The Norwegian model and working life of the future

On Wednesday this week, the Fougner committee presented its report (NOU 2021: 9) on various forms of affiliation and business organization in working life. The committee proposes several changes that strengthen the protection of employees and set stricter requirements for how the employer organizes the business and the workforce.

1. The Norwegian model and prospects

In the report, the expert group has used the Norwegian model as a basis for its recommendations and assessments. The term “the Norwegian model” refers to how we in Norway have chosen to organize society. It describes how economic politics, fiscal politics, wage formation, working life politics and public welfare cooperate. The core of the Norwegian model is the interaction between these factors and has contributed to high employment, good economic development, and a high standard of living in Norway.

The expert group highlights several possible challenges for the Norwegian model in facing the future working life:

• Increased unemployment and a need for restructuring due to the corona pandemic.
• New ways of organizing work through increased use of digital solutions, i.e., platform work (which Foodora is an example of) and home office.
• A need for increased reorganization to achieve the goal of a more sustainable society.

Earlier this week, the Norwegian Ministry of Labor and Social Affairs presented a report concerning measures to strengthen union coverage in the working life. The report was prepared in collaboration with the main employer organizations and the main trade unions. An unionized working life and high occurrence of collective bargaining agreements are emphasized as fundamental factors in securing the continuation of the Norwegian model. It is reasonable to read the official report from the Fougner-expert group in connection with this report. With that in mind, it is not difficult to understand that the expert group propose amendments to strengthen employee’s rights.

2. Different forms of employment in Norway

The norm in the Norwegian working life – and the main rule of the law – is a relationship between two parties where the employee is permanently employed by the employer. In their official report, the expert group has surveyed the use of alternative ways of engaging labor in the Norwegian working life. The alternative ways include part-time work and temporary employments as well as labor from the external labor marked, including hiring from staffing agencies and others, self-employed personnel, consultants etc.

In the report, the expert group refers to several studies of working environment and working conditions. These support a finding that alternative ways of engaging labor often influence an individual’s actual and perceived quality of work and security of work. Companies’ choices with regards to recruitment and organization in general are influenced by external driving forces such as technological development, digitalization, and globalization. Nevertheless, the expert group has, based on comprehensive data material, concluded that the use of alternative ways of engaging labor in Norway is stable and modest.

The expert group refers to the fact that the proportion of fixed term employments have increased steadily during the last 20-25 years. In the same period, the proportion of self-employed personnel and temporary employments have decreased with 2 %, to 5 % and 8 % respectively of the total employed persons. Up to 50 % of the temporary employments were transferred to permanent employment within one year of the engagement. The proportion of hired personnel from staffing agencies and others has been reduced a bit during the last years. Nevertheless, the expert group has proposed amendments that relate to the different ways of engaging labor.

Work communicated through a digital platform, such as Foodora and Uber, is a relatively new phenomenon. Certain participants in this segment have grown rapidly during the last years. Even though European surveys show that many perceives themselves as employees, today, it is normal to define the person working as a self-employed person. However, whether an individual must be classified as an employee, or a self-employed person depends on an individual assessment.

The expert group concludes that there are relatively few who work through a digital platform as their main activity. Only 0,3 – 2,5 % of the Norwegian workforce has worked on a digital platform. This is significantly below the expected and may be due to the Norwegian model, which is unique for Norway.

3. The proposals from the expert group

The expert group has divided itself into a majority and minority with regards to the proposals concerning different ways of engaging labor, how employers organize themselves and the consequences of by-passing the working environment act. The minority, the representatives from the employer organizations, mainly argue that the current regulations and non-statutory law is clear and good enough meeting the challenges of the future.

