Judgment by the Supreme Court in the Norwegian-case

Judgment by the Supreme Court in the Norwegian-case

On 12 December 2018, The Norwegian Supreme court gave their judgment in the so-called “Norwegian-case”. The case concerned the question of whether a group of pilots and cabin crew employed in subsidiaries in the Norwegian group could claim employment in the parent company Norwegian Air Shuttle ASA (NAS) and the operating company Norwegian Air Norway AS (NAN) in addition to being employed by the subsidiaries, either on the basis of the rules on unlawful hiring in the Norwegian Working Environment Act (WEA) or employer responsibility based on special grounds.

Background

Originally, NAS was the only company in the Norwegian group, and the pilots and the cabin crew were previously employed by this company. Due to massive growth and international expansion, Norwegian needed to change the structure of the company.

Through a comprehensive reorganization process over several years, the company's airline operations were moved to several fully owned operating companies with air operator’s certificate. The idea was that the parent company would not have any operational activity in the future. Due to problems with obtaining the necessary certificates, some activity was nevertheless left in the parent company.

After a number of business transfers within the Norwegian group, the pilots and the cabin crew were employed in two different subsidiaries, which were to provide crew services to Norwegian’s airline operator companies.

NAS and NAN thus entered into agreements on the provision of pilot and cabin crew services with the subsidiaries. The essential question was whether this hire meant that the pilots and the cabin crew could claim employment in NAS. The pilots, but not the cabin crew, also demanded employment in NAN on the same basis. 

The Supreme Court’s decision

The Supreme Court unanimously gave judgment in favour of Norwegian, and the employees’ claims were therefore not accepted. The Supreme Court assessed employer responsibility on three alternative legal grounds:

1. Employer responsibility on the basis of unlawful hiring of employees

The Supreme Court first considered whether the business model of Norwegian was based on acquisition of services, or whether it was based on hire of employees. The Court found that the arrangement was based on acquisition of services. The court emphasized, inter alia, that the subsidiaries had managerial control - the agreement on the provision of pilot and cabin crew services implied an obligation to provide a complete service, and it was their responsibility that the crews were qualified. The subsidiaries further decided which pilots and members of the cabin crew who should constitute the flight crew on each flight, and they were also responsible for the result of the service.

2. Employer responsibility based on special grounds

The Supreme Court also considered whether the parent company had employer responsibility based on special grounds, i.e. because the company had acted as an employer and performed employer functions.

The Supreme Court found that the formal and economic aspects of the employment were clearly with the subsidiaries. The court thereafter considered whether the parent company nevertheless acted as employer for the pilots and the cabin crew, and stated that the threshold is high for placing employer’s responsibility elsewhere than on the company the employee is formally employed in.

The Supreme Court found that the parent company did not exercise employer functions other than to a very limited extent, and that it was difficult to have both a contractual relationship (acquisition of services) and employer responsibility. Thus, the parent company could not be considered as an employer next to its subsidiaries based on special grounds. 

3. Employer responsibility due to unlawful hiring in the period up to 1 September 2016

The Supreme Court ultimately assessed whether the parent company NAS and the operating company NAN had to be considered as employers because the employees had been unlawfully hired for a period until 1 September 2016.

The Supreme Court stated that the hiring was unlawful in this period.

The Court however found that it would be “clearly unreasonable” to give the pilots and the cabin crew permanent employment in the parent company, and for the pilots also in the operating company. This would create major problems for the group's operations. Further, NAS and NAN did not have the necessary resources to follow up the pilots and the cabin crew members - all of these functions were relocated to the subsidiaries, and nearly all operational activities were transferred out of the parent company.

 

What does the decision mean?

The decision provides guidance regarding the line between acquisition of services and hire of employees, employer responsibility based on special grounds and the right to employment in case of violation of the rules regarding hire of workforce.

The Supreme Court's decision implies that businesses can organize themselves out of employer responsibility, and has been criticized. The court emphasizes in the judgment that the threshold for placing employer responsibility elsewhere than where the employee is formally employed is high, and that the courts shall be careful to overrule the company's opinion of the appropriate organizational structure.

Expanding the concept of employer responsibility to other companies than the company employee is formally employed in is thus a task for the Norwegian legislators.

Homble Olsby advokatfirma as

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