Hiring of workforce from temporary work agencies

Hiring of workforce means a situation where an employee is hired from his/her employer to a client/third party, and is subject to the client's management and instructions during the hiring period.

Under the Norwegian Working Environment Act ("WEA"), the legal basis for the hiring depends on whether the employing entity is a temporary work agency or an undertaking whose primary objective is not hiring of workforce.

For temporary work agencies, the starting point is that the client/third party hiring the workforce must have a legal basis for hiring from the temporary work agencies. Generally, where the client/third party could have hired employees on a fixed term contract, the client/third party may also use hired workforce from the temporary work agency. The basis for fixed term employment is regulated in Section 14-9 of the WEA. From our experience, the majority of hire-ins are based on the two following alternatives; (a) where "the work is of a temporary character", or (b) for "work as a temporary replacement for another person or persons".

For hire from undertakings whose primary objective is not hiring of workforce, the possibility of hiring workforce is much more lenient, as long as the client/third party asks for services within the main areas of activity of the undertaking, and that not more than 50% of the workforce is hired out at the same time.

Please note that certain procedural requirements must also be adhered to relating to hiring of workforce, such as for instance consultations with the employee representatives within the client/third party. We will not elaborate further on these aspects here.

The changes entail that the possibility of hiring workforce from temporary work agencies are limited, as it will no longer be possible to hire from temporary work agencies where the work is of a temporary character, cf. alternative a) explained above. The changes apply to all industries and is not geographically delimited. For undertakings which are not bound by a collective bargaining agreement concluded with trade unions with a right of nomination, the relevant scenarios for hiring-in employees will in most cases be (i) substitutes hired from a temporary work agency or from a production company or (ii) assignments of a temporary nature, provided that the employees are hired from a production company.

Although it will no longer be possible to hire personnel for assignments of a temporary nature from temporary work agencies, a limited exemption has been proposed in a separate Regulation allowing hiring of health personnel and advisers/consultants with specific expertise in clearly defined projects.

The changes in legislation also affect some other elements that are closely linked to hire-in situation.

Whether a set-up should be considered as an employment relationship or a contractor relationship has over years been evaluated based on certain key criteria established in case law and the preparatory works to the WEA. As the abovementioned changes most likely will increase the level of consultancy agreements, a new definition of the distinction between hiring of workers and contracting will be established by law. The definition includes a list of what criteria that are to be considered when determining the nature of the relationship. These criteria are to a great extent in line with the principles that have been applied prior to the legal definition being included in the WEA.

The new definition places emphasis on which of the parties that is responsible for the management of the work and bears the risk/responsibility for the work results. Other relevant criteria are whether the main service to be delivered under the agreement is workforce, if the work that is to be delivered is closely linked to the client's activities, if the work covers a more permanent need with the client and if the work happens within the client's primary area or within its main activity.

The rules also entail that hired employees may claim permanent employment after three years.

As pertains to temporary work agencies, we note that an approval scheme is being established, with extended requirements pertaining to documentation and stricter sanctions. The Norwegian Labour Inspection Authority will have the authority to supervise the compliance with these rules. Any violations of the proposed rules may be sanctioned in the form of order and/or infringement fees, cf. the WEA Section 18-10.