New regulations relevant for redundancies in group companies

A termination of employment due to redundancy is only valid if the employer does not have other suitable, vacant roles to offer. The obligation to identify and offer such other roles has so far been limited to the employing entity. The new legislation will expand this duty, so that employers which are part of a group of companies will have an obligation to identify and offer other suitable roles within other group companies to fulfill this requirement.

The intention of the new legislation is to strengthen the employees' protection in connection with reorganizations and restructurings when the employer is a part of a group of companies. The Ministry of Labor and Social Affairs is also of the opinion that this new legislation will result in more uniform and long-term strategies when it comes to employee policies, skill development among the employees and internal training across group companies.

The new legislation will be applicable to employers which are part of a group of companies. In this context, a group of companies is defined as a parent corporation with one or more subsidiaries. A corporation is to be considered a parent corporation if the corporation has determining influence over another corporation through agreement or ownership.

Municipalities, county authorities, foundations and organizations can also be a parent company in this regard. The new legislation will only apply to Norwegian corporations. If the parent company is a foreign company with more than one subsidiary in Norway, the requirements will only apply to the Norwegian subsidiaries not to the foreign parent company.

The starting point is that all Norwegian companies within the group are in-scope of the obligation. However, it is the Ministry's intention that it will be possible to limit the scope to companies within the group which have the same kind of jobs or same kind of employees as the entity that is downsizing. The limitation must be justified, but also aspects such as geography or business sector would be relevant. It is a requirement that both the need to limit the numbers of group companies in scope and the limitation criteria are discussed with the employee representatives in advance.

Failure to investigate and offer relevant suitable positions will have an impact of the validity of a termination of employment due to redundancy. Compliance is therefore important to avoid liability.

The new requirements will imply additional obligations on companies which form part of a group, and we recommend that such companies identify and assess the potential impact on the current organization. It will be important to ensure that systems and policies are in place to ensure timely and adequate information sharing across group companies so that the obligations can be fulfilled.