Overview of current temporary lay-off rules

Overview of current temporary lay-off rules

1. Introduction

Covid-19 has led to that many companies have experienced a reduction in the workload, and several companies have had to temporarily lay off employees for longer or shorter periods. Because the rules only to a small degree are legislated and there have been several temporary regulations since the outbreak of Covid-19, it can be difficult for employers and employees to get a good overview of the rules on temporary layoffs.

Temporary layoffs are regulated in collective agreements, including the Main Agreement between LO and NHO, which also provides guidelines for businesses that are not directly bound by collective agreements. In addition to the unwritten rules, and as a result of Covid-19, several new, temporary regulations have been introduced that regulate certain special issues.

Below is a review of the key terms and procedural rules related to temporary layoff, including an overview of what the current rules are, and which rules that have been proposed to be changed.

2. What is temporary lay-off?

Lay-off means that the employer and employee are temporarily deprived of their duties and rights in the employment relationship. The employment relationship exists, but the obligation to pay wages for the employer and the obligation for the employee to perform work for the employer temporarily ceases.

3. Terms for temporary lay-off

In order for an employer to be able to lay off employees, there must be a "justifiable reason" for the temporary lay-off, cf. the Main Agreement § 7-1 no. 1. This means that the employer must conclude that the company, for a limited period, cannot employ the employee in a way that is justifiable and proper for the company.

Temporary lay-off is relevant in cases where the company has a reduced need for labour. The prerequisite for temporary lay-off is that the need is considered temporary. If there is reason to believe that the conditions that justify reduced staffing will persist, the employee must instead be terminated through a downsizing justified by the company's circumstances.

4. Discussions with employee representatives

Before the temporary lay-off is implemented, the employer must discuss possible temporary lay-offs with the employee representatives, cf. the Main Agreement § 7-2. In the discussions, it should be considered whether there is an opportunity for implementing other measures. It should also be considered whether terminations should be implemented instead of temporary layoffs.

If the employer is not able to state the probable length of the temporary lay-off, the employer must continuously assess and discuss with employee representatives whether there is still a "justifiable reason" for the temporary lay-off. These new discussions must take place within one month after the temporary lay-off, and thereafter every month, if the parties do not agree on anything else, cf. the Main Agreement § 7-4 no. 3.

For companies that are not bound by a collective agreement, there is no obligation to discuss the temporary lay-off in advance and along the way, unless the company has more than 50 employees. It may nevertheless make sense to discuss the temporary lay-off and evaluate the situation regularly in consultation with the employee representatives or other elected employee spokespersons. This reduces the risk that the courts will subsequently conclude that the conditions for continued temporary lay-off were not met.

The employer should document the content of the consultations with the employee representative/other elected employee spokespersons.

5. Selection

If the conditions for temporary lay-off are met, the employer must select which employees are to be temporarily laid off.

The employer must first decide on the sample circle, i.e., which part of the workforce is to be temporarily laid off. The starting point is that the selection circle is the entire company, but exceptions are conceivable - i.e., exceptions on the basis of how the shortage of work affects the company’s business.

Furthermore, the selection must take place on the basis of justifiable selection criteria. For companies that are bound by collective agreement, the selection shall be based on the seniority principle. Other criteria may also be important in the selection, cf. the Main Agreement § 7-1 no. 3.

For companies that are not bound by collective agreement, the same seniority principle does not apply. However, the selection in such companies must nevertheless be based on justifiable criteria such as the company's need for labour supply, the employee's qualifications and social conditions.

If the employer is to take employees fully or partially back to work during the temporary lay-off period, or increase the temporary lay-off rate, the employer must perform a new assessment of the selection.  

6. Notice period for temporary lay-off

Before employers temporarily lay off employees, the employer must give written notice of temporary lay-off, cf. the Main Agreement § 7-3. The main rule is 14 days’ notice. In the event of unforeseen events, two days' notice may be given. The notice deadlines also apply to companies that are not bound by a collective agreement. If the employer is to temporarily lay off more than 10 employees, the employer must also give written notice of temporary lay-off to NAV.

What may be considered as an unforeseen event must be considered and assessed specifically. In March 2020, several employers gave two days' notice, due to a sudden reduction in demand for work due to Covid-19. Now that we have been living with Covid-19 for almost a year, Covid-19 will not in itself be considered an unforeseen event anymore.

However, it is conceivable that new and stricter restrictions could be considered as an unforeseen event, i.e., an order to close stores for a specific period. NAV will be able to review whether there is a basis for a shortened notification period.

