Cross-border work – Halvorsen & Co Law Firm

Cross-border labour

Many foreign workers perform work in Norway. At the same time, it happens that particularly vulnerable workers are exploited by unscrupulous actors. The risk is often greatest for unskilled labour that does not master Norwegian and has limited knowledge of the regulations. It also happens that employers operating abroad recruit labour to Norway on terms that deviate from what the worker has reason to expect.

The core of the problem: employment contract and social security affiliation

A recurring issue arises when an employee works in Norway but is – wholly or partly – affiliated with a foreign company. Such cross-border employment relationships can have significant practical and financial consequences, both for pay and working conditions, and for rights in cases of illness and injury. A gap frequently arises between what the parties believe has been agreed and what the regulations actually stipulate. This becomes particularly apparent when entitlement to benefits from the National Insurance Scheme and questions of coverage for work-related injuries need to be assessed.

A concrete example from practice

A concrete case illustrates the issue: the significance of a «Norwegian» employment contract when the genuine connection to the employer and social security scheme is different from what the contract indicates.

The starting point is that the employee performs work in Norway under an employment contract drawn up to Norwegian standards, with permanent employment and regulation of working hours and salary terms according to Norwegian legislation. In the event of injury or illness, it would be natural to expect benefits from NAV during sick leave and – if the conditions are otherwise met – benefits and/or compensation related to occupational injury. However, this presupposes that the employee is covered by Norwegian social security (choice of law), and that relevant coverage exists.

In the specific case, it later transpired that the employee had signed two employment contracts with two companies that were in reality run by the same employer: one in their country of residence and one in Norway. The employee was thus formally linked to two countries, even though the work was carried out in Norway. After the injury, the employee contacted NAV (Norwegian Labour and Welfare Administration) about sickness benefit. It then emerged that the employee was formally registered as employed in their country of residence, and after registration there, had been seconded to Norway. At the same time, he was registered in Norway's Employer and Employee Register (Aa-registeret). The social security authorities in the country of residence confirmed that at the time of the injury, he was covered by the country of residence's social security legislation as a seconded employee.

Legal starting point: choice of law according to EEA rules

Under EEA rules, the general principle is that a person can only be covered by the social security legislation of one member state at a time. For workers who work in two or more EEA countries, it must be clarified which country's social security legislation applies (choice of law), according to the social security coordination regulations.

Consequences for the employee in case of illness and injury

Although the reality of the case was that the employee had a Norwegian employment contract, performed work in Norway (and not in their country of residence), and acted in good faith believing that working in Norway granted them rights as in an ordinary Norwegian employment relationship, their social security affiliation became decisive. NAV must, as a starting point, base its decision on the choice of law clarification from the other Member State, and could not simply assume that working in Norway automatically entailed membership in the National Insurance Scheme. As the case stood, the employee risked being excluded from the benefits they expected in case of illness and injury in Norway. In certain cases, questions may arise regarding incorrect choice of law information or abuse, but the threshold for altering a choice of law clarification is high, and the way forward will often lie via the authorities in the state that made the decision.

The case is not yet concluded. Nevertheless, the preliminary assessments highlight the complex issues that can arise in cross-border employment relationships. The question is not only what the employment contract stipulates, but also what legal and factual ties exist to the employer and social security scheme – and what consequences this has for the individual.

What should the employee clarify in advance?

The above case raises several questions, including who is effectively acting as the employer, what weight a Norwegian employment contract should have, and whether the procedure could involve circumventing Norwegian regulations – and how this can be addressed if so. The article does not delve into all the questions, but highlights pitfalls for employees who enter into employment with foreign companies and later discover that their connection to Norway does not provide the rights they have reasonably assumed.

It is therefore particularly important to clarify before commencing employment who the actual employer is, what the terms of employment and pay are, and which country's social security legislation applies. If in doubt, it may be necessary to contact the social security authorities in the relevant countries to clarify the choice of law, and potentially follow up if the information on which the decision was based does not correspond to how the employment relationship is actually structured.

Please do not hesitate to contact us if you have any questions about your employment relationship or terms of employment.