For the first time, the Supreme Court has clarified the scope of the exemption for "particularly independent positions" in Section 10-12 (2) of the Norwegian Working Environment Act. The judgment establishes that the exemption is to be interpreted narrowly, and that the employee must have clear and evident independence.
Background and legal question
The case concerned a project manager in a construction company who claimed overtime compensation from the person who was the CEO and chair of the board, after the company went bankrupt. The project manager was responsible for several large construction projects – the largest with a budget of up to NOK 100 million. He had significant flexibility with regard to working hours with no requirement to record his hours, and the employer exercised little control over how the work was performed.
Both the District Court and the Court of Appeal found that the project manager was exempt from the working time regulations. The issue before the Supreme Court was whether the project manager held a "particularly independent position" under Section 10-12 (2) of the Working Environment Act. The Supreme Court disagreed with the lower courts and set aside the Court of Appeal's judgment.
What does the Supreme Court say in the judgment?
The Supreme Court held that the exemption for "particularly independent positions" must be interpreted narrowly. It is not sufficient that the position offers flexible working hours and the opportunity to decide when during the day the work is performed. The position must involve clear and evident independence. The key question is whether the employee decides what is to be done, what is to be delegated, how the work is to be done and when the work is to be performed. The employee must have considerable freedom to decide both the scope of the work and when it is performed.
The assessment of whether a position is "particularly independent" must take into account all framework conditions, not only the so-called internal framework conditions set by the employer. External framework conditions, such as deadlines and requirements from customers, business partners or public authorities, are also relevant. According to the Supreme Court, a position that is not independent due to external framework conditions cannot become particularly independent simply because the employer refrains from setting limits on working hours. However, employees in "particularly independent" positions will also have to work within certain framework conditions. According to the Supreme Court, framework conditions only prevent a position from being "particularly independent" where they limit the employee’s ability to decide their working hours "to a decisive extent". Unfortunately, the judgment offers little guidance on where this threshold lies.
The Supreme Court also noted that the provisions in Chapter 10 of the Working Environment Act must be interpreted in light of the EU Working Time Directive, which points in the same direction: the assessment centers on the freedom to decide the length of one’s working hours, and it is not sufficient that the employee decides when during the day the work is performed.
For the project manager in this case, this meant that although he managed his work tasks and had considerable freedom as to how the work was to be done, he had limited control over his own workload, and he did not freely decide when the work was to be performed. The framework conditions in the construction projects effectively limited his ability to determine his own working hours, and in practice he could not decline assigned tasks. The Supreme Court also emphasised that, because he had to request time off in lieu, he did not freely decide his working hours. Therefore, he did not hold a "particularly independent position", and was not exempt from the working time regulations.
The exemption for "leading positions" was not at issue in the case before the Supreme Court. However