The corona virus - from temporary layoff to termination

The corona virus - from temporary layoff to termination

Employers' various prospects after temporary layoffs:  Several employers have had to initiate layoffs in connection with the corona pandemic. A few months later, the employers are now in different positions.

Some employers have had the opportunity to resume operations or experience a gradual increase in activity, which means that the temporarily laid-off workers can return to work. More information about what employers need to consider when temporarily laid off workers return to work can be found in this article.

Other employers are in an inconclusive situation, where it is not clear whether the activity will increase or not. Employers' exemption from payroll obligations during temporary layoffs are basically limited to six months. Employers who initiated temporary layoffs in the winter will as a starting point have to take the temporarily laid-off workers back over the summer. The Government has therefore proposed to extend the scheme of unemployment benefit and the employer's exemption from payroll obligations during temporary layoffs until October 2020. The Government's proposal will be considered in Stortinget (Parliament) at the end of July. If the proposal is approved, this will give employers more time to recover from the pandemic and clarify the prospects for the future.

For other employers, the financial impact of the corona pandemic may be so extensive that they realize that the company's reduced need for staffing or the need for cost cuts will persist. Some companies may have had financial problems even before the corona pandemic or may experience reduced demand because of customers / consumers changing behaviour, for example through more e-commerce or changes in how they meet and travel. For these companies, it may be appropriate to take measures other than temporary layoffs, including workforce reductions.

When is it right to downsize instead of temporary layoff?

Employers with laid-off employees must continuously assess whether there is still a "justifiable reason" for the layoffs. For layoffs to be justifiable, the company's financial challenges or reduced staffing needs must be temporary. If the financial situation worsens, the prospects for the future looks bad or for other reasons the employer receives a permanently reduced need for staffing, there will no longer be a legal basis for layoffs. In this situation, the employer must consider other measures, including whether a workforce reduction is necessary.

Requirements to the workforce reduction process

There are strict form requirements for workforce reduction processes in the working life. The employer must be able to document that there is a justifiable reason for termination by workforce reduction pursuant to section 15-7 of the Working Environment Act, including that the employer has accomplished a proper process. The process should be well thought through and planned, with the involvement of employee representatives and information to the employees which ensures the employees insight and opportunity to influence the process. An orderly process will usually result in fewer conflicts and a smoother implementation.

Before the employer decides on workforce reductions, the employer should document the management's assessment of the need for cost-cutting measures and why this must be done by workforce reductions. The employer should obtain documentation about the company's financial position and consider other alternatives in consultation with employee representatives.

If workforce reduction is necessary, the employer should prepare a new organizational chart showing which positions will be in the company after the transition. The employer must furthermore determine the selection circle and selection criteria, i.e. the criteria to be used to determine which employees will be relevant candidates for termination.

When selecting employees who are to be downsized, it is important to note that it is not necessarily the temporarily laid off employees who will be downsized. Temporary layoffs have a more short-term perspective than workforce reductions and higher time pressure, and the employer is therefore somewhat freer to set selection criteria based on the company's current needs. In temporary layoffs, employers have been able to focus on maintaining the necessary operations and thus emphasized on retaining important functions.

In the event of workforce reductions, the employer must work more thoroughly and think more long-term. Employees' competence, experience and seniority will typically be justifiable selection criteria. Employers who are bound by collective wage agreements may be less able to deviate from the principle of seniority in workforce reductions than in temporary layoff processes. When downsizing, employers must also be more willing to provide training in new tasks.

As a starting point employers' duty to provide information and discuss workforce reductions with employee representatives only applies to mass redundancies with more than 10 employees, for employers who regularly employ at least 50 employees and according to certain collective wage agreements. However, for the sake of an orderly process, we recommend that the employer provide information and discuss the workforce reductions with employee representatives as far as possible even in cases where the employer is not obliged to do so.

After the workforce reduction is finally decided by the board, the company should provide information to all employees. The management must then - based on the selection criteria that have been decided – carry out the preliminary selection of which employees are at risk of losing their jobs, and which shall thus be called to individual discussion meetings in accordance with aml. § 15-1.

The parties shall discuss the employer's preliminary assessment of the employee, whether social conditions must be considered in the employer's decision, the possibility of relocation to other suitable work, etc. After a discussion meeting, the employer must consider the employee's comments and make a final decision on whether the employee should be terminated.

After termination by the employer

If the employer terminates a temporarily laid-off employee, the employer's duty of remuneration will re-enter during the notice period. The employer can therefore not avoid paying wages during the period of notice by temporary laying off the employee first. The employee has an obligation to work during the period of notice, but the parties can agree that the employee shall receive a salary without an obligation to work if the employer has no work to offer during the notice period.

Employees who claim to have been unlawfully terminated may require still standing in the position until legal proceedings concerning the termination is finally settled, or the parties have come up with an amicable solution.

If the employee has found a new job during the temporary layoff, the employee will be able to start a new job without being bound by the notice period. The employer will then not have to pay wages during the notice period. This rule basically only applies to working relationships under the Main Agreement, but since this is often an appropriate solution for the employer, the rule will probably also apply outside of collective bargaining.

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