Dismissals and Termination of Employment in Norway

Legal information about notice periods, severance pay, summary dismissals, grounds for termination and more.

1. Dismissal of employees

1.1 Reasons for dismissal

Under statutory Norwegian law, an employee is protected against termination without “just cause”. Such just cause may be related to the enterprise or the employee. 

The specific situations forming such “just cause” is not stipulated in the legislation. Case-law provides guidance on the threshold and criteria for certain situations.

Termination of employment due to circumstances relating to the enterprise (e.g. redundancy) will in most cases be considered justifiable if it can be established that there is a long-term need for the enterprise to curtail operations, rationalise, restructure, or take similar actions. Case-law has detailed further rules on the execution of the rationalisation processes that should be carefully observed before a decision on reorganisation/down-sizing is made and implemented.

Termination of employment due to the employee’s circumstances must be based on the employee’s breach of contract or duties. In essence, each individual employee’s situation needs to be considered and weighed against the employer’s situation. The threshold for termination based on the employee’s circumstances is high and the employer needs to document objectively justifiable reasons for the dismissal.

1.2 Form

The notice of dismissal needs to be in writing and must be handed over to the employee personally or sent by registered mail. The notice shall include information on the right to dispute the validity of the termination of employment, and additional information regarding:

  • the right to demand a negotiation meeting with the employer;
  • the right to remain in one’s post after the end of the notice period until a final ruling is made by a court;
  • the right to claim compensation for damages;
  • any preferential right if made redundant; and
  • within what time period the various claims must be made against the employer or lodged in court by the employee.

1.3 Notice period

The minimum length of notice for both the employer and employee is one month. However, most employment agreements in Norway typically specify a mutual notice period of three months. For employees with a probation period in their contract, the minimum notice period is 14 days during the probation period.

Furthermore, a longer notice period may follow from statutory rules, based on age and seniority:

  • Employees employed for at least five consecutive years – at least two months’ notice;
  • Employees employed for at least ten consecutive years – at least three months’ notice;
  • Employees employed for at least ten consecutive years and who are over 50 years of age – at least four months’ notice;
  • Employees employed for at least ten consecutive years and who are over 55 years of age – at least five months’ notice; and
  • Employees employed for at least ten consecutive years and who are over 60 years of age – at least six months’ notice.

1.4 Involvement of employee representatives

Through case-law and major collective agreements, a requirement has developed for an information and consultation process involving elected employee representatives prior to the decision to reorganise/downsize a company. There is no mandatory requirement to inform and consult with employee representatives unless: 

  • ten employees or more are to have their employment terminated; 
  • the company is bound by collective wage agreements; or 
  • the company has more than 50 employees. 

However, the court will always intensify the test of the “just cause” if a redundancy process was not subject to consultations before the decision was made.

The selection of each employee to be dismissed needs to be based on a selection process. A selection circle and selection criteria must be established, upon consultation with employee representatives. In the individual consultation meeting that always needs to be held before the decision on termination is made, the individual employee is entitled to assistance from his/her employee representative (or a different advisor).

1.5 Involvement of a union

Involvement of a union is not regulated under statutory law (with the exception of what is set out above) but can be mandatory according to a collective agreement. 

1.6 Approval of state authorities necessary

No approval from authorities is required when terminating employment. However, the Norwegian Labour and Welfare Organisation must be notified if ten or more employees are affected by a redundancy process (including severance agreements).

1.7 Collective redundancies

Under statutory law, collective redundancies mean termination of ten or more employment relationships within a period of 30 days due to circumstances related to the entity (including severance agreements). 

An employer contemplating collective redundancies shall at the earliest opportunity enter into consultations with the employees’ representatives. Employers are further obligated to give the employee representatives all relevant information in writing. This information shall also be submitted to the Labour and Welfare Service. Collective redundancies will not be effective earlier than 30 days after the Labour and Welfare Service has been notified. The Labour and Welfare Service may extend this period of notice. 

1.8 Summary dismissals

Summary dismissal is only permitted if the employee has committed a gross breach of contract/duties. Examples of breaches that may constitute grounds for summary dismissal are severe insubordination, the flouting of safety requirements, illegitimate absence for a period of time, embezzlement or any similarly serious situation.

1.9 Consequences if requirements are not met

If the employer does not comply with the procedural rules, or if the termination does not reach the legal standard of “just cause”, the court may rule that the employment continues. Additionally, the employee may claim compensation for his/her economic and non-economic losses.

1.10 Severance pay

There are no statutory provisions entitling employees to severance pay upon termination. The employees are entitled to work in their notice period, and receive pay as per usual. 

However, the parties are free to enter into severance agreements. Employers tend to enter into such agreements as an alternative to starting a termination process, or if an employee disputes a termination. Such agreements normally offer the employee either garden leave or economic compensation, or a combination of these elements. In return, the employee waives his/her legal right to dispute the termination.

