In a recent case, a number of Norwegian Airlines pilots and cabin crew claimed that three of the companies in the Norwegian Group constituted their employer. However, the Supreme Court concluded that only one of the companies constituted their employer.

Facts

Over the past six years, Norwegian carried out a reorganisation. Originally, all pilots and cabin crew based in Norway were employed by a company which also held the airline's air operator's certificate (AOC). One of the reorganisation's aims was to move the operational activities away from the company holding the AOC (now the group's parent company) to different subsidiaries established during the reorganisation.

The operational activities were transferred partly to subsidiaries with AOCs and partly to a subsidiary responsible for personnel. The latter had its own subsidiaries, including one to which the pilots were transferred (pilot subsidiary) and one to which the cabin crew were transferred (cabin crew subsidiary). The cabin crew were transferred directly from the parent company to the cabin crew subsidiary. The pilots were first transferred to a subsidiary holding an AOC (AOC subsidiary) and then to the pilot subsidiary. All of the transfers were considered and carried out as a transfer of undertakings. The subsidiary responsible for personnel entered into a framework service agreement with the parent company and the AOC subsidiary regarding the supply of personnel (ie, the pilots and cabin crew).

Claims and legal basis

The pilots claimed that, in addition to their formal employer (the pilot or the cabin crew subsidiary), the parent company and the AOC subsidiary were their employer. The cabin crew claimed that, in addition to the cabin crew subsidiary, the parent company was their employer. The pilots and the cabin crew claimed that these other companies exercised employer functions towards them.

The legal basis for the claims was that the supply of personnel to the parent company and the AOC subsidiary constituted an unlawful hiring of personnel. In accordance with Norwegian labour law, this entitled the employees to employment in the other entities. Alternatively, they claimed the application of the non-statutory provision of shared employer responsibility in particular circumstances. The airline argued that the conditions for using the non-statutory provisions of shared employer responsibility had not been fulfilled. Further, the personnel had not – apart from during a limited period before the new corporate structure had been completed – been hired by the parent company and the AOC subsidiary. Instead, the personnel had been supplied through an acquisition of services.

Supreme Court decision

The Supreme Court first addressed the question of whether the supply of personnel constituted a hiring of personnel or an acquisition of services. The court considered the various factors which were relevant to the overall assessment and stated that the most relevant factor was which party was responsible for the work and the result of the work performed. After an overall and individual assessment, which included a review of the relevant provisions in the framework agreement, the Supreme Court concluded that the parent company and the AOC subsidiary were not responsible for the work or the result of the work performed. This factor, together with other relevant factors, led the court to find that the supply of personnel constituted an acquisition of services and not a hiring of personnel. Therefore, only the pilot and cabin crew subsidiaries constituted the employees' employer.

For the limited period during which the airline had agreed that the two companies had hired personnel, the Supreme Court found that the hiring contravened Norwegian legislation. This entitled the employees to claim that they were also employed by the parent company and the AOC subsidiary. However, the court invoked the exceptional rule under which employees are, nonetheless, unentitled to employment due to the unlawful hiring of personnel, as it was evidently unreasonable for them to obtain such employment in the said entities. In its assessment, the Supreme Court stated that a reorganisation may, in certain circumstances and for a limited period, fulfil the conditions for temporary employment or hiring of personnel.

As regards the claim concerning shared employer responsibility due to particular circumstances, the Supreme Court upheld that the non-statutory provision was a narrow exception from the main rule of one employer, and that no such particular circumstances existed in the cast at hand. The court also stated that it was difficult to invoke an acquisition of services and shared employer responsibility simultaneously.

Comment

This ruling clarifies the factors which are relevant in an assessment of whether the engagement of personnel is considered an acquisition of services or a hiring of personnel. The main factor to be considered is who is responsible for managing the work and the result of the work performed. Further, the Supreme Court maintained the narrow exception under which the non-statutory provision of shared employer responsibility in particular circumstances can be invoked. It is thus up to the legislature to expand this concept.

The ruling also demonstrates that a reorganisation may, in certain circumstances and for a limited period, provide sufficient grounds for using temporary employment contracts or hired personnel. Finally, the Supreme Court commented that the courts ought to be careful to overrule fundamental commercial assessments concerning the appropriate corporate structure of a business, as they normally fall under an employer's management prerogative.

For further information on this topic please contact Lise Gran or Ole Kristian Olsby at Homble Olsby Advokatfirma AS by telephone (+47 23 89 75 70) or email (olsby@homble-olsby.no or gran@homble-olsby.no). The Homble Olsby Advokatfirma website can be accessed at www.homble-olsby.no.

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.