Supreme Court rulings make transfers of employees in outsourcing more difficult

Two Supreme Court rulings in June 1999 have upheld the right of employees in some cases to avoid being transferred to a new employer when an enterprise transfers support functions to another enterprise. Employees may choose to stay with their original employer, which in turn is obliged either to provide alternative work, or to resort to ordinary legal dismissals.

In two rulings issued on 30 June 1999, the Norwegian Supreme Court endorsed the right of employees in some cases to avoid being transferred to a new employer, when the enterprise is transferring support functions to another employer (outsourcing). Both cases related to the outsourcing of defined task areas with few employees, one concerning a switchboard operator and the other three cleaners. The employees who brought the cases wanted to retain their employment with the original employer. They claimed that employees have a legal right to choose whether to work for the new employer or maintain employment with the original employer.

The employers claimed that employees do not have the right to prevent employment contracts from being transferred from one employer to another, and in any case do not have the right to choose whether or not to retain their original employment contracts. The employers grounded their argument on the provisions incorporated into the Working Environment Act in connection with the Norwegian transposition of the European Union Council Directive on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses (77/187/EEC).

The Supreme Court ruled that the EU Directive stipulates only a minimum standard in relation to employee protection. The issue must therefore be dealt with in accordance with the Norwegian legal framework, which for the last few decades has remained unchanged. The Court believes there to be no general right of reservation for employees, but that they may in particular circumstances refuse to be transferred to another employer, and choose to remain with the original employer. This is the case when a transfer will have an impact on employees' working conditions. The Supreme Court argued that the transfers taking place in the two cases in question might indeed prove to have such consequences, and that the employees could therefore choose to continue working for the original employer.

The decision does not mean that employees will automatically acquire the right to stay with their original employer, because that employer may choose to resort to dismissals. However, a dismissal must satisfy normal legal requirements, which include a provision that the employer must examine the possibility of providing alternative work, and take account of employees' seniority. In both the cases in question, the employees had already been dismissed by their respective employers. In one of the cases, the Supreme Court ruled that shortage of alternative work was a valid reason for dismissal. In the other case, a second court case is being filed by the employee, on grounds of unfair dismissal. The recent Supreme Court rulings may nevertheless make the transfer of support functions more difficult.

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