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    Corona virus may give rights to temporary lay-offs

    There are constantly new reports about possible consequences of the corona virus (covid-19), including consequences for Norwegian companies. Some industries are particularly hard hit, like airlines and travel industry in general. But other companies, like those with commodity agreements from countries that have implemented quarantines for their factories, are also affected. When commodities are not delivered, Norwegian companies may be forced to shutdowns or curtailed operations. Other companies report that they have implemented quarantines for employees who have recently visited high-risk countries for corona virus, to protect other employees from possible infection. It is impossible to predict the complete extent of the pandemic.

    May the corona virus give access to temporary lay-offs?

    A question that arises in this connection is whether the corona virus situation gives Norwegian companies the access to lay off their employees. Lay-off is an instrument companies may use during temporary disruptions to the daily operations that is not caused by the employees. Lay-offs are a temporary solution where the employee is exempted from normal working duties, and the employer is partially exempt from their duty to pay salaries. The employment relationship continues, and it is a prerequisite that work stoppage is temporary.

    The rules for when lay-offs may be implemented is mainly unregulated by law, but follows from common law / tariff agreements; except for the duty of remuneration, which is pursuant to the Act on the obligation to pay wages during temporary redundancies. In principle, the same rules apply for introducing lay-offs, regardless of the reason for the temporary disruptions. A specific evaluation must therefore be made as to how the corona virus has affected the company, to establish whether the conditions for lay-offs have been fulfilled or not. In other words, the main point is how the situation affects the company’s activity, not the employees.

    The primary condition for lay-offs to be in accordance with the law, is that they are impartial. In accordance the principle of impartiality, it is a requirement that lay-offs are considered necessary for the company for a limited period because of shutdown or similar. Typical cases where lay-offs will be considered impartial is by temporary lack of orders and full stocks, where there is a need to reduce cost by way of reduced salaries or by complete or partial production stoppage due to lack of raw material. For companies experiencing these situations due to the corona virus, the requirement may be fulfilled.

    A situation that is less likely to fulfill the requirements for lay-offs will be cases where Norwegian companies on their own accord implement quarantines for employees after returning from high-risk areas, as a safety measure to protect other employees from the risk of infection. Most importantly, a self-imposed quarantine will not be considered a shutdown of the company. The quarantine is implemented to protect other employees, not the operation as such. Should the government impose extensive quarantine regulations that will affect the production substantially, it may be considered differently. If the quarantine leads to shutdown due to lack of essential personell, the requirement for lay-offs may exist. There must always be a specific evaluation in each individual case. Before lay-offs can be implemented, the issue ought to be discussed with the employee representatives in the company. This is not an absolute prerequisite, but such discussion could be expedient to uncover whether there are other possible solutions to the situation, and this will ensure an impartial decision, cf. the principle of impartiality.

    Lay-offs are only legal for a limited period, and in accordance with The basic agreement between the Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO), as a basic rule for no longer than 6 months. As soon as the consequences for the company are no longer present, the lay-offs must be revoked, as the requirements are no longer fulfilled.

    Warning regulations and duty of remuneration

    In general, employees must be warned 14 days before the employer implements lay-offs. The Norwegian Labour and Welfare organisation (NAV) reported 3 March 2020 that the exception; a warning duty of just two days, that is valid for «unforeseen events» such as natural disasters, may be applicable if the lay-offs are caused by consequences of the corona virus. If the abovementioned requirements for lay-offs have been fulfilled, the condition for using the shorter warning may also be fulfilled, but again, this must be given a specific evaluation in each individual case. It may be argued that – the more time that passes between the outbreak of the corona virus before the company is affected, the better premises there have been for the company to plan and prevent negative effects of the virus. The consequence may be that the case cannot be categorised as an unforeseen event. LO argues for this interpretation. There will always be a need to evaluate each individual case specifically in this connection to establish which warning regulations apply.

    As a main rule, the employer has a duty of remuneration for the first 15 days during lay-offs, cf. the Act on the obligation to pay wages during temporary redundancies, Section 3 first paragraph. This is the so-called employer-financed period 1. There are exemptions from this duty of remuneration, amongst others by shutdowns or curtailed production caused by «natural circumstances», cf. same section, second paragraph. NAV have made it clear that the condition is not applicable to lay-offs caused by the corona virus, without substantiating this any further. The employer organisation Virke seems to accept this evaluation with no further reasoning. Without delving further into the problem, the issue seems problematic.

    Final remarks

    If your company is affected negatively in some way or other because of the corona virus situation, it may be expedient to have an assessment on whether lay-offs can be implemented to ease the negative consequences this may have for your company.

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    Tonje Liavaag
    Partner | Advokat

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