No general right to retain employer in transfers

In December 2000, the Norwegian Supreme Court ruled in two appeal cases that there is no general right for employees to retain employment with their original employer in cases of outsourcing or change of ownership. There are, however, exceptions to this general rule.

On 21 December 2000, the Norwegian Supreme Court ruled in two appeal cases concerning employee's right to retain employment with their original employer in the event of outsourcing or change in ownership. Both cases had previously been through previous court proceedings at lower levels before going on appeal to the Supreme Court in 1999. The Supreme Court concluded that there is no general right for employees to retain employment with an original employer in the case of a transfer of activity to another employer, although this general rule is not without exceptions.

The first case involved employees within the psychiatric care section of the municipality of Oslo, whose functions were transferred to two private hospitals in the city. The dispute concerned the extent to which the employees had a right to retain employment with the original employer after the transfer had taken place in 1998. A lower appeals court, the Borgarting appeals court, did not uphold the appellants claim to retain employment with the original employer. The second case involved employees in the sanitary department of the municipality of Oslo, part of which was transformed into a public limited company in 1996. In the prior appeals case, the court had ruled that the transformation from a public to a private company had to be regarded as a principal change, with significant impact on the employment contracts and working conditions of the employees concerned.

Both December 2000 Supreme Court rulings stipulate, on the basis of previous rulings and on legal theory, that there is no general right of employees to retain employment with the original employer in the case of a transfer of ownership to another employer, but that this general rule is conditioned by the effects of outsourcing or a transfer of ownership on the employment contracts and working conditions of the employees concerned. The basic reasoning is that such a right may be made operational only in cases where a shift in employer regime has significant negative effects on the job situation of employees. On the basis of two previous Supreme Court rulings (NO9907142N), a legal practice has developed of drawing a distinction between: transfers that involve the whole company, or an autonomous part thereof, which are usually regarded not to have detrimental effects on employment conditions and contracts; and transfers that involved a small and integrated part of an enterprise, such as support functions, in which there is a greater likelihood of significant changes occurring to employment conditions and the content of employment contracts.

The Supreme Court found that the first case (Oslo psychiatric care) involved the transfer of the whole company, or an autonomous part thereof, and as such there was no evidence to suggest that employment conditions and contracts were significantly altered. Yet the Court did not rule out a right to retain employment contracts in the case of such a transfer, stating only that it is not common. The Court also rejected the viability of the previous appeals court ruling in which a transfer from a public to a private company was held in itself to constitute evidence of a detrimental shift in employment conditions. In the second case (Oslo sanitary department), on the other hand, a majority of the Court's judges found that the transfer from a large public employer to a smaller private employer entailed significant alterations and uncertainty with regard to employment contracts and conditions, and that the employees concerned would in this case have had a right to remain with the original employer, if they had utilised this right at the time of transfer. The employees failed to do this.