Dismissals – a guide to foreign employers and employees

1. Dismissal with notice – what is it?

A dismissal with notice is a unilateral decision from the employer to end an employment relationship at the end of the agreed notice period. It differs from summary dismissals where employment is terminated with immediate effect.

Employees who believe themselves unlawfully dismissed may contest the dismissal within the deadlines set out in the Norwegian Working Environment Act. The deadlines are described below. The terminated employee can choose whether to claim:

1. Invalidity of the dismissal and compensation / damages.
2. Compensation / damages only.

1.1. Unlawful dismissal – invalidity and / or damages

Invalidity means that the dismissal is considered without effect. It is then deemed void, so that the employee, as a clear general rule, is entitled to continue in his or her position. In addition to getting the position back, the employee is entitled to compensation for suffered financial loss and redress for non-economic loss. The main economic loss would be loss of wages if the employee has withdrawn. Redress comes in addition. The employee is also entitled to reimbursement of legal costs.

It is often the case that the employee does not want his or her position back, but merely a compensation for incurred financial loss. An employee may choose to settle for a claim for damages and is thus not obliged to claim that the dismissal is invalid.

When invalidity of the dismissal is not sought, damages will include both loss of salary up to the time of court’s decision, as well as estimated loss on income going forward. Future wage losses must be assessed specifically, and the courts have accepted compensation for lost wages for up to 2 years. In addition, the employee is entitled to redress.

1.2. When is the termination legal?

In order for a termination to be deemed legal, it must be deemed justifiable due to circumstances relating to the:

1. Employee
2. Employer / undertaking (for instance redundancy / downsizing)

When it comes to justifiable cause, it has been established by the courts that the employer must have strong reasons, as the threshold for termination is high.

What will deem the termination justifiable depends on the circumstances that form the basis for the dismissal, see item 1.3 and 1.4 below.

For example, the threshold for termination is considerably lower in cases of embezzlement or financial infidelity than in a case of inadequate work performance. The assessment, both factual and legal, and the required evidence also differ.

1.3. Termination justified by employer’s circumstances – downsizing

Dismissal due to circumstances relating to the employer is often referred to as downsizing. We have written extensively on the subject:

• In section 18 in our overview of Norwegian employment law.
• In section 12.2 in our brief guide to Norwegian employment law

In general, in redundancy situations, the Working Environment Act and the requirement of justifiable cause stipulate the requirements for the employer’s:

1. decision to cut staffing and downsize
2. area of selection (whole or certain parts of the undertaking) as well as selection criteria for redundancy (for instance seniority, competence, applicability, interpersonal skills or usefulness for the employer going forward)
3. selection of employees for redundancy in accordance with the laid-out criteria
4. possibility to offer other suitable, vacant work within the company, given that such exist, and that the employee is qualified

1.4. Terminations justified by the employee’s circumstances

Terminations based on the employee’s circumstances may relate to the following circumstances:

1. Inadequate work performance
2. Disobedience or negligence of orders
3. Disloyalty
4. Uncooperativeness and harassment
5. Improper behaviour
6. Influence of alcohol during working hours, or drug addiction
7. Absenteeism
8. Long term illness beyond the protected period of 12 months

1.5. Automatically unlawful terminations

Some forms of dismissals are automatically illegal. The precondition is that the employee files a lawsuit within the deadlines set out in the Working Environment Act. This includes:

1. Verbal dismissal as well as dismissals that do not meet the requirements laid out in Section 15-4 of the Working Environment Act, that requires the dismissal to be in writing, that it contains information about both the right to demand negotiation and institute legal proceedings and the right to remain in one’s position, the time limits that apply for requesting negotiations, instituting legal proceedings or remaining in one’s post, and the name of the employer as appropriate defendant in the event of legal proceedings.
2. Dismissal on the grounds of absence due to sickness within the 12-month protected period from the employee became ill.
3. Dismissal as retaliation against whistleblowing.
4. Dismissals due to pregnancy or parental leave.
5. Partial dismissal and employer acting outside his so-called management prerogative (dismissal with an offer of suitable alternative employment)
6. Termination of temporary employment, where the temporary employment relationship is deemed illegal
7. Termination of a contractor relationship, where the contractor in fact is to be viewed as employed.
8. Dismissal justified in a so-called transfer of undertaking.

