The EFTA Court sends the case regarding Norwegian hiring rules back to Oslo District Court

On November 20, the EFTA Court issued an advisory opinion in connection with the Oslo District Court case between Bygg & Industri Norge AS with others and the Norwegian State. The question in the case was whether the Norwegian restrictions on the hiring of temporary workers are contrary to the EEA Agreement. The EFTA Court stated that the hiring rules constitute a restriction on the right of establishment under Article 31 of the EEA Agreement, but that it is up to the Norwegian courts to decide whether the restrictions can be justified. The EFTA Court also asked Oslo District Court to consider whether the hiring rules are contrary to Article 28 of the EEA Agreement on the free movement of workers.

Background

On April 1st, 2023, several restrictions were introduced regarding the hiring of temporary workers. Among other things, the general access to hire from staffing agencies for work of a temporary nature was abolished. It is still permitted to hire from staffing agencies for substitute positions, or by agreement with union representatives for companies that have a collective agreement with a trade union with nomination rights. However, hiring from staffing agencies for construction work at building sites in Oslo, Akershus, Østfold, Buskerud, and Vestfold is completely prohibited.

Bygg & Industri Norge AS with others feel that their business has been restricted by these rules and believe the rules are contrary to the EEA Agreement. They have therefore filed a lawsuit in Oslo District Court, claiming compensation.

When a Norwegian court must interpret an EEA legal provision, it may in certain cases refer the interpretation question to the EFTA Court before issuing a judgment. If the conditions for this are met, the EFTA Court will provide an advisory opinion, as it did on November 20.

Overview of the EFTA Court’s Advisory Opinion

The principle of free movement of goods, services, persons, and capital (the four freedoms) applies in the EEA area. The questions referred by Oslo District Court to the EFTA Court concerned whether the hiring rules constituted a restriction on the movement of services.

The EFTA Court considered that the correct question was whether the hiring rules were contrary to the free movement of workers, or alternatively, the right of establishment. This was an argument made by Bygg & Industri Norge both in the district court case and before the EFTA Court, but it was not among the questions referred to the EFTA Court. The fact that the district court had asked the “wrong” questions meant that the case was not as well presented as the EFTA Court would have liked.

Nevertheless, the EFTA Court’s opinion provides important clarifications for assessing which freedoms are affected, and it offers some guidance on whether the hiring rules are contrary to Article 28 or Article 31 of the EEA Agreement. The latter is the focus of the following discussion.

The EFTA Court on Possible Violation of the Free Movement of Workers

For the right of workers to be employed and work without discrimination to be effective, the EFTA Court emphasized that employers must have a corresponding right to employ them. Thus, even though the hiring rules primarily restrict staffing agencies, they may also indirectly affect the free movement of workers.

Furthermore, the EFTA Court clarified that both direct and indirect discrimination, depending on the circumstances, may constitute discrimination contrary to Article 28 of the EEA Agreement.

On this basis, the EFTA Court held that the Oslo District Court must assess whether the hiring rules may have a greater impact on workers from other EEA states than on workers in Norway. If so, they constitute a restriction under Article 28 of the EEA Agreement that must be justified to be compatible with the article. These questions were not well elucidated for the EFTA Court.

The EFTA Court on Possible Violation of the Right of Establishment

The EFTA Court stated that the right of establishment means, among other things, that citizens of an EEA country should generally be able to start and conduct business activities in other EEA countries. Similarly, a company validly established in one EEA state should, as a rule, also be able to conduct its business in another EEA state through a branch or subsidiary established there.

Since one of the staffing agencies in the case was a subsidiary of a Danish parent company with non-Norwegian owners, the EFTA Court considered Article 31 of the EEA Agreement applicable. The EFTA Court further concluded that the hiring rules constitute a restriction on the right of establishment. At the same time, it emphasized that EEA law in certain cases allows restrictions on the right of establishment. This is the case, for example, if the restriction applies regardless of nationality, is justified by overriding public interests, is suitable for achieving the stated objective, and does not go further than necessary to achieve the objective.

The State argued that the purpose of the hiring rules “was to limit the use of hiring from staffing agencies that displace permanent, direct employment, but more importantly, the underlying purposes are to protect workers, prevent abuse, ensure a well-functioning labour market, and safeguard workers’ health and safety.” The EFTA Court considered these legitimate objectives, but stated that it is up to the Norwegian courts to decide whether the hiring rules are actually justified by such objectives.

If Oslo District Court finds that the hiring rules are justified by legitimate objectives (which the State must prove), it must assess whether the measures comply with the EEA law’s principle of proportionality. Under this principle, the restrictions must be suitable for achieving the objectives and not go further than necessary.

In practice, the EFTA Court sent the case back to the Oslo District Court with more questions than the Oslo District Court had sent to the EFTA Court. Perhaps we are a bit wiser, nonetheless. The heaviest homework was also given to the State. The EFTA Court provides clear guidelines on the documentation required for the assessments made and the considerations the rules are intended to safeguard. Therefore, the EFTA Court’s opinion is not an absolute defeat for the plaintiffs.

The advisory opinion can be read in full here.