The Redundancy Process Step by Step: What Employers Need to Have in Place

In Brief

• A redundancy process requires a valid business reason based on the company's financial or operational circumstances.
• Before proceeding with dismissals, employers must assess less intrusive alternatives and document that assessment.
• The selection pool and selection criteria must be determined and applied consistently to ensure the dismissals are legally defensible.
• Consultation with employee representatives and individual consultation meetings are mandatory steps before any decision is made.
• The notice of termination must comply with statutory formal requirements; otherwise, it may be deemed invalid.

What Does a Redundancy Process Involve?

A redundancy process is the implementation of a workforce reduction, from the initial decision through to the final termination of employment. For employers, this includes identifying and documenting the need for redundancies, consulting with employee representatives, informing employees, determining the selection pool and selection criteria, conducting individual consultation meetings, and ultimately issuing notices of termination in accordance with statutory requirements.
 

Step 1: Document the Financial or Operational Basis

Before initiating the process, you must be able to document why the redundancy is necessary. The Norwegian Working Environment Act requires that a dismissal be objectively justified, and in redundancy situations this means the company must have genuine financial or operational reasons justifying the need to reduce headcount.
 

Typical examples include:
 

• Declining revenue
• Loss of contracts
• Reorganisation
• The need for cost reductions

In practice, you should gather and document financial statements, budgets, forecasts, and board resolutions that demonstrate the situation. It is advisable to prepare a separate memorandum summarising the background. The documentation should be sufficiently specific to withstand scrutiny from employees, trade unions, or a court.
 

– A sound redundancy process begins long before the first conversation with an employee. The employer must be able to demonstrate why the redundancy is necessary, which alternatives have been considered, and how decisions have been made throughout the process.

Per Karsten Wahl, Lawyer at Svensson Nøkleby
 

If you are uncertain whether the basis is sufficient, our employment law specialists can assist with the assessment.
 

Step 2: Assess and Implement Less Intrusive Alternatives First

The requirement for objective justification also means that the employer must consider whether there are alternatives to dismissal. This should form part of the company's assessment of the need for redundancies.
 

Before taking the step of terminating employees, you should investigate and document that you have considered measures such as:
 

• Recruitment freezes and natural attrition
• Redeployment to other positions within the company
• Reduction of overtime and use of temporary labour
• Voluntary severance agreements or early retirement arrangements

There is no requirement that every alternative must be implemented, but you must be able to demonstrate that a genuine assessment was carried out. Document which alternatives were considered and why they were not sufficient.
 

Step 3: Determine the Preliminary Selection Pool and Selection Criteria

Once it is clear that dismissals are necessary, you must determine which positions will be affected and which employees must be assessed. This typically involves two main concepts: the selection pool and the selection criteria.
 

Selection Pool: Who Is Included?

Which part of the business will the redundancy affect? The entire company, a department, or a specific office?

As a general rule, the entire undertaking constitutes the selection pool. However, it may be objectively justified to limit the pool to a specific department, for example, provided there are sound reasons for doing so.
 

Normally, the reason for the redundancy itself will determine what is necessary. For instance, technological investments may have eliminated certain administrative positions. This may make it necessary and objectively justified to limit the selection pool to administrative staff.
 

Selection Criteria: Who Must Leave?

Which factors should determine who must leave? Common selection criteria include length of service (seniority), competence/suitability, and social considerations. Seniority has traditionally carried significant weight in Norwegian employment law, but employers may place emphasis on competence where the needs of the business justify doing so. Where the employer is bound by a collective bargaining agreement, the agreement will provide clear guidance for the selection process, and there must normally be an objectively justifiable reason to depart from the principle of seniority. The most important consideration is that the employer applies the established selection criteria consistently.
 

Step 4: Consult Employees and Employee Representatives Before Making a Decision

Employers are generally required to discuss the need for redundancies, the basis for the selection process, and possible measures to reduce negative consequences with employees and employee representatives as early as possible.
 

Under Section 8-1 of the Working Environment Act, companies with 50 or more employees are required to inform and consult employee representatives regarding matters of significance to employees’ working conditions.
 

Collective Agreements and Businesses Without Employee Representatives

For employers bound by a collective bargaining agreement, the obligation to consult is normally regulated by that agreement. Consultation with employee representatives must take place before a redundancy decision is made, and minutes from the discussions are usually required.
 

For businesses without employee representatives, there is no automatic equivalent obligation.
 

Working Environment Committee and Safety Representatives

The Working Environment Act nevertheless requires companies with at least 30 employees to establish a Working Environment Committee (AMU).

The committee must consider plans affecting the working environment, including rationalisation measures that redundancies will normally involve. We therefore recommend involving the AMU during the decision-making phase.
 

Employers are also required to appoint a Safety Representative once the organisation has five or more employees. The Safety Representative safeguards the interests of employees in matters relating to the working environment. For smaller businesses, it is therefore advisable to involve the Safety Representative as early as possible.
 

Collective Redundancies and Notification to NAV

If you are planning to dismiss at least 10 employees within a 30-day period, this is defined by law as a collective redundancy and is subject to specific legal requirements. The Norwegian Labour and Welfare Administration (NAV) must, among other things, be notified as early as possible, and the dismissals cannot take effect until at least 30 days after the notification has been submitted. In such cases, consultations with employee representatives must follow a more formalised process, including written information and formal minutes of the discussions.
 