1.6. Dismissals that likelly will be deemed illegal

Some redundancies, as a rule, will most likely be considered illegal. These include:

1. Dismissals without a prior consolidation meeting as decreed by law
2. Dismissals based on erroneous facts
3. Concealed dismissals – for instance dismissals that in reality are based on other circumstances (terminations that are in fact due to other than stated reason)

2. Employee’s procedure for termination

2.1. Employees may require negotiations / negotiation meetings

An employee who wishes to claim that a dismissal with notice or summary dismissal is unlawful, may demand negotiations within 14 days of termination taking place.

An employee may furthermore demand that the employer – in writing – states the circumstances claimed as grounds for the dismissal. It is often advisable that the employee demands such reasoning in writing and thereafter demands negotiations.

In our article advice to employees in case of unfair dismissal, we have summarized advice for those with a dismissal case on their hands.

2.2. The employer must ensure that the negotiation meeting is carried out

If a claim for negotiations is put forth, the employer must ensure that a negotiation meeting is held. As part of the negotiation meeting, the employee typically puts forth the reasons he or she believes the dismissal to be unlawful. A negotiation meeting has the following outcome:

1. Employer maintains that the dismissal is lawful
2. Employer withdraws the dismissal
3. The parties reach an agreement through a severance agreement

2.3. The deadlines for litigation if agreement is not reached

If an agreement is not reached and the employer upholds the dismissal, the employee must file a lawsuit within certain deadlines. If these deadlines are exceeded, the dismissal will be deemed legal, even though it may originally have been illegal / unlawful.

As laid out by the Working Environment Act, the following deadlines apply for filing a lawsuit:

• A claim that the dismissal is invalid: 8 weeks from the conclusion of negotiations
• A claim for compensation only: 6 months after the end of the negotiations

If negotiations have not been held, the deadlines are calculated from when the dismissal was given.

2.4. The right to remain in a position

In the event of a dispute concerning whether an employment relationship has been legally terminated, the employee has a special right to stay in his / her position until the legality of the dismissal has been decided by the court.

The right to remain in a position means the employee’s continued work is unaffected by the termination. The employee is obliged to work and has the right to receive a salary during the period.

The right to remain in position is valid until a decision is reached in the case, or until the court decides that the conditions for remaining in position no longer apply. As a clear general rule, an employee may remain in their position if the dismissal is due to circumstances relating to the undertaking (downsizing).

The right to remain in position does not apply to:

1. Summary dismissals,
2. Dismissal during trial period and based on the specific rules that apply for dismissals during the trial period,
3. Disputes regarding illegal temporary employment, or
4. workers hired from temporary work agencies or other companies

3. Employer’s procedure for termination

The threshold for dismissal is high and the employer must have strong reasons. Therefore, before a dismissal is carried out, the employer should substantiate:

1. Whether there is a factual basis for dismissal, which may be proved
2. The further procedure / case processing required before dismissal is decided and carried out.

In general, requirements for verifiability and documentation form the basis of any dismissal. These are reviewed afterwards by the court. Many dismissals are rendered invalid as a result of negligent preparations, including the employer’s case work and documentation.

3.1. Preparation and re-examination of the factual basis for dismissal

The employer must substantiate a justifiable basis for a dismissal, meaning the employer must clarify the facts on which the dismissal was based and the assessments that led to dismissal.

The assessment topics and the basis differ but may nevertheless be summarized in this overview of terminations based on employees’ circumstances (cf. item 1.4 above).

