Unions test business closure law

The effectiveness of a Norwegian law that prevents the unnecessary closures of businesses is to be tested in the courts. The Norwegian United Federation of Trade Unions is concerned that Norway’s Restructuring Act is not working as intended. In September 2012, pre-trial negotiations were held in connection with the closing down of a flight engine manufacturing company, and one of the central issues in the case is whether the rules of the Restructuring Act were broken.

Background

In 2006, a Norwegian paper and pulp company closed down one of its profitable manufacturing plants. The main reason for the closure, according to the company, was over-production in the pulp and paper market. Shutting down the plant was seen as a way of alleviating the pressure in the market, and the owners therefore did not want to sell to anyone else. As a consequence, 380 people lost their jobs.

In the wake of this case, the Norwegian parliament (Stortinget) adopted the Closure of Businesses Requirements Law (Restructuring Act) (in Norwegian), obliging businesses to give notification of closures.

What the law says

The act aims to ensure that businesses do not close until all other options have been considered. An owner who wants to close a business with 30 or more employees or dismiss 90% of its workers must first give notice of this to the county municipal authorities. The notification should contain information about the number of employees in the company and the type of operations they run.

The notification must also include an outline of the consequences of a closure for the employees and the company, the context of the closure plans and the efforts made to find alternative solutions.

To ensure there is time to review and consider alternatives to closure, the company may not make a decision to close down or make dispositions that substantially impair the value of the business until 30 days after notice of closure has been given.

During this period, the county municipal authorities shall convene a meeting where owners, representatives of the employees, municipal authorities, Innovation Norway and the local labour market authorities are represented. The purpose of this meeting is to review possible measures for the continued operation of the business, or alternatives to closing it down. In these discussions the parties should also consider compensatory measures and restructuring opportunities, as well as measures to alleviate the effect on the local community.

The county municipal authorities may levy fines on businesses if the rules are not complied with. It may also levy a violation charge.

Degree of compliance

According to the news portal Frifagbevegelse.no, the act has been criticised by the trade union movement since it was enacted. Some say the act is merely a collection of empty words, and that the county municipal authorities do not have the competence needed to consider such cases.

There are also concerns that the authorities lack the tools to deal with company owners who refuse to consider alternative solutions to closure. In such cases, no constructive discussion takes place and therefore no solution can be reached to safeguard jobs of the employees.

Unions now want to check the efficacy of the act in the courts.

Pratt & Whitney case

The flight engine manufacturer Pratt & Whitney decided in March 2012 to close down its workshop at Sola in Stavanger, southwest Norway. The jobs of 195 employees were lost, of which 100 were members of the Norwegian United Federation of Trade Unions (Fellesforbundet). Twenty-five of these workers have now, with the support of the Norwegian Confederation of Trade Unions (LO), taken out a lawsuit against the company on the grounds that the redundancies were illegal.

Talks between the company and the county municipal authorities had been carried out prior to the closure of the plant. The employees believe, however, that company management in these meetings failed to provide the authorities with sufficient information. They say, for example, that Pratt & Whitney failed to reveal that meetings between the company and a potential buyer had taken place. Interest in buying the company had been expressed not only by another company, but also the affected employees.

Norway’s Secretary of State for Trade and Industry, Halvard Ingebrigtsen, had called on the company to enter into negotiations with the view to selling the business if this was a real alternative. The company decided, however, not to sell, but to close down. In the opinion of the employees, this decision was made before the 30 days’ notice required by the legal framework, and before the owners had exhausted all other possibilities.

Commentary

The critique raised against the restructuring act may be seen as an expression of the frustrations felt by many shop stewards about their lack of influence over the closing down of businesses in Norway. Under existing rules, owners are relatively autonomous when deciding whether or not an economic activity is to be continued.

An employee’s right to keep his or her job depends on whether or not the employer is able to offer alternative work, and if not, this is sufficient grounds for dismissals. Shop stewards want to see the costs of closing down Norwegian businesses increased.

Alsos Kristin, Fafo

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