The Supreme Court recently ruled that employees who are subject to a transfer of undertakings can choose to stay with their former employer if it is likely that they will lose their early retirement pension under the new employer.
The employee in the matter before the Supreme Court argued that she would lose her early retirement pension (which she would qualify for when she turned 62 years old) if she were transferred to the new employer. The early retirement pension was part of a collective bargaining agreement that applied to the former and not the new employer.
The early retirement scheme is partly funded by the state and forms part of a significant number of collective bargaining agreements in Norway. Employees must fulfil a number of requirements in order to be eligible, including being employed at a company which is bound by a collective bargaining agreement that provides for the scheme.
The total early retirement pension amount that the employee would receive once she fulfilled the required conditions 14 months after the transfer date was Nkr1.3 million (approximately €137,400).
The main rule under the Norwegian transfer of undertakings (protection of employment) legislation is that employees must be transferred to the new employer if a transfer is considered to be a transfer of undertakings. As a statutory exception, employees may opt not to transfer to the new employer (reservation right). In such cases, the employment contract will cease without further notice on the transfer date. In addition, a non-statutory Norwegian rule provides employees with the right to choose to stay with their former employer (right to choose). This narrow exception requires there to be "not insignificant changes in the employee's situation". The non-statutory rule has been developed by case law and the Supreme Court has not previously assessed pension issues in this regard.
The Supreme Court stated that whether employees in a transfer of undertakings have the right to choose to stay with their former employer depends on a specific assessment of the changes to each individual's work situation that the transfer will bring about. This assessment includes how likely it is that these changes will be realised. The Supreme Court went on to say that the type of consequence is not the decisive factor; rather, the weight of the consequences in the individual case must be considered.
In its assessment of the case at hand, the Supreme Court found that the employee would likely have received an early retirement pension within one to two years of the transfer if she stayed with the former employer. Of relevance to this assessment was the extent to which the conditions for receiving the early retirement pension were fulfilled on the transfer date and the length of time until the withdrawal date. The Supreme Court concluded that:
- the loss of a total pension of Nkr1.3 million was a not insignificant change in the employee's work situation; and
- she was therefore entitled to choose to stay with her former employer.
The Supreme Court also clarified that personal circumstances which are unrelated to an employee's work situation are irrelevant in an assessment of whether they have a right to choose to stay with their former employee. In the matter at hand, the employee had a large, personal debt due to her husband's dementia. However, this was not accepted as grounds for her right to choose.
This judgment will affect future transfers of undertakings in Norway in situations where part of a company is transferred and the transferor offers the early retirement scheme under a collective bargaining agreement, but the transferee does not. A consequence of an employee invoking their right to continue their employment relationship with the transferor may be that the employee risks being made redundant.
For further information on this topic please contact Ole Kristian Olsby at Homble Olsby Advokatfirma AS by telephone (+47 23 89 75 70) or email ([email protected]). The Homble Olsby Advokatfirma website can be accessed at www.homble-olsby.no.
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