due reason not to do so.
The employer must also consider whether the individual employee shall be fully or partly laid off. This assessment must also be objectively justified.
Consultations with employee representatives
Before a decision regarding lay-off is made, the employer shall, to the extent possible, discuss the measure with the employee representatives.
If necessary, consultations may take place over phone or skype. A protocol should be set up from the discussions. The protocol should include information regarding, among other things, the reason for the lay-offs, the notification deadline that is applied, the supposed length of the lay-off, and whether the parties agree on how to send the notification of lay-offs.
If ten or more employees are laid-off, the employer shall notify NAV. The form for such notice can be found on NAV’s website. NAV is currently working on setting up a digital solution for notice of mass lay-offs.
Notification of lay-offs
The employer must provide the employee with a written notification of the temporary lay-off. The notice period is 14 days. However, the employer may notify with two days’ notice if the lay-off is due to unforeseen events. Interruption in operations due to the corona virus outbreak may be regarded as an unforeseen even. For example, where businesses experience an immediate shortage of raw material supply, cancelled or postponed orders or where restaurants etc. are forced to completely or partially close due to recommendations\measures made by the authorities.
Note that the employer is obligated to make an individual assessment for each case regarding whether a two days’ notice is compliant. The employer must arrange for genuine consultations on this topic with the employees representatives.
The notice period starts at the end of the workday the notification is given, and is normally counted in calendar days.
The notice must be unconditional. However, it is possible to withdraw or post-pone an already given notice if lay-off is no longer necessary in the immediate future.
The notification should, as a minimum, contain the following information:
It may be convenient to notify employees by email.
Salary during lay-offs – unemployment benefits
The Norwegian Parliament recently passed new legislation in relation to salary/unemployment benefits during lay-offs which entered into force on 20 March 2020.
The employer is usually obligated to pay salary for the first 15 days of the temporary lay-off period. However, according to the legislative changes that entered into force 20 March 2020, the employer’s obligation to pay salary to the employee is now limited to two working days.
The legislative changes also apply to already implemented lay-offs. This means that if the employer has already laid off employees and paid wages for two or more days, the employer is not obligated to pay any more salary during the lay-off period.
After the end of the employer period, the Norwegian government will cover 18 days with full payment limited to NOK 599 148 (six times the Basic Amount- the Basic Amount currently being NOK 99 858).
After 18 days, the employee may be entitled to unemployment benefits of up to 80% of income up to three times the Basic Amount and 62.4% of income from three times the Basic Amount up to six times the Basic Amount. Partially laid off employees, may be entitled to graded unemployment benefits.
In order for the employee to be entitled to unemployment benefits, the employee must have had an income of 0.75 times the Basic Amount or more the last 12 months or 2.25 times the Basic Amount the last 36 months. In addition, there is no longer a three-day waiting period before the payment starts. This means that laid off employees will not have to go three days without income.
Finally, the employee’s work hours must be reduced with a minimum of 40% in order for the employee to be entitled to unemployment benefits. This way, full-time employees who is laid off two working days a week will be entitled to unemployment benefit.
Holiday must generally be taken as normal. However, the employer and employees may agree to reschedule the holiday in accordance with the provisions of the Holidays Act. Such agreement can also be made, after the lay-off notification is sent. The employer may also, to a certain extent impose the employee to take holidays during the lay-off period.
The Holiday Act applies to laid off employees. Planned holiday that fall during the lay-off period shall be taken as normal. After the notice of lay-off is sent, the employee and the employer may also agree that holiday is taken during the lay-off period. The employer may also unilaterally decide, within the framework of the Holidays Act, that holiday shall be taken during the lay-period. During holidays, the employee is not entitled to holiday pay and not unemployment benefits.
Lay-off is a temporary measure. The notification of lay-offs shall state the length of the lay-off period. According to The Basic Agreement NHO-LO, the lay-off period can last no longer than six months.
If the employer is not able to determine how long it is necessary to lay off the employee, the employer may decide that the lay-off period shall last until further notice. This will however trigger a duty to proceed with monthly consultations regarding the basis for further lay-offs.
The main rule
As a starting point, all employees can be laid off. However, employees may not be laid off if either the employer or the employee has given a notice of dismissal.
Employees who remain in their position in connection with a dispute regarding the lawfulness of a termination of their employment, may be laid off after the end of their notice period, provided that the basis for lay-off is not the same as the basis for the termination of their employment.
Laid off employees can terminate the employment with 14 days' notice regardless of the mutually agreed notice period. Employees who have been laid off for three months or more may terminate without notice if they are laid off until further notice. An employee who resigns while on leave will not be entitled to pay during the notice period to the extent the notice period falls within the lay-off period.
However, if the employer dismisses a laid-off employee, the employee will be entitled to salary during the agreed notice period.
Employees in quarantine can be laid off to the same extent as other employees. If an employee is quarantined due to illness, the rules for sick leave applies as usual.
Employees on sick leave
Employees on sick leave can be laid off. What benefits the employee is entitled to while laid off will depend on whether or not the sick leave occurred before the employee was laid off. The employer has no obligation to pay sickness benefits during lay-off.
Employees who were on sick leave before they were laid off may be entitled to sickness benefits from NAV. This applies even if the employer period of 16 days salary during sick leave has not expired at the time the employee is laid off. However, when the sick leave ends, the employer will be obligated to pay salary during the remainder of the employer period of 16 days. The employee may then be entitled to unemployment benefits.
Employees starting sick leave after being laid off is entitled to sickness benefits pursuant to the National Insurance Act's.
Employees on care leave
Employees on care leave may also be laid off. If laid off, they will no longer be entitled to care allowance, but will receive unemployment benefits in accordance with the aforementioned rules.
Please note that the advice in this newsletter may change depending on the development of the coronavirus and the actions of the health authorities and the government and the decisions of the national assembly. Everyone should stay up to date on developments by following information from the Norwegian Institute of Public Health and the Government. If you have any questions about how your business will handle measures related to the spread of the coronavirus, please contact our expert team: