Acquiring a Norwegian Company: How to Handle Employees and Employment Contracts During an Acquisition

Dalan Law Firm is a leading Norwegian law firm with strong expertise in employment, corporate, real estate and transaction law. Our lawyers regularly advise international clients, including on acquisitions, reorganisations, and cross-border business in Norway. For legal support, please contact us on chat, email (jervell@dalan.no or post@dalan.no) or by our contact form.

1. Before the deal – employment due diligence and documentation

Norwegian buyers and sellers are expected to maintain proper and up-to-date employment documentation.
A buyer should always conduct a targeted employment due diligence, focusing on both legal compliance and practical HR risk.

Unlike many jurisdictions, Norway has a cause-based employment protection system, not an at-will regime. Terminations must be objectively justified in accordance with Section 15-7 of the Working Environment Act, and employees enjoy extensive protection from dismissal, procedural and consultation rights. Poor documentation can therefore delay or prevent necessary restructuring after closing.

Key areas of review include:

• Employment contracts, job descriptions, and seniority levels – confirm that agreements meet statutory requirements and reflect actual duties and pay.
• Bonus schemes, pension and insurance obligations – verify written terms, accrued entitlements, and any unfunded liabilities.
• Pending disputes, absences, and redundancy processes – identify potential exposure to ongoing or future claims.
• Collective agreements and union representation – review applicable collective bargaining coverage and information- and consultation duties under Chapter 8 of the Working Environment Act.

For more information on Norwegian Employment law read our:

• Norwegian employment guide (thorough guide) – a comprehensive overview og key rules and procedures
• Norwegian employment law (short guide) – a concise summary for international companies and HR professionals

2. Employment due diligence – what a foreign buyer should look for

Foreign investors often underestimate the scope and complexity of Norwegian employment law. The due diligence process should therefore identify both legal and cultural risks that may impact valuation, post-closing integration, or ongoing employment costs.

We have written a general guide on purchase and sale og business entities in Norway here.

Key areas of focus include:

1. Employment protection and termination rights: Norway applies a cause-based system, not employment-at-will. An employee may only be dismissed if the employer can demonstrate fair and objective grounds (so-called justifiable cause), and procedural rules (including a prior consultation meeting) are strictly enforced.
   For detailed overview of Norwegian regulation on dismissal and redundancy, see Dalan’s guide on Norwegian employment law chapter 16 – 21.
2. Employment contracts and compliance:  Ensure that written employment agreements meet statutory requirements and reflect the employee’s actual role, salary, and working time. Deviations or “silent practices” (e.g. informal benefits or bonuses) can lead to post-closing claims. For detailed explanation of Norwegian employment law, see Dalan’s full guide chapter 3 – 4.
3. Bonus and variable pay structures: Check whether bonuses are contractual or discretionary. Norwegian courts frequently interpret unclear wording in favour of the employee, so past practice matters as much as formal policy. For detailed explanation of, see Dalan’s full guide chapter 3 – 4 and 7 – 8.
4. Working time, overtime, and flexibility: Confirm compliance with Norwegian working-time limits, including registration of hours and compensation for overtime, which are strictly regulated and closely enforced. For detailed explanation, see Dalan’s full guide chapter 6.
5. Pension, insurance, and other benefit: Review both mandatory occupational pension schemes (OTP) and any supplementary pension or insurance arrangements for key staff. Unfunded liabilities or historic under-payments can materially affect the transaction.
6. Collective bargaining and employee representation: Identify whether the company is bound by a collective agreement, and whether employee representatives or unions are active. This determines consultation duties under Chapter 8 of the Working Environment Act and affects restructuring flexibility after closing.
7. Ongoing disputes and whistleblowing cases: Map any pending or threatened claims relating to unfair dismissal, discrimination, harassment, or whistleblowing.
   Such claims can delay the transaction or trigger warranty breaches after closing. For detailed explanation of Norwegian termination law, see our article on whistleblowing.
8. Key personnel and retention risk: Assess whether key employees have stay-on bonuses, or restrictive covenants. These may require renegotiation before closing.
9. Temporary employment and use of consultants: Norwegian law strictly limits the use of temporary employment and independent contractors. Temporary hires are only permitted under specific statutory grounds (for example, to replace an employee on leave or to meet a temporary workload increase). Improper classification of workers as consultants or freelancers can result in employment status being reclassified by the courts, exposing the buyer to retroactive salary, pension, and holiday pay liabilities.
10. Non-compete and non-solicitation clauses: Post-employment restrictions are closely regulated in Norway. Non-compete clauses must be , and cannot exceed 12 months after termination. Employers must provide during the restricted period (at least 100% of salary for the first six months, and 70% thereafter).