The employer must issue a temporary lay-off certificate to those who are temporarily laid off. The certificate must state the reason for, and the probable length of the temporary lay-off. The temporary lay-off notice can be used as a temporary lay-off certificate if the conditions are met.

7. Must a new notice be given in the event of new or extended temporary lay-off?

After the employer has temporarily laid off employees, it may in some instances be necessary to submit a new notice of temporary lay-off.

There may be a need for a new notice of temporary lay-off if the employer has specified a time limit for the temporary lay-off. In such cases, a new notice will be required submitted before the first temporary lay-off period expires. The employer does not have to pay wages to the employee (employer period) in the event of extended temporary lay-off.

Another situation that may give rise to a need for new notice is if the employer has reduced the employee's temporary lay-off rate for a period but wishes to extend the temporary lay-off rate again later. The employer must then send a new notice before the temporary lay-off rate can be extended again. The employer will not have to pay a new employer period in such an extension.

A final alternative that may give rise to a need for new notice is if the employer takes the employee back to work in a full-time position for more than 6 weeks, cf. the Main Agreement § 7-3. If the employer wishes to temporarily lay- off the employee after this period, the employer must send a new notice and pay new salary in a new employer period.

8. Employer period I and II

After the notice of temporary lay-off has expired and the temporary lay-off takes effect, there is an  employer period where the employer must pay wages to the employee. Before Covid-19, the employer period was 15 days. Following the outbreak of Covid-19, the employer period was reduced to two days for some time, before being increased again to 10 days on 1st September 2020. This 10 days employer period still applies today.

After the employer has temporarily laid off employees for 30 weeks, a new employer period of 5 days will apply. This new employer period II will in principle enter into force on 1st March 2021, but the Government has proposed postponing the entry into force of employer period II until 1st June 2021.

9. Duration of temporary lay-off

At the beginning of Covid-19, the temporary lay-off period was limited to 26 weeks. On 1st November 2020, the temporary lay-off period was extended to 52 weeks. In January 2021, the Parliament asked the Government to extend the maximum redundancy period until 1st October 2021.

10. Wage support as an alternative to temporary lay-off

In the summer of 2020, the Government introduced wage support as an alternative to temporary lay-off. This was done in order to get more employees back to work. As of today, and until 1st March 2021, employers can apply for wage support for October, November and December 2020. In order to be granted wage support, the company must have had a fall in turnover of at least 10%. Moreover, the employer must also have had temporarily laid off employees since 31 August 2020.

Furthermore, it is required that the employee returns to at least the same job percentage as before the temporary lay-off, and that the employee can work in the same job percentage until 1st February 2021. The employer cannot temporarily lay off other employees at the same time as they choose to take back temporarily laid off employees with wage support.

11. Requirements for being able to receive unemployment benefits during temporary lay-off

The requirements for being able to receive unemployment benefits have been changed several times after the outbreak of Covid-19.

The requirement for reduced working hours in order to be entitled to unemployment benefits was 50% before the outbreak of Covid-19. After Covid-19, the requirement was reduced to 40% before it was raised again to 50% on 1st November 2020. In January 2021, the Government proposed lowering the requirement to 40% until and including 30 June 2020.

The income limit for being entitled to unemployment benefits has - before the outbreak of Covid-19 - been 1.5 G (NOK 152,026.50) in the last 12 months, or 3 G (NOK 304,053) in the last 36 months. After the outbreak of Covid-19, the limit was lowered for a period to 0.75 G (NOK 76,013.25) in the last 12 months or 2.25 G (NOK 253,377.50) in the last 36 months. On 1st November 2020, the limit was set at 1.5 and 3 G again, but in January 2021 the Government has proposed to reintroduce the level of 0.75 G and 2.25 G.

The rate for unemployment benefits has - before Covid-19 - been 62.4% of the salary basis up to 6 G (NOK 608,106). Following the outbreak of Covid-19, the rate for unemployment benefits went up to 80% of income below 3G, and 62.4% of income between 3G and 6 G. This rate has been extended several times, and currently applies until 1st July 2021.

Before Covid-19, there has been a waiting period of three days to be entitled to unemployment benefits. Following the outbreak of Covid-19, the waiting period was temporarily repealed. The repeal has been extended several times and is currently valid until 1st October 2021.

The temporarily laid off and the unemployed have previously had a limited opportunity to combine unemployment benefits with education and training. Following the outbreak of Covid-19, students can combine education and training. This scheme is currently valid until 30 June 2021. If the students receive support from Lånekassen (The Loan Fund) in addition, NAV must approve the education in order for the students to be able to receive unemployment benefits.

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