For redundancies justified by downsizing, a lack of sufficient case processing as well as non-defensible selection for redundancy may result in the dismissal being viewed as unlawful. Whether or not the business should downsize, and the number of employees that has to be made redundant, is considered a business decision and is rarely re-examined by the courts.

3.2. Case processing and procedure

Requirements imposed on an employer’s case processing and procedure are reinforced in certain situations:

1. Dismissal due to discretionary assessments of the employee’s performance which cannot be substantiated on an objective basis. If, for instance, the dismissal is based on inadequate proactivity, interpersonal skills, independence etc. there are often stricter requirements for documentation, e.g. whether written warnings or so-called PIPs (performance improvement plans) have been issued.
2. Selection of employees for redundancy based on similar discretionary assessments as mentioned above, e.g. personal suitability, commercial understanding, interaction skills etc. To be given any weight, such criteria often require that this has been communicated to the employee before the redundancy process started.
3. Cases of mass redundancy place particular requirements to the case processing. This follows from EC legislation.
4. Dismissals of employees under special protection, e.g. due to illness or who have invoked whistleblower protection. Such dismissals require good documentation for the employer to be able to substantiate that the termination is not due to any of the protected circumstances.

4. Trial of validity of termination

4.1. Employee’s preparations and lawsuits in termination cases

It is always the employee who makes a case about the legality of the employer’s termination. We advise the employee to spend time on the subpoena, trying to make it as complete, convincing and good as possible.

It is more enlightening to have a unified and good presentation of the case than dividing the argument into several procedural briefs. The goal of the subpoena is to be convincing, and it is better done when argumentation and documentation are gathered and not spread across multiple documents.

The employer then has the burden of proof that the termination is factual. Furthermore, there are requirements for the employer’s case processing and that the assessments are verifiable. It is therefore particularly important to include provocations, i.e. requests for submission of documentation and assessments, as part of subpoenas from employees.

We have written an article with advice that touches on how the employee should proceed. It provides more comprehensive advice for workers who find themselves in a dismissal situation.

4.2. Employer’s response to employee’s lawsuit in termination cases

When a lawsuit has been filed by the employee, the employer may request negotiations, if such have not been held. The court case would be postponed until negotiations have been concluded. If the dismissal is clearly unjustifiable, the employer may also consider withdrawing the dismissal to limit their loss.

If the termination is maintained, the employer must prepare their defence. The employee’s subpoena should be read very carefully, so there is no doubt why the employee believes the termination to be unlawful and what submissions and evidence form the basis for this conclusion.

The employer should obtain and provide supplementary documentation and clarify in a convincing manner why the decision to dismiss the employee was both correct and factually sound. The employer should devote time to the defence pleading so their argument is consistent and concentrated and not provided “piece by piece” as part of several pleadings.

If an employee has invoked their right to remain in position, the employer should consider whether there are grounds for requesting the employee to leave their post while the court case progresses. The threshold is high, especially when it comes to downsizing, but sometimes it is not insurmountable.

4.3. The legal process up until the court decision

Most employment law cases are resolved out of court. If it does come to a legal process, many disputes are resolved by so-called court initiated mediation.

Regarding the time frame, most cases are decided in the district court within six months of a pleading being filed. Employment law cases are prioritized by the courts. If the case is resolved by mediation, even judicial mediation, the case will be completed earlier than the usual six months.

If the district court’s verdict is appealed, the appeal case will often be decided by the appeal court between one and 1.5 years after the appeal. This means a job protection case may last as long as two years, sometimes even longer. A few cases go all the way to the Supreme Court.

The legal process will also depend on whether the employee has invoked their right to remain in position as the case progresses. If so, the employment relationship continues, and the employee will work as normal and receive a salary as normal.

A legal process is both expensive and burdensome for those involved. Furthermore, litigation takes a lot of time for the involved parties and for many employers, non-measurable alternative costs may be significant. It is therefore often advisable to try and find amicable solutions, if possible.