Important clarification from the Supreme Court on the after-effect of a collective agreement

In the judgment of 2 June 2021 in the so-called "Grefsenhjemmet case", the Supreme Court clarified that provisions on stabilization increment in a collective agreement must be regarded as individual wage terms that become part of the person’s individual employment contract, and that such terms did not lapse as a direct as a result of the termination of the collective agreement.

In the labour law community, many have been waiting anxiously for the Supreme Court ruling in this case. During the legal process, there have been some strong discussions in the specialist community, and especially the Court of Appeal's ruling has been discussed.

The question of whether collective agreements at all can have individual after-effect must now be considered finally clarified by the Supreme Court. This implies a fundamentally important clarification of a question that has not often been pushed to extremes  before the Labour Court or the ordinary courts, but which nevertheless has great practical significance.

In this specific case, the dispute concerned the extent to which nurses at Grefsenhjemmet were entitled to retain a stabilization increment that followed from a special agreement under the National Agreement for Health and Social Services between Virke and the Norwegian Nurses' Association ("Virke agreement") after Grefsenhjemmet changed employer organization to NHO Service in 2014.

Both the Oslo District Court and the Borgarting Court of Appeal gave a judgement in favour of the the employer, and when the case was heard in the Supreme Court, a large number of working life organizations had declared third-party intervention to shed light on the principled aspects of the case.

In its terms, the Supreme Court reviews the sources of law in a way that illustrates that there are relevant sources in this area that are very old. It is worth noting that the Supreme Court, on the way to its conclusion, states that the legal sources provide "solid basis" that the so-called "normative provisions" in a collective agreement become part of the individual employment agreements between the parties bound by a collective agreement. "Normative" provisions are mainly provisions that apply to individual pay and working conditions, in contrast to provisions of a mandatory nature that apply to the relationship between the parties to a collective agreement.

After finding that neither the rules of the Labour Disputes Act on the after-effect of collective agreements nor the special regulation on the after-effect of collective agreements in the event of a business transfer decide the question in this case, the Supreme Court thoroughly reviews preparatory work, case law and policy considerations.

The conclusion is, as already mentioned, that the provisions of a collective agreement that have become part of the individual employment contract do not lapse as a direct consequence of the termination of the collective agreement. The Supreme Court also states that the stabilization increment could not be removed by virtue of the employer's right to manage.

The Supreme Court has only decided the question of the individual after-effect, but not the alternative grounds for claim on the part of Grefsenhjemmet which applied to other grounds for termination. The Court of Appeal must therefore re-examine the case and then decide whether there is still no room for after-effect in a case where a collective agreement is replaced by a new collective agreement or because the stabilization increment is in conflict with the current collective agreement. The final outcome of the case is thus not given by the Supreme Court's judgment, and there are therefore several interesting questions in this case.

What we in any case can establish after the Supreme Court's ruling is that provisions on individual pay and working conditions in a collective agreement become part of the individual employment contract, and that these provisions do not lapse automatically as a result of the termination of the collective agreement.