3. Transaction structure

3.1 SPA or APA and employment transfer

The treatment of employees during an acquisition depends on whether the deal is structured as a share purchase (SPA) or an asset purchase (APA).

1. Share purchase:
   The employing entity remains the same – only ownership of the shares changes. All employment relationships, contracts, and obligations continue automatically.
   Buyers should, however, confirm that all key employees are properly employed by the target company itself (and not by another group entity or management company)
2. Asset purchase:
   In an APA, the buyer acquires part or all of the business assets. If this constitutes a transfer of undertaking under Chapter 16 of the Norwegian Working Environment Act, employees are automatically transferred to the buyer on existing terms.
   Both seller and buyer have joint and several liability for employment-related obligations that arose before the transfer date.

3.2 Documentation and warranties

Employment-related clauses are usually included in the SPA or APA, covering:

1. Transfer of employees and liabilities (incl. accrued holiday pay, bonuses, and pensions).
2. Seller’s warranties on compliance with employment law and absence of disputes.
3. Indemnities for any breaches or claims arising from pre-closing events.
4. Confirmation that all information and consultation duties have been fulfilled under Chapter 16.

Legal tip: Always reconcile the employment schedules in the SPA/APA with payroll and tax data (A-melding) to avoid post-closing disputes. Hidden liabilities such as unpaid overtime or misclassified consultants are common in Norwegian transactions.

3.3 Shareholders’ agreements and transition service arrangements for key management

In Norwegian private-company transactions, the treatment of management and key shareholders is often formalised through two additional agreements:

1. a shareholders’ agreement, and
2. a transition or management service agreement.

Shareholders’ agreement (aksjonæravtale)

Where the selling management retains a minority stake post-closing, or the buyer wants to ensure continuity, a shareholders’ agreement regulates the parties’ rights and obligations as co-owners.
Key provisions typically cover:

• Governance and board representation – ensuring the new owner’s control while allowing management participation.
• Transfer restrictions (lock-up, right of first refusal, tag-along/drag-along clauses).
• Exit mechanisms and valuation formulas for buy-back of management shares.
• Good-leaver / bad-leaver provisions linking ownership to continued employment.

Such clauses must be carefully drafted to comply with Norwegian mandatory employment law. In particular, “bad-leaver” clauses that penalise termination may be considered invalid if they effectively restrict an employee’s statutory right to resign.

Transition or management service agreements

When former owners or executives stay on temporarily after closing to ensure continuity, a separate transition service or consultancy agreement should define:

• Duration and scope of services (typically 6–12 months).
• Compensation structure (fixed fee, success bonus, or hourly rate).
• Reporting and confidentiality obligations.
• Non-compete and non-solicitation clauses compliant with Chapter 14A of the Working Environment Act.

Such agreements help preserve operational knowledge and reassure customers and employees during the integration phase. They must, however, clearly distinguish between employment and independent consultancy to avoid reclassification risk under Norwegian law.

Legal tip: If management remains as minority shareholders, align all three instruments — the SPA, shareholders’ agreement, and employment/consultancy contracts — so that rights and obligations are consistent and enforceable under Norwegian law.

4. Workforce changes and harmonisation after acquisition

Post-acquisition integration is often the most complex part of an M&A transaction.
Even after the deal is closed, the buyer must align employment terms, roles, and internal structures without breaching Norwegian labour law.

Norwegian law provides strong protection against unilateral changes to an employee’s role, salary, or working conditions – a concept known as the employer’s managerial prerogative (“styringsrett”).

