In recent years, various Norwegian politicians and workers' organisations have raised the question of whether zero-hour employment contracts should be prohibited. A 'zero-hour' employment contract is a contract under which an employee:
- agrees to be available for work as and when required; and
- has no specific working hours or times.
Zero-hour contracts have been criticised, as affected employees have unpredictable working schedules and salaries and enjoy poor or no employment protection. These contracts are particularly controversial in Norway, which is generally known for its high level of employee protection.
Zero-hour contracts are typically used by staffing agencies – especially in the construction and building industry – whose employees are often offered full-time contracts with no guaranteed salary or hours. However, they are also common in other sectors, such as the healthcare, education, nightlife and media sectors, where employees are often hired as on-call staff or emergency substitutes.
In early 2017, a district court held that a formal agreement under which a staffing agency's full-time employees were not entitled to salary payments between assignments was illegal. Further, the government recently issued a discussion document outlining its proposal to include a definition of 'permanent employment' in the Working Environment Act and introduce new rules regarding the recruitment of employees through staffing agencies, which is intended to target zero-hour contracts.
This update examines the existing legislation and case law, as well as the government's proposed amendments.
The Working Environment Act allows for permanent and temporary employment contracts. The main rule under the act is that all employees should be hired on a permanent basis, unless certain specific and exhaustive conditions apply (Section 14-9). The most common conditions under which a temporary employment contract may be agreed are when the work is of a temporary nature or another employee requires a temporary replacement (ie, a substitute).
At present, the act contains no definition of 'permanent employment'. However, case law has set out minimum standards for the types of contract which might qualify as permanent employment contracts.
In 2005 the Supreme Court found that a permanent employment contract had, in reality, constituted an illegal temporary contract in the so-called 'Braaten case'. The employee in question had been hired for an indefinite period as an on-call employee, with a one-month notice period. Both the length of the employment and the working hours had been subject to the company's need for a workforce. The employee had been paid by the hour and had worked in a more or less full-time position. The employer claimed that the employee had been employed under a permanent contract, but without guaranteed hours and salary. However, the employee claimed that, in reality, he had been hired on a temporary basis, which was illegal.
The Supreme Court referred to the legislative reasons for having strict conditions for temporary employment contracts (ie, employees should have a reasonable level of security – including predictability – with regard to their employment). An employee who is offered work only when the employer needs or is willing to offer work is, in practice, far from a permanent employee with employment protection rights. In light of this, the court found that – even though the agreement had, according to its wording, been permanent and included a notice period – in practice, it circumvented the strict temporary employment conditions.
District court case
The aforementioned 2017 district court case followed the principles set out by the Supreme Court in 2005. The district court found that apparently permanent contracts which had been signed by six Polish construction workers were in fact illegal temporary contracts.
The six workers, who had been hired through a staffing agency, had not been entitled to receive wages between projects and argued that they had been repeatedly employed on a temporary basis for each project, which contravened the statutory temporary employment conditions. The staffing agency disputed this position, claiming that the model was well suited to the construction industry and had offered the employment protection rights required by law. Further, it argued that the employees had had the right to work whenever work was available and could not be dismissed without justifiable cause.
The district court stated that permanent employment contracts without a guaranteed salary may be regulated and practised in many different ways, and that the formal title or label is not decisive for whether a contract will be categorised as permanent or temporary. Further, the fact that the employees in this case had not been entitled to receive salary payments between projects did not necessarily mean that they had not had employment protection or predictability with respect to their working hours and salaries. In an assessment of whether the minimum standards for permanent employment are fulfilled, it is necessary to make a concrete evaluation of the employment contract and how the employment relationship is practised.
The court highlighted the fact that the staffing agency had offered the employees work for one week at a time, regardless of the length of its customers' projects. This practice represented an uncertainty and unpredictability regarding working hours, as referred to above. Further, the court emphasised that the employees had had less employment protection rights compared with permanent employees as:
- the company's practice meant that the employees had not had preferential rights to available work;
- the employment contract stated that the employment relationship would automatically end in the event that there was no contact between the agency and the employees for more than three months between projects; and
- the employees had not had the same rights as permanent employees with regard to sickness benefits and paid public holidays.
The employees were all awarded compensation and afforded permanent employment status, including a stated work percentage (ie, a minimum guaranteed salary).
According to the principles set out by the Supreme Court in 2005, a permanent employment contract must provide for minimum guaranteed work hours – and therefore a minimum guaranteed salary – in addition to employment protection rights. Further, whether a zero-hour contract qualifies as a permanent employment contract depends on an overall assessment of the contract and the employment relationship in question.
Based on the above, employers can – in practice – offer employees:
- a permanent employment contract, under which they have a minimum guaranteed number of working hours and salary; or
- a temporary employment contract, in case of individual work periods or projects, provided that the conditions set out in Section 14-9 of the Working Environment Act are met.
In early 2017 the government issued a discussion document in which it proposed new rules regarding staffing agencies. The proposal includes the following amendments:
- The Working Environment Act should be amended to include a definition of 'permanent employment', which provides that:
- an employment contract must be for an unlimited period;
- an employee's employment protection must be comprehensive; and
- an employee's workload or percentage of employment must be predictable.
- A new provision regarding temporary employees hired through staffing agencies should be added to the act, allowing such agencies to hire temporary employees to work as substitutes for their customers' employees in order to ensure the flexibility of such agencies.
- A quota for employees hired through staffing agencies should be introduced. The proposed quota is 10 to 15% of an employer's workforce, but this number is up for discussion.
To date, the bodies which have provided comments on the consultation agree, to a large extent, on including a definition of 'permanent employment' in the act. However, the second and third proposals outlined above are more controversial and are unlikely to be passed.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.
For further information on this topic please contact Ole Kristian Olsby or Nina Elisabeth Thjømøe at Homble Olsby Advokatfirma AS by telephone (+47 23 89 75 70) or email ([email protected] or [email protected]). The Homble Olsby Advokatfirma website can be accessed at www.homble-olsby.no.