Episode 5: The snow mechanic ruling

After several hours negotiating in a meeting, you have just landed a termination agreement with an employee. A few weeks later you are sued by the same employee. He argues that the agreement does not apply that that he has effectively been terminated from his employment. This was the situation in an Appellate Court ruling from 2022. In this podcast episode we will look at the ruling to see if there is anything we can learn from it that can be used the next time you negotiate a settlement agreement.

Transcript

[00:00:00] Lill: Hi, my name is Lill Egeland. I head up the Employment Law Department of Simonsen Vogt Wiig, and welcome to this episode of Norwegian Employment Law in 10 Minutes. Now, we have a separate episode on the conclusion of termination agreements and the Norwegian law. So I recommend that before you listen to this episode, you should listen to that one.

[00:00:29] In this episode, I am going to give you the highlights of a appellate court ruling on termination agreements that came in 2022. As you know from listening to the episode on termination agreements in Norway, It is fully possible for an employer and an employee to conclude termination agreements in Norway.

[00:00:52] In this particular case, an employer and an employee had concluded an agreement, but the employee said that the agreement was invalid, that the agree, that the employee had been subjected to pressure in signing the agreement, and as a consequence that the agreement was not valid. So the case was that a mechanic, I actually like to call him a snow mechanic because he was hired to work on an indoor snow facility in Norway, and he was in his probation period.

[00:01:31] He didn't do too well. and the employer, after a couple of months or three months, invited him for a meeting. During that meeting, the employer basically said that the employer didn't want to have the employee working for him anymore, sent him home, had him deliver his keys, and basically fired him in that meeting.

[00:01:53] A week later, the employer invited the employee for a consultation meeting informing him that we are considering to terminate your employment. The employer brought a lawyer to the meeting, the employee brought a union representative. The conclusion of the meeting was, after some back and forth, that the parties signed a termination agreement.

[00:02:14] In that agreement, the employee got, one month. severance pay and was released from his obligation to work during the notice period. Sometime after when the employee applied for unemployment benefit, he realized that he wouldn't get the benefits until after a prolonged waiting period. because the unemployment authority said that you have been terminated due to something that you can be blamed for, because this is what your employer said when we contacted them.

[00:02:48] So you'll have to wait 12 weeks before you get the unemployment benefits. This didn't, go well with the employee, so he filed a lawsuit against the employer saying that the termination agreement was invalid. He won in the first court, but in the appellate court, the question then became, was this ruling from the first court, instance court, correct, or was it not?

[00:03:15] So the, appellate court started by saying that any termination agreement, can be concluded, The parties can enter into such agreements, and as a main rule, they are valid. However, there is a rule under Norwegian law in the Agreements Act from 1918, saying that if an agreement is unreasonable, then it shall be set aside as non binding.

[00:03:46] So the question before the court was then, is this an unreasonable agreement? The Appellate court starts by saying that, the threshold is fairly high for anything to be unreasonable under Norwegian law. They started by looking at, what happened in connection with the conclusion of the agreement?

[00:04:06] Was there indeed, indecent pressure to sign such an agreement? The court went into the situation of the meeting between the employee and the employer, said that, yes, the agreement was concluded during the meeting. However, the employee was represented by, a union rep. There was no pressure.

[00:04:30] In the meeting, on the contrary, it was the employee who wanted to have a, termination. The employee wanted to find a solution where he quit. There was back and forth with offers. Three months, two months, they ended on one month. So there was nothing in the, in the meeting that indicated there was any pressure.

[00:04:56] The appellate court also said, in addition to this, we need to see, the relationship between the parties. Is there anything in that relationship that should indicate that this is an unreasonable and invalid agreement? Of course, there's a difference in strength between an employer and employee the court says, but this will always be the case. It cannot imply that a termination agreement is invalid as a consequence. It also looked at the strength, the difference of strength between the lawyer of the employer and the union rep of the employee, but found that really, in this case, there was no difference, to talk of in the strength between those parties.

[00:05:40] As a side note, it's quite uncommon and a bit strange that this is, even, looked at in the courts, but, in this case, anyway, the courts came to the conclusion that there was not a big difference in strength. Next, the court asked, is the content of the agreement unreasonable? The employee got one month, Whether or not this is unreasonable depends on whether or not their termination would have been valid.

[00:06:09] If the termination is valid, then it cannot be unreasonable, for the employee to get 14 days extra. So the court went into the case, and I won't go into the details of what the court said, but the court came out of that assessment saying that, in this case, the termination would not have been valid. this would have been an invalid termination. However, the fact that the termination itself would have been invalid doesn't mean that a termination agreement in the wake of this, process would be invalid because there are other elements we have to consider also. Okay, it says the court, it would have been an invalid termination.

[00:06:54] However, it is the employee who wanted to have a closure. The employee also gets 14 days more than he would have received in a termination, and he would not have been entitled to remain in his position. Furthermore, there's a benefit for the employee to be finished with the case anyway.

[00:07:15] So in all, there were sufficient amount of benefits for the employee for this termination agreement to be valid. So the conclusion after reviewing all of these elements was for the court that this was a valid agreement that could be upheld. So the employee basically lost the case.

[00:07:39] Now, what can we learn from this court case. first of all, we can learn that if you're in a meeting with the employee or a conversation with the employee, and there's a talk of a termination, you shall never say to the employee that the employee is terminated. You should never, give any indication that a final decision has been made.

[00:08:03] This is not something you should do until after you have had a formal consultation meeting with the employee where you've heard everything that the employee has to say and you provided everything you want to say. And at that point, you're ready to conclude on a termination. And if you do, then you need to, submit a formal letter containing a number of elements.

[00:08:26] So that's the first thing you shall never say to the employee that the employee is fired. Secondly, If you are in a position where you want to conclude a termination agreement, make sure that the employee has enough time to think about whether or not to conclude it. If the employee is represented by either a lawyer or a reunion rep, very often you can be in a position to actually conclude the agreement in a meeting.

[00:08:54] However, it is also good not to take the chance. Even if the employee is represented, you should give the employee the possibility to think about it, to until the next day. So those are two takeaways from this court case. I hope you've learned something more about termination agreements in Norway. Enjoy the rest of your day and come back for our next episode.