Settlement of the principle of seniority in the Basic Agreement

The dispute between The Confederation of Norwegian Enterprise (NHO) and the Norwegian Confederation of Trade Unions (LO) before the Labour Court of Norway (Arbeidsretten) has recently been settled. The dispute arose in connection with the so-called Skanska case, which shall now be tried before the Supreme Court in Norway. The Supreme Court must determine whether this settlement may lead to an overruling of the Court of Appeal’s judgment in the case.

Background - the Skanska-case

The background for the settlement is the Skanska case. In 2016, Skanska Norge AS dismissed a number of employees due to decline in turnover. 8 of the dismissed employees subsequently instituted legal proceedings and disputed the validity of the dismissals, as they had longer seniority than employees that were not dismissed.

Skanska was bound by the Basic Agreement between LO and NHO, and thus had to comply with the rules on workforce reductions/ rationalization in the agreement. The Basic Agreement section 8-2 states that “if notice of dismissal is given because of cutbacks or restructuring, the seniority principle may be departed from when there is a due reason for this”. One of the questions in the Skanska case was if Skanska could let the employees’ competence outweigh the principle of seniority in the workforce reduction.

The employees lost in the District Court, but won in Court of Appeal. The Court of Appeal found that Skanska in reality applied competence as the main criteria for the selection instead of seniority, and thus applied the principle of seniority in section 8-2 of the Basic Agreement incorrectly.

NHO subsequently declared thirty party intervention, and appealed the case to the Supreme Court. NHO argued that the Court of Appeal had applied the wrong tariff norm, and that there was no legal basis for claiming that seniority is the main rule. Due to NHO’s appeal, LO submitted a writ of summons to the Labour Court regarding the interpretation of section 8-2 of the Basic Agreement.

The Supreme Court stopped the case until the decision from the Labour Court was made, as the ordinary courts normally follow the decisions of the Labour Court. Compelling reasons therefore indicated to stop the proceedings before the Supreme Court until the Labour Court had made a decision.

The settlement

The case before the Labour Court has now been settled, and the Supreme Court can therefore consider the Skanska case.

However, the settlement does not mean that the disagreement about the weight of the seniority principle is put on the shelf. Both LO and NHO have argued that the settlement provides support for their interpretation of the provision.

The settlement states, as a starting point, that seniority is the basis for the selection of employees upon termination. This is in accordance with LO’s opinion. However, the settlement also states that seniority is a factor to be considered upon the election of employees to be terminated, and the weight of the seniority principle depends on an overall assessment in each case. Further, it is stated that section 8-2 does not mean that seniority is the decisive factor in every case, and that the seniority principle may be departed from when there is a due reason for this. NHO therefore claim that the settlement provides support for their interpretation of the provision. On the other hand, the settlement does not provide any guidelines on the weight of competence compared to seniority.

How the Supreme Court interprets the settlement remains to be seen. The date for the Supreme Court’s trial of the Skanska case has not been set. We will return with information about the Supreme Court’s judgment in the Skanska case when the judgment has been made.