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Preferential rights went out the window

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Legal news
calendar 19 June 2022
globus Norway

Employees who are terminated due to redundancy will have a preferential right to available positions in the company unless the positions are filled internally. As a result, the Norwegian Court of Appeals concluded that three employees’ preferential right did not apply as the positions were filled by internally.

Three employees in a company with activities within the offshore oil industry were terminated due to redundancy. In connection with the termination, they were informed of their preferential rights which meant that they had an entitlement to available positions within the company unless the positions were internal.

After the termination period, but while the preferential rights still applied, the company temporarily employed employees from a subsidiary company in relation to a project. In addition, because the two companies operated with different shifts, the company also had to hire an extra 27 employees.

Despite being qualified for three of the positions, the three employees never received an employment offer. Consequently, they claimed compensation with reference to their preferential rights.

No external positions equals no preferential right

Preferential rights are only applicable when available positions are available for job seekers outside of the company. When the Norwegian Court of Appeals concluded that the employees did not have any preferential rights to the positions, this was precisely because the positions were not available externally.

As for the company’s temporary employment of the subsidiary employees, this was not external positions. The reason was that the temporary employment was a temporary transfer of undertakings between the two companies. Because the employees therefore automatically transferred together with the transfer of activities, the positions had never been available to employees outside the company.

As for the available 27 positions, the company had filled the positions by use of an internal restructuring process. In other words, the company had also here filled the positions internally, by making use of people who were already employed by the company.

IUNO’s opinion

Employees will have a preferential right for one year, when terminated due to the company’s circumstances, such as redundancy. As seen in this case, this right will however only apply for external positions. It is also a condition that the employee is qualified for the position.

IUNO recommends that companies keep an overview of former employees with preferential rights, as it is the company’s responsibility to offer the employees available positions. If the company has offered a suitable position to an employee with preferential rights that the employee declines, the preferential right expires. Companies should further be aware that terminations during the coronavirus pandemic might be covered by an extended preferential right of two years.

[The Norwegian Court of Appeal’s judgement of 23 May 2022 in case LF-2022-5454]

Three employees in a company with activities within the offshore oil industry were terminated due to redundancy. In connection with the termination, they were informed of their preferential rights which meant that they had an entitlement to available positions within the company unless the positions were internal.

After the termination period, but while the preferential rights still applied, the company temporarily employed employees from a subsidiary company in relation to a project. In addition, because the two companies operated with different shifts, the company also had to hire an extra 27 employees.

Despite being qualified for three of the positions, the three employees never received an employment offer. Consequently, they claimed compensation with reference to their preferential rights.

No external positions equals no preferential right

Preferential rights are only applicable when available positions are available for job seekers outside of the company. When the Norwegian Court of Appeals concluded that the employees did not have any preferential rights to the positions, this was precisely because the positions were not available externally.

As for the company’s temporary employment of the subsidiary employees, this was not external positions. The reason was that the temporary employment was a temporary transfer of undertakings between the two companies. Because the employees therefore automatically transferred together with the transfer of activities, the positions had never been available to employees outside the company.

As for the available 27 positions, the company had filled the positions by use of an internal restructuring process. In other words, the company had also here filled the positions internally, by making use of people who were already employed by the company.

IUNO’s opinion

Employees will have a preferential right for one year, when terminated due to the company’s circumstances, such as redundancy. As seen in this case, this right will however only apply for external positions. It is also a condition that the employee is qualified for the position.

IUNO recommends that companies keep an overview of former employees with preferential rights, as it is the company’s responsibility to offer the employees available positions. If the company has offered a suitable position to an employee with preferential rights that the employee declines, the preferential right expires. Companies should further be aware that terminations during the coronavirus pandemic might be covered by an extended preferential right of two years.

[The Norwegian Court of Appeal’s judgement of 23 May 2022 in case LF-2022-5454]

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Anders

Etgen Reitz

Partner

Sofie

Aurora Braut Bache

Senior associate

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Akina

Ørum Masaki

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Starup Poulsen

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Etgen Reitz

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Aurora Braut Bache

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