NEW JUDGEMENT FROM THE NORWEGIAN SUPREME COURT – HIRED WORKERS ARE ENTITLED TO PERFORMANCE-RELATED COMPANY BONUS

On 2 November 2020, the Norwegian Supreme Court ruled on the understanding of the concept of pay for workers hired from temporary work agencies (HR-2020-2109-A). The case revolved around whether hired workers were entitled to performance-based company bonuses as if they had been permanently employed, by virtue of the rule of equal treatment of wages and working conditions for employees.

 

Case facts
The temporary work agency Semco Maritime AS had hired out two workers on a long-term basis to the oil company Aker BP (“Aker”). Aker had established a bonus scheme at the company level for its employees, which was based on the company’s profits. The bonus scheme applied to all “permanent employees of Aker BP (including apprentices)”. From 2013, bonus payments had ranged between NOK 45,000 to NOK 75,000 for employees in similar positions as the two hired workers.

 

The hired workers were excluded from the bonus scheme and filed a lawsuit against the temporary work agency demanding bonus as if they had been permanent employees of Aker. The hired workers won the case in the District Court, while the Court of Appeal came to the opposite result. The workers then appealed the case to the Supreme Court where they ultimately prevailed.

 

The subject matter of the case
The question raised before the Supreme Court was whether the two hired workers were entitled to a company bonus as if they were permanent employees in Aker, pursuant to the rule on equal treatment of wages and working conditions when hiring from temporary work agencies.

 

The hired workers argued that the company bonus was included in the definition of “pay” and therefore covered by the rule mandating equal treatment with permanent employees. The workers also claimed that the bonus scheme entailed an element related to their individual work performance. The temporary work agency argued that a company bonus based on the financial results of the company could not be considered as pay, as the results would not be linked to the workers’ individual performance.

 

The conclusions of the Supreme Court
The Supreme Court considered whether the hired workers were eligible for the bonus scheme by reason of the rule on equal treatment of “pay” in the Norwegian Working Environment Act Section 14-12a (1) (f). The rule was introduced in 2012 to implement the Directive of the European Parliament and of the Council on temporary agency work from 2008. The purpose of the rule is to ensure equal treatment with permanent employees. The Supreme Court considered that the bonus scheme in Aker was performance-based at a group level, determined by the overall performance of the company’s employees the preceding year. As such, the bonus scheme had an element linked to work performance.

 

The Supreme Court unanimously ruled that the bonus scheme in Aker was covered by the term “pay”. Consequently, the hired workers were entitled to the same bonus as the permanent employees. Emphasis was placed on the goal of achieving real equality between the payment received by the permanent employees and that of the hired workers.

 

The temporary work agency was ordered to pay bonus to the two hired workers. It is worth noting that a deduction was made for one of the workers as the worker had a period of temporary lay-off.

 

Following this judgement, temporary work agencies must observe that bonuses linked to either individual performance and performance at group level are included in the term “pay” and subsequently covered by the rule of equal treatment with permanent employees. Bonus schemes will be covered by the rule if they are linked to remuneration for work performed. This applies regardless of whether the company operates with bonus schemes at an individual or at the company level.

 

Companies hiring workers from temporary work agencies must also take note, as they are jointly and severally liable under the Norwegian Working Environment Act Section 14-12 (c) for payment of wages, holiday pay and any other remuneration pursuant to the rule of equal treatment.

 

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Contact persons in Brækhus Law:
Eirin Simonsen
Eivind Arntsen
Lisa Eian
Kritine N. Slotnæs

09.11.2020