The main proposals of the majority of the expert group are to

• Clarify and establish by law the content of the assessment of who is to be considered as an employee.
• Establish by law an assumption that if it is uncertain whether a person is an employee or self-employed person, a person is considered as an employee unless the employer can substantiate otherwise.
• Establish by law the non-statutory rule concerning shared employer responsibility, which was key in the airline Norwegian judgement from 2018 (HR-2018-2371-A).
• Expand the employer’s duty to offer other suitable work before termination of employment in a workforce reduction and the employee’s preferential right to new employment if that person is made redundant. The expansion implies that the group of companies as such are part of these assessments, not only the specific company that the person is employed by.
• Annul the general ground for using temporary employment in the working environment act section 14‑9 (1), letter f), which was created in 2015.
• Repeal the so-called four-year rule for temporary employments, meaning that all persons who have been employed temporarily for three consecutive years are entitled to permanent employment.
• Look closer at and clarify the use of temporary employments in universities and university colleges.
• Clarify what the term “work as a trainee” involves as a basis for temporary employment.
• Establish by law a definition of hiring labor (from staffing agencies or others) as well as the factors that the majority of the expert group find significant in the overall assessment in distinguishing between hiring and so-called manning contract.
  • A unified expert group agrees that the following criteria are key in this regard: Whether the hirer leads the work and whether the hirer has an independent responsibility for the result.
• Clarify that the employer’s responsibility for persons who are not their employees also comprise situations where the work is performed in other places than the physical place of work, i.e., digitally.
• Extend the requirement to have a safety representative for all companies regardless of size. Further, that the tasks of the safety representative also comprise hired personnel and self-employer persons when these have a certain degree of connection to the company.
• Lower the threshold for when it is required to establish a working environment committee.
• Establish by law a new provision regulating information and discussion in groups of companies.
• Establish by law the non-statutory possibility of precluding arrangements that entails by-passing of the working environment act.
  • A by-passing exists if an arrangement is motivated by reducing an employee’s rights and/or has the effect that the employee’s rights have in fact and legally been reduced, contrary to the aim of the working environment act.

The majority advise further investigation of by what means new ways of corporate structures and contractual relationships between companies can challenge the power in the relationship between the employer and the employee.

The whole expert group has assessed whether to provide the main employer organizations and trade unions with a general possibility to agree on temporary employments. However, they concluded that such amendments were not desired now. They also assessed whether certain contractors would have a need to negotiate collectively but refrained from any proposal due to the ongoing process in the EU in this regard.

4. Reflections

Several of the expert groups proposals will provide employees with a stronger protection than today. Overall, the proposals can be considered as measures to prevent the increasing international trend of division in the working life where employees with full rights on one side and other ways of engaging labor with fewer and poorer protections and rights on the other side. As such, the proposals of the majority of the expert group can be considered based on a precautionary measure. In the further follow-up of the official Norwegian report, we assume that a key question will be in whether such amendments are required given that Norway seems to have a considerably better well-functioning labor marked than other countries.

Among the specific proposals from the majority of the expert group, it is worth noting the proposal to provide employees with rights within a group of companies in a workforce reduction. If other suitable work can be found elsewhere in the group, that position must be offered to the employee. Furthermore, a redundant employee has a preferential right to new employment for any open position in any of the companies within the group. Today, the employee only has these rights in the specific company that is party to the employment agreement. Most of the Norwegian employees in the private sector work within a group of companies. Therefore, if the proposal is adopted, the practical consequences will be major for many employers in workforce reduction processes in the form of increased costs and reduced flexibility. Another proposal that will provide employees with increased protection is the general rule of preclusion that the expert group propose to establish by law. The proposal implies that the courts can deem invalid any arrangement and agreement that entails by-passing of the working environment act. There is no such regulation in the current legislation.

Recent case law from the Supreme Court shows that it can be challenging to classify an employment – the distinction between the different ways of engaging manpower is complicated. The proposal from the majority of the expert group to clarify the term “employee” will probably not simplify the assessments as the proposal does not include a significant deviation from the current law. However, the clarification can contribute to reduce the extent of the working persons in the so-called grey areas of the working life. In principle, this can lead to increased costs for the employer or other entities that engage manpower as they must make thorough assessments prior to entering a contract. Failure at that point in time could have economic and legal consequences for the receiver of the work performance. The expert group believe that this amendment will contribute to a larger number of permanent employees. As is well known, this is the main rule in the Norwegian working life and a core element in the Norwegian model.

The official report has been presented by the Ministry of Labor and Social Welfare with a deadline for consultation by 1 November 2021. It is reasonable to assume that it will be another exciting early summer in 2022 when the Government refines the proposals on the way to the Parliament.