Key principles to consider include:

4.1 Scope of the employer’s managerial prerogative:

Under Norwegian law, the employer’s managerial prerogative (“styringsrett”) allows reasonable changes to an employee’s duties, reporting lines, and organisation. However, this right is limited by law, collective agreements, the employment contract, and general principles of fairness and proper procedure. Employers must base changes on objective and legitimate grounds, and ensure that decisions are neither arbitrary nor discriminatory.

Substantial changes to an employee’s role, pay, or working conditions fall outside this prerogative and require either the employee’s consent or a formal notice of termination (“change termination”).

4.2 Restructuring and redundancy

Any reorganisation involving potential redundancies must follow the statutory process under the Working Environment Act, Chapter 15. Employers must follow strict procedural rules and document the business rationale, and assess alternatives before issuing notice.

Under Norwegian law, dismissals must satisfy two levels of justification:

• General justification – the restructuring must be based on legitimate business, organisational, or economic reasons, not arbitrary or pretextual grounds.
• Individual justification – the selection of employees for redundancy must be fair, objective, and verifiable, taking into account competence, seniority, and the employer’s operational needs.

In addition, the employer must:

• consider redeployment obligations, offering any suitable alternative position within the company or corporate group before dismissal, and
• respect statutory re-employment rights (“fortrinnsrett”), giving dismissed employees priority for new comparable positions for up to one year after termination.

4.3 Collective and individual consultation duties

Before implementing major structural or staffing changes, Norwegian employers must inform and consult with employees and unions in accordance with Chapters 8 and 16 of the Working Environment Act. This includes formal meetings with representatives, documentation of alternatives, and (where relevant) individual discussions with each affected employee.

4.4 Temporary changes and harmonisation of benefits

Harmonising salary levels, bonus structures, or working-time arrangements after an acquisition is permissible only if based on objective business needs and carried out through proper procedure. “Levelling down” benefits or pay to achieve uniformity can easily be challenged unless negotiated with employees or their unions. It must also be done within the scope of employer’s managerial prerogative.

4.5 Retention measures and stay-on bonuses

To maintain stability post-acquisition, buyers may offer stay-on bonuses or retention packages for key employees. Such arrangements are valid under Norwegian law, provided that they do not restrict the employee’s statutory right to resign with notice.
Clauses that effectively bind employees beyond the notice period may be considered unlawful non-competes.

4.6 Non-compete and confidentiality obligations

If new contracts are issued as part of harmonisation, all non-compete clauses must comply with the statutory rules on scope, duration, and compensation, see above. Employers must also issue a written statement confirming enforcement within four weeks of termination.

5. Transfer of undertaking – Chapter 16 of the Working Environment Act

When a transaction qualifies as a transfer of undertaking under Chapter 16 of the Working Environment Act, employees are automatically transferred to the new employer on existing terms and conditions.

Key consequences include:

• All employees assigned to the transferred business follow automatically to the buyer.
• Terms of employment (salary, benefits, seniority, vacation, etc.) remain unchanged with certain exceptions
• The transfer itself cannot justify dismissal.
• Both seller and buyer are jointly liable for obligations accrued before the transfer date.

The buyer therefore inherits not only the workforce but also accrued benefits and liabilities.
Both parties must inform and consult employees or their representatives about the transfer, its reasons, and its legal and practical effects.

Legal tip: Even partial asset transfers can qualify as a transfer of undertaking if the activity continues in an organised form. Always assess this early to avoid unexpected automatic transfers.

6. Key takeaways and contact

• Norwegian employment law is strictly cause-based – not at-will.
• Employee rights and consultation duties follow the company, regardless of ownership changes.
• Poor HR handling can reduce deal value or trigger warranty claims.
• Early legal planning and clear documentation are essential to avoid post-closing disputes.

Contact Dalan Law Firm

Dalan Law Firm is a full-service Norwegian law firm with particular expertise in employment, corporate, real estate, and transaction law.

Our lawyers regularly advise international clients on acquisitions, reorganisations, and cross-border business in Norway.

📩 For legal support, contact us at:

• Email: post@dalan.no or jervell@dalan.no
• Chat or contact form at www.dalan.no

You may also contact the article’s author, Svein Steinfeld Jervell, directly at jervell@dalan.no.
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