Minutes from Consultations

Although it is not a legal requirement in all cases to prepare minutes of such consultations, these records often constitute crucial documentation demonstrating that the employer has carried out a thorough decision-making process. We therefore recommend that minutes are always prepared following such consultations or information meetings. The minutes should summarise the information provided and matters discussed, record any comments or input from the parties present, and be signed by all participating parties.
 

Step 5: Finalise the Selection Pool, Criteria, and Implementation Plan, and Conduct the Assessment

After the consultations, the final selection pool and the criteria are determined following any input from employee representatives and/or safety representatives. It is advisable that the decision is anchored in management, for example through a board resolution or documented management meeting minutes.
 

Prepare a preliminary implementation plan with a timetable for the individual meetings, an overview of who will be affected, and who will lead the process. Ensure that sufficient time is allowed in the plan for the necessary decision-making processes and consideration time before the individual meetings.
 

Thereafter, a preliminary assessment is carried out of which employees are presumed to be affected, using the established selection pool and selection criteria. The criteria must be applied consistently, otherwise this may easily be challenged later on with a claim that the dismissal is invalid. Therefore, ensure that the assessments can be reviewed and that you are able to explain why one employee was selected rather than another.

Step 6: Conduct Individual Consultation Meetings

Individual consultation meetings must be held with employees who are being considered for dismissal before any decision to terminate employment is made.

This requirement follows from Section 15-1 of the Working Environment Act.
 

Failure to hold such a meeting constitutes a procedural error and may result in the dismissal being declared invalid.
 

– A consultation meeting must be a genuine discussion, not merely information about a decision that has already been made. The employee must have the opportunity to present information that could influence the final assessment.

Ronny van der Meij, Lawyer at Svensson Nøkleby
 

Employees have the right to bring an employee representative or another adviser to the meeting. The employer must explain the basis for the potential dismissal and provide the employee with an opportunity to present their views.

What Should Be Discussed During the Meeting?

During the consultation meeting, the employer must provide a more detailed explanation of why it is considered necessary to carry out dismissals. This includes a summary of the company’s business and financial assessment, as well as an explanation of which selection pool and which selection criteria have formed the basis for the selection. In addition, the employer must explain how this has resulted in the employee now being considered potentially redundant.

During the consultation meeting, you must also discuss circumstances relating to the employee that may be relevant to the final assessment, including:
 

• Possibilities for other suitable work within the company. Even if the redundancy is objectively justified, a dismissal is not justified if the employer has other suitable work within the company to offer the employee. If the company is part of a group, this obligation also includes suitable work in other companies within the group.

• The employee’s competence and experience.

• The employee’s personal circumstances, such as dependants, age, health, or financial situation. A dismissal may be considered to lack objective justification if no balancing of interests has been carried out between the company’s needs and the disadvantages that a dismissal imposes on the employee.
   

Prepare minutes from the meeting and ask the employee to sign them. The minutes are important documentation should the dismissal later be disputed. Final decisions regarding the termination of an individual employment relationship may only be made after the consultation meetings have been completed.
 

Step 7: Provide Written Notice of Termination in Compliance with the Formal Requirements of the Law
 

The notice of termination must be in writing and comply with the formal requirements set out in the Working Environment Act, as provided in Section 15-4 of the Working Environment Act. The notice of termination shall, among other things, include:
 

• Information about the right to demand negotiations and to institute legal proceedings, including information about the deadlines that apply for doing so.
• Information about the right to remain in the position while negotiations are ongoing.
• Information about who the employer is and the correct defendant in legal proceedings.
• Information about the preferential right to a new position.

The notice of termination shall be delivered personally or sent by registered mail. Any failure to comply with the formal requirements, meaning that the notice of termination does not satisfy the statutory content requirements, will as a general rule result in the dismissal being declared invalid.
 

Conclusion
 

A redundancy process may be both objectively justified and necessary for the business, based on well-documented circumstances beyond the employer’s control. Nevertheless, dismissals carried out as part of the process may be declared invalid in legal proceedings if one or more procedural errors have been made along the way. Ensuring that all steps in the process are thoroughly considered is essential in order to secure a lawful process. It is therefore advisable to involve legal assistance at an early stage of the process in order to set the right course from the outset.
 

Contact our experienced employment lawyers for a no-obligation discussion of your situation.
 

Frequently Asked Questions About the Redundancy Process
 

1. What is a redundancy process?

A redundancy process is the actual implementation of a redundancy from the decision stage through to the final dismissal. It includes identifying and documenting the need, consultations with employee representatives, informing employees, determining the selection pool and selection criteria, conducting individual consultation meetings, and ultimately dismissals in accordance with the formal requirements of the law.
 

2. What requirements apply to a redundancy process involving employees?

The dismissal must be objectively justified by the company’s financial or operational circumstances. The employer must also have considered less intrusive alternatives, carried out consultations with employee representatives and employees, and finally complied with the formal requirements of the Working Environment Act when issuing the notice of termination.
 

3. How long does a redundancy process take?

There is no fixed timeframe, but sufficient time must be allowed for thorough assessments, consultations, and individual meetings. In cases of collective redundancy, meaning at least 10 employees within a period of 30 days, special rules apply.
 

4. What does preferential right following a redundancy process entail?

Employees who are dismissed in connection with a redundancy must be informed of their preferential right to a new position. This must be stated in the notice of termination itself, in accordance with the formal requirements of the Working Environment Act.
 

5. When is a redundancy process considered a collective redundancy?

If an employer plans to dismiss at least 10 employees within a period of 30 days, this is considered a collective redundancy. In such cases, special rules apply, including notification to NAV and a more formal consultation process with employee representatives, including written information and formal minutes.