1.11 Non-competition clauses

Under Norwegian law, it is possible to restrict or limit an employee’s freedom to take up a position with a new employer or to commence, operate or participate in other undertakings following the termination of employment. In order to do so, the employer and employee must have agreed upon a non-compete clause in writing before the termination. Such a clause is often included in the employment agreement. However, a non-compete clause may only be invoked in so far as it is necessary to safeguard the employer’s particular need for protection against competition, and never for a period longer than 12 months following an employee's termination of employment.

The employer is obliged to give a written statement to the employee on whether and to what extent the non-compete clause will be invoked, detailing the employer’s particular need for protection. If this is not done within the timeframes set out below, the employee is not bound by the non-compete clause:

  • Within four weeks if the employee requests a written statement during the employment.
  • Within four weeks if the employee resigns.
  • Within two weeks if the employee is summary dismissed.
  • At the same time as the dismissal with notice is issued if the dismissal is due to circumstances relating to the employee.

If the non-compete clause is invoked, the employee is entitled to his/her salary for the duration of the non-compete period, if the salary is less than 8 G (G = the national insurance basic amount, approximately NOK 100,000). For salary above this threshold, the employee is entitled to at least 70% of his/her salary. The compensation may be limited to 12 G. The employer may furthermore reduce the salary by up to 50% if the employee receives other remuneration during the non-compete period.

Non-compete clauses can only be invoked if the employee resigns or is summarily dismissed or if the dismissal of the employee is objectively justified based on circumstances relating to the employee. A non-compete clause cannot be invoked if the employee is made redundant.

1.12 Miscellaneous

The decision to terminate an employment relationship needs to be based on sound evidence and ensuring just forms of procedure. This is inherent in the assessment of “just cause” and may singlehandedly form grounds of invalidity.

2. Dismissal of managing directors

2.1 Reasons for dismissal

Under Norwegian statutory law, the parties may agree in writing that the Managing Director (MD) waive the statutory rights of job protection against severance pay. This is regularly done, normally through the employment agreement. Such a waiver means that the Board of Directors may decide to terminate the MD’s employment without cause, and that the MD is put on garden leave from the date the Board of Directors decide.

If such an agreement has not been concluded, the MD will be protected against termination without just cause under the same statutory rules as all other employees. In such a case, he/she will have the same right to dispute the termination. However, due to the nature of the MD’s position and its importance to the entity, the requirements for MDs are normally stricter than for “regular” employees.

2.2 Form

If the MD has not agreed to waive his/her employment protection rights, the regular requirements on form applies, as stated above. If the MD has waived his/her rights, no particular requirements to form apply, unless otherwise agreed upon. However, as always, we recommend that the notification be issued in writing, and that the receipt be documented.

2.3 Notice period

If the MD has not agreed to waive his/her employment protection rights, the regular requirements on the notice period apply as stated above. If the MD has waived his/her rights, the Board of Directors may require the MD to resign with immediate effect, or at any other time they wish, unless otherwise agreed upon.

2.4 Involvement of employee representatives

If the MD has not agreed to waive his/her employment protection rights, the regular rules on employee representatives’ involvement apply. If the MD has waived his/her rights, the employee representatives may still assist the MD in the termination process, if he/she so wishes. However, it is quite unusual for this to happen.

2.5 Involvement of a union

Not applicable.

2.6 Approval of state authorities necessary

Not applicable.

2.7 Collective redundancies

Not applicable.

2.8 Summary dismissals

If the MD has agreed to waive his/her employment protection rights, the Board of Directors may require the MD to resign with immediate effect, against severance pay. However, if there are grounds for summary dismissal in accordance with statutory legislation, the Board of Directors may instead choose to invoke these rules. In such a case, the MD would not be entitled to severance pay (or payment during the notice period). 

2.9 Consequences if requirements are not met

If the MD has not agreed to waive his/her employment protection rights, and his/her employment is terminated based on statutory law, he/she may dispute the termination before the courts as per usual. This would entail an assessment of the legal threshold for a dismissal with or without notice, as well as the forms of procedure. If the termination is ruled invalid, the MD would be entitled to continued employment and may claim compensation for economic and non-economic damages. 

2.10 Severance pay

If the MD has agreed to waive his/her employment protection rights, this needs to be accompanied by a corresponding right to severance pay in order to be valid. The level of the severance pay is not detailed in the legislation and will normally depend on the size of the company, the competence of the MD, the industry level and other factors. 

If the MD has not entered into such an agreement, the parties may agree on a severance agreement, whereby the employment is terminated against severance pay.

2.11 Non-competition clauses

The MD may, in writing, waive his/her rights after statutory legislation in respect of restrictive covenants on competition, against severance pay. This is generally done in the employment agreement. This means that the obligations placed on the MD can go further than allowed for other employees, as well as freedom to agree on the compensation. Normally, the right to severance pay if the MD’s employment is terminated is seen as compensation for invoking the non-compete clauses as well. 

If the MD has not agreed to such a waiver in writing, the statutory rules on non-competition clauses apply. This includes the right to minimum compensation and the requirement of a written notice to trigger the non-compete, as outlined above.

2.12 Miscellaneous

Not applicable.