Personal liability for unlawful termination

Personal liability for unlawful termination

In 2015, the ownership of a mountain hotel was transferred to new owners, and the hotel was used as temporary shelter for asylum seekers. The hotel’s chef was terminated from his position. The question in the case was whether the chef could hold A, who had been active in the company’s operations, and B, who was the chairman of the board, personally liable for damages, as the company was bankrupt. The Court of Appeal found that the chef had been subject to an unlawful termination. The Court divided themselves into a majority and a minority regarding the question of liability. The majority found that A and were both liable for damages due to the unlawful termination.

The legal situation

An employee who has been subject to an unlawful termination may claim damages from the employer in accordance with the Norwegian Working Environment Act. The starting point in Norwegian law is that the creditor may only seek coverage for his claim in the company’s assets. This applies correspondingly to claims that have arisen in employment.

The question before the court was whether A and B could be held personally responsible for damages. The court considered the following rules as the basis for establishing such responsibility:

  • The Norwegian Private Limited Liability Companies Act section 17-1, which states that the general manager, board members or shareholders may be held liable for any damage which they, in the capacity mentioned, have caused intentionally or negligently.
  • The general rule of non-statutory liability for intentional or negligent acts, under which the wrongdoer becomes liable for foreseeable losses arising from the act.

This general rule of non-statutory liability for intentional or negligent acts entails that wrongdoer can be blamed for his/her actions or omissions. The court had to consider whether A and B had acted negligently upon the termination of the chef, which gives rise to liability for damages.

The court’s decision

A had no formal roles in the company, but was nevertheless held liable with reference to the general rule of non-statutory liability for negligent acts. The majority emphasized the following facts in their assessment:

  • A had an important role in the transfer of the hotel, and in the negotiations with the Norwegian Directorate of Immigration (UDI) regarding accommodation of asylum seekers.
  • A had acted fraudulently towards the bank which sold the hotel. Upon request by the bank, A confirmed that they did not intend to use the hotel as temporary accommodation for asylum seekers. In the meantime, A negotiated with UDI with the purpose of reaching an agreement of such temporary accommodation.
  • The secrecy and the fact that the transfer and the establishment of the hotel as accommodation for asylum seekers happened quickly made it impossible to protect the employees’ rights in a sufficient manner.
  • The court found that A, through ownership in other companies, had a significant personal interest in the hotel’s operations.
  • A was aware of the hotel’s weak financial position, and he had been familiar with the fact that it was possible that the chef would be unable to recover his losses from the company.
  • The chef had protection as an employee.

The chairman of the board, B, was held liable for damages on the basis of the Norwegian Private Limited Liability Companies Act section 17-1. The conclusion was based on the following facts:

  • B was familiar with A’s actions, and was also involved in the correspondence with the bank.
  • B’s 100%-owned company was the buyer of the hotel, and B was familiar with the problems related to the employees when he entered the position as chairman of the board.
  • As the chairman of the board, B should have engaged himself in maintaining the chef’s rights.

After an individual assessment, the minority found that neither A or B could be held responsible for the losses the chef had incurred as a result of the unlawful termination.

The judgment is not currently legally enforceable.

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