Employee Rights During Downsizing: What You Should Know

When facing a downsizing process, it is essential to understand your rights and obligations as an employee. Downsizing occurs when a company reduces its workforce due to financial challenges, restructuring, or other operational reasons.

This article explains your legal rights during downsizing, what you should be aware of, and how to handle such a situation in the best possible way.

The Legal Framework for Downsizing

Downsizing – also known as termination due to business-related reasons – occurs when an employer reduces the number of employees. The need for downsizing may be based on economic difficulties, organisational changes, or other operational requirements. This differs from terminations that are based on the employee’s personal circumstances.

For a downsizing to be lawful, the employer must comply with the legal framework set by the Working Environment Act (arbeidsmiljøloven) and other relevant legal sources.

According to Section 15-7 (1) of the Act, a termination must be based on a “justifiable reason” (saklig grunn). This means the employer must be able to document and justify why the downsizing is necessary.

In practice, a distinction is made between strong and weak grounds:

• Strong reasons exist in cases of serious economic challenges – such as continuous losses, negative equity, or imminent risk of closure or bankruptcy.

• Weaker reasons, such as a desire for increased profitability or efficiency, require a more thorough assessment and documentation to meet the legal standard of a justifiable termination.

Employees in Norway enjoy strong employment protection, even in downsizing situations. This protection stems from the wording “justifiable reason” in Section 15-7 of the Working Environment Act. The provision is intended to safeguard employees from unreasonable or arbitrary dismissals, given the severe economic and social consequences they may face.

Therefore, the law imposes strict requirements for justification, due process, and proper documentation throughout the entire downsizing process.

Before implementing a downsizing, the employer must also assess alternative measures – such as internal transfers or voluntary solutions – as required by Section 15-7 (2). If it is possible to redeploy an employee to another suitable position, this must be attempted before proceeding with termination.

Fundamental Employee Rights: Notification and Consultation

Before a downsizing can take place, the employer must notify and consult with employee representatives.

Both Section 15-2 of the Working Environment Act and Section 9-6 of the Main Agreement between LO and NHO require employers to inform and involve employee representatives in the process.

The employer must provide the representatives with all relevant information in writing, including:

• The reasons for potential terminations

• The number of employees affected

• Which departments or work groups are involved

• The total number of employees usually employed

• The categories of employees normally engaged

• The timeframe for planned terminations

• Proposed criteria for selecting which employees may be dismissed

• Proposed criteria for calculating any severance payments

The written notice must be given as early as possible, and no later than the time when consultation meetings are called, cf. Section 15-2 (3).

The main purpose of these consultations is to reach an agreement that avoids or limits the number of terminations.

Employee representatives play a key role in safeguarding employees’ interests and ensuring the process is carried out in accordance with laws and collective agreements. Employers must document these consultations and explain how the representatives’ input has been considered or implemented where relevant.

Notice Period

In downsizing cases, notice periods follow the rules set by the Working Environment Act or the employment contract.

If not otherwise specified by contract or collective agreement, the general rule is a mutual notice period of one month, cf. Section 15-3 (1).

There are exceptions depending on the length of employment:

• More than five years of service → two months’ notice

• More than ten years of service → three months’ notice

The employer must inform the employee of their notice period, and the employee is entitled either to work during this period or to receive salary in lieu of work.

Employees should use the notice period strategically – for example, to apply for new jobs or engage in further education, ensuring a smooth career transition.

Documentation and Justification

The employer must be able to present objective documentation supporting the need for downsizing, cf. Section 15-7 of the Act.

This may include:

• Economic analyses

• Business plans

• Minutes from consultation meetings with employee representatives

Proper documentation is crucial to prevent legal disputes and to demonstrate that the downsizing is both fair and necessary. Employers should maintain transparency and open communication with employees and provide access to relevant information – such as financial reports, forecasts, and other factors influencing the decision to downsize.

Employee Rights During Downsizing

Right to a Consultation Meeting

Before any termination, employees are entitled to a consultation meeting with the employer, cf. Section 15-1 of the Working Environment Act.

This meeting allows employees to present their views and questions regarding the termination and the process itself. It is an essential safeguard to ensure that the termination is handled fairly and lawfully.

Employees should prepare thoroughly and may bring a union representative or lawyer to ensure that all relevant points are raised and documented.

Right of Re-employment

According to Section 14-2 (1) of the Working Environment Act, employees dismissed due to downsizing have a preferential right to re-employment if a new position becomes available within one year after termination.

This right applies to employees who have been employed for at least 12 months during the previous two years, cf. Section 14-2 (3). It also applies to temporary employees, cf. Section 14-2 (2).

This means the employer must offer the former employee any suitable position before hiring new applicants.

Employees should stay informed about internal job postings and be proactive in applying. Updating qualifications and skills can also strengthen their chances of re-employment.

Right to Appeal

If an employee believes their termination is unjustified or unfair, they have the right to appeal – either through internal grievance procedures or external bodies such as the Norwegian Labour Inspection Authority (Arbeidstilsynet).

Employees should carefully document all relevant facts supporting their claim. A well-prepared appeal can lead to a reassessment of the decision. Union involvement often strengthens the case, as unions have experience handling such matters and can offer additional support and advice.

Important Advice for Employees

Documentation

Keep detailed records of everything related to the downsizing process – including meetings, emails, and written correspondence with the employer. Proper documentation can be decisive in the event of a dispute. Maintain all files securely and systematically.

Communication with the Employer

Maintain open and respectful communication with your employer and employee representatives. Ask questions and seek information about your rights. Transparent and professional communication can help ensure a smoother process and reduce potential conflicts.

Legal Advice

Seek legal assistance if you are uncertain about your rights or the downsizing procedure. A lawyer can provide valuable guidance, assess your situation, and help you safeguard your interests. Legal counsel can also assist in negotiations and represent you in case of a dispute.

Conclusion

Downsizing is a challenging process for both employers and employees. By understanding the legal framework, rights, and obligations, both parties can navigate the situation fairly and lawfully.

Key factors for a just process include sound justification, employee participation, and clear communication. When these principles are followed, employers can maintain a professional relationship with staff while avoiding disputes. Employees who are well-informed and prepared can protect their rights and plan their next steps effectively.

Want to learn more about downsizing? Read our main article on the topic or contact us for guidance.

Contact Us About Downsizing

If you have questions about your rights during a downsizing process, or suspect that a downsizing is unlawful, contact one of our employment lawyers.

At Advokatfirmaet Verito AS, we specialise in employment law and can assist you with advice, negotiations, and representation in disputes.

Reaching out to us is free of charge.
24 02 21 20 | post@verito.no

Read the Norwegian version Rettigheter ved nedbemanning 

Frequently Asked Questions

Sources

• Working Environment Act (arbeidsmiljøloven)

• Main Agreement between LO and NHO