Norway: ‘Zero-Hour' Contracts Ruled Illegal

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By Marcus Hoy

A formal arrangement under which full-time employees of a staffing agency did not receive salary between assignments has been ruled illegal by a Norwegian court. On March 24, the Bergen District Court found that contracts signed by six Polish construction workers breached Section 14 of Norway's Working Environment Act (104/2016/). Although officially classed as permanent employees, the workers were not guaranteed a minimum number of working hours and were only paid for the work they carried out.

Traditionally, foreign construction workers have been employed by Norwegian staffing agencies on temporary contracts. An alternative model under which employees are offered full-time contracts without guaranteed salary or hours has become more common in recent years. According to a March 24 statement from the Confederation of Trade Unions (LO), the district court ruling renders such contracts illegal.

Six employees had sued the staffing agency with the support of their trade union, claiming that full-time employment as defined in Section 14 of the Working Environment Act includes the right to receive a regular salary. A key distinction between permanent and temporary employment is security of tenure, the union said, and security of tenure cannot be said to exist if working hours and thus a salary are not guaranteed.

Security of Tenure

The company disputed this position, claiming that the model was well-suited to the construction industry and offered security of tenure as defined by the law. Employees had the right to work whenever work was available and not to be dismissed without fair justification, the employer said, and the agency had the obligation to provide each employee with as much work as required if the work was available. Some of the plaintiffs had been in continuous employment since they were hired, according to the employer, and although they were not entitled to a salary during work-free periods, full-time employees were covered by statutory rules on sickness benefits, social insurance and pensions.

In support of the employees' claim, the union referred to a 2005 Supreme Court ruling (2005/826) that redefined a casual employee's permanent contract as an illegal temporary contract. Security of tenure, the Supreme Court held, should include the right to earn a salary through regular employment.

Using that ruling as guidance, the District Court agreed that the six plaintiffs lacked the security of tenure required to define an employment relationship as permanent. The relationship should thus be classed as temporary, the court ruled, and the contracts were therefore illegal. The employees were all awarded compensation, and the staffing company was ordered to amend their contracts to include a guarantee of salary.

Important Clarifications

LO attorney Edvard Bakke, who represented the workers in court, told Bloomberg BNA April 6 that the ruling would be seen as significant in other industries besides construction.

“This provides some important clarifications with regard to the employment conditions of workers who are directly employed by staffing agencies,” Bakke said. “It states that like all other employers, staffing agencies must adhere to the Working Environment Act and have no special status. Their employees have the same rights as employees of regular companies.”

“As the six workers were employed without a guaranteed wage, they argued that they were in reality employed on a temporary basis repeatedly and the statutory requirements for temporary employment had not been applied,” Bakke continued. “In a unanimous ruling, the District Court agreed with this view, stating that the employees should be afforded status as permanent workers. This means that they are entitled to a guaranteed salary in accordance with that status, regardless of whether or not the agency utilizes their labor.”

“In our opinion, this ruling will have serious consequences for the entire staffing industry and will reduce the widespread use of illegal employment contracts in this area,” Bakke concluded. “Of course, other employers should adhere to the ruling too, regardless of their industry. If they argue that workers who are employed on zero-hour contracts are permanent employees, workers can then, provided the statutory requirements for temporary employment are not applied, argue that they are in reality employed on illegal temporary contracts and claim permanent employment status.”

Serious Consequences

“The judgment is the result of an interpretation of Norwegian rules, so it is difficult to see any EU legal implications, but I cannot exclude it,” Bakke said.

“It is important to keep in mind that this is a District Court ruling and that it may or may not be appealed,” Tron Dalheim, attorney at the ADAB legal firm told Bloomberg BNA April 5. “This verdict is based on principles laid down by the Supreme Court in 2005, which state that a permanent employment contract must provide for certainty of work and employment protections. Generally, court verdicts are seen as examples as opposed to important guidance. However, this ruling does make it clear that the courts must make a specific and broad assessment of such contracts to determine if they meet the requirements laid down by the Supreme Court.”

“As a general rule, zero-hour contracts can be seen as problematic in Norwegian law, since they can very easily conflict with the 2005 Supreme Court ruling,” Dalheim added.

On March 24, the LO said that it now expected the practice of zero-hour contracts to end. The confederation had already rejected a proposal from the Confederation of Norwegian Enterprise that zero-hour contracts be considered legal for temporary workers.

To contact the reporter on this story: Marcus Hoy in Copenhagen at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

For more information on Norwegian HR law and regulation, see the Norway primer.

The LO statement is available in Norwegian here.

The Bergen District Court decision is available in Norwegian

here.

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