Controversy over law on extension of collective agreements

In October 2008, the Norwegian Tariff Board decided to extend the sectoral collective agreement in the field of engineering to cover all employees in the shipyard industry. Collective agreements can be extended in industries where foreign employees are thought to be subject to substandard wage and working conditions. The move has generated controversy among the social partners, particularly over the calculation of working time for those subject to the extension.

In October 2008, the Norwegian Tariff Board (Tariffnemnda) approved the extension of collective agreements in a new case put forward by the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO). The trade union confederation claims to have evidence which proves that foreign workers in the shipyard industry are subject to poorer wage and working conditions than their Norwegian counterparts. The decision was made after several postponements aeuro" the last one occurring in June 2008, when the Tariff Board called for a review of the Act relating to the general application of wage agreements (in Norwegian) and the administrative provisions in light of recent developments in case law and legal practice in the European Court of Justice (ECJ).

Extension of collective agreements

A request for the extension of collective agreements aeuro" or more precisely of selected provisions stipulated under the collective agreement aeuro" may be made in cases where it is evident that foreign workers are subject to substandard wage and working conditions in the Norwegian workplace. Such requests are considered and decided on by the Tariff Board, and its decisions are implemented as administrative provisions. The Tariff Board has one representative from each of the social partner organisations as well as three independent members, including the boardaeuroTMs leader. Decisions regarding extensions are made for a time-limited period and may be restricted to specific industries under a collective agreement, or to particular regions.

Case of engineering industry

The case in question involves the general application of the Engineering Industry Agreement to NorwayaeuroTMs shipyard industry. LO presented its demand in September 2007 and based it on what it considers as sufficient evidence of foreign employees being subjected to substandard wage conditions which deviated from those of their Norwegian colleagues in the industry. In addition to the agreementaeuroTMs minimum wage provisions, LO also called for an extension of the agreementaeuroTMs provisions on working time aeuro" that is, the introduction of a 37.5-hour working week aeuro" along with its provisions on overtime regulations, and wage and working time provisions for shift work.

The case had been considered by the Tariff Board on several occasions since September 2007 in a drawn-out process compared with previous cases of this kind. A proposal outlining the administrative provisions underpinning the case was subject to a hearing by the relevant social partner organisations in the spring of 2008 (Hearing report (in Norwegian)). The Tariff Board was expected to make a decision on the case in June 2008. However, by this date the board decided to postpone its decision, as a majority had voted in favour of a review of the Norwegian Act relating to the general application of collective agreements in light of recent developments in case law and legal practice in the ECJ. The Act was sent to the Ministry of Justice and the Police (Justis- Og Politidepartementet) to be reviewed in the context of the legal framework of the EU.

In its response in September 2008, the ministry argued that the Norwegian legislative framework on the extension of collective agreements conforms with EU legislation. However, it added that the way this extension is practised in specific cases means that it falls short of the EU rules concerning aeuro" among other things aeuro" the free movement of services (Commentary from the Ministry of Justice (in Norwegian, 20Kb PDF)). The implication is that specific deliberations and implementations will have to be the responsibility of the Tariff Board itself.

Decision of Tariff Board

In October 2008, the Tariff Board finally made its decision (in Norwegian) on the case concerning the general application of the Engineering Industry Agreement to the whole shipyard industry. LOaeuroTMs demands have largely been met in this decision. Thus, the agreementaeuroTMs minimum wage provisions have been made generally applicable. This means that the minimum hourly wage levels applicable to all workers in this area are NOK 126.27 (about a,¬14 as at 24 November 2008) for skilled workers and NOK 120.90 (a,¬13.52) for unskilled workers.

Moreover, workers who are forced to live outside the home will receive an extra hourly supplement in addition to the minimum wage. Similar supplements will also be granted for overtime and shift work in accordance with the provisions of the collective agreement, and weekly working hours are to be set at 37.5 hours. The norm for weekly working hours will have a bearing on the time from which overtime is calculated, as well as on the scale of working time reductions for employees working shifts. A number of other provisions are also covered by the extension procedure aeuro" including rules for the remuneration of expenses connected with travel, food and lodging, as well as requirements in relation to accommodation.

Debate over calculation of working time

One of the more contested issues in this case has been the basis on which the working time of those subject to the extension should be calculated: that is, based on the collective agreementaeuroTMs provisions on weekly working time, which amounts to 37.5 hours, or on the provisions of the Working Environment Act (2.1Mb PDF), amounting to 40 hours. Initially, the boardaeuroTMs majority proposed to make the 40-hour weekly working time of the Work Environment Act the statutory minimum. This was the approach taken in relation to the general application of the collective agreement in the construction sector in 2006.

In its final decision, however, the Tariff Board took as its point of departure the provisions of the relevant collective agreement. In relation to the general application of collective agreements, it is emphasised that the purpose of the Work Environment Act is to ensure that foreign workersaeuroTM wages and working conditions are, as a whole, equivalent to those of Norwegian workers. Nonetheless, the high collective agreement coverage within the engineering industry aeuro" where at least 90% of workers are covered by collective agreements aeuro" means that the basis for generally applicable working time regulations should be the provisions of the collective agreement, in order to ensure that both domestic and foreign workers are subject to equal working time conditions.

The board representative from the Confederation of Norwegian Enterprise (NA|ringslivets Hovedorganisasjon, NHO) argued that it had not been sufficiently documented that a general application was justified in this case, and that a decision of general application ought to involve a significantly smaller part of the industry than that called for by the majority. NHO maintained that the working hour provisions of the Working Environment Act should be used rather than provisions of the collective agreement, and based its argument on EU and European Economic Area (EEA) law.

Other decisions

The Tariff Board made a number of other decisions at its meeting in October 2008. Existing extensions were prolonged, including the general application of the national agreement for the construction sector which was extended until the spring of 2010. The demand raised by LO to extend the collective agreement for the electrical installation industry to the entire country was also discussed; at present, this agreement is only applicable to workers in the Oslo area. A proposal for a resolution to extend the agreement is now being considered by the relevant parties, and a resolution is expected within the course of this year. However, the NHO representative voted against such a resolution.


LOaeuroTMs demand for a collective agreement extension for the shipyard industry has generated controversy among the Norwegian social partners. This follows previous disagreement between the employee and employer side over the justification regarding decisions to extend a collective agreement. However, discussions have recently taken a different turn compared with previous occasions: in this instance, the focus is on how the Norwegian regulatory framework relates to EU law and recent EU legal practice.

NHO considers that since Norwegian work environment legislation already provides for regulations on overtime and shift work, it would be contrary to legal practice if an extension decision introduced provisions that go beyond the conditions which follow from the minimum provisions of the legal framework. The confederation therefore views it as a violation of the Agreement on the European Economic Area (EEA) to make the working time provisions of the collective agreement, including provisions on overtime and shift work, generally applicable. NHO has given no indication of what its next strategic step will be in relation to this matter. However, the majority of the Tariff BoardaeuroTMs members do not agree with the confederation on this issue.

Another related issue which has been subject to discussion, and a matter for debate in other cases concerning the extension of collective agreements, is that of documentation. In terms of evidence of substandard working conditions, the burden of proof rests mainly with the social partner organisations aeuro" in practice, usually the employee side aeuro" which must obtain evidence to prove that the wages and working conditions of foreign workers are below that of their Norwegian co-workers. Experience shows that it is often difficult to obtain such documentation for workers stationed in Norway by foreign companies. As part of the state budget talks in the autumn of 2008, the government indicated that it would consider how the requirements with regard to documentation, as well as the rules of procedures of the Tariff Board, may be changed to allow for a smoother administrative process in this regard.

Kristine Nergaard, Fafo Institute for Applied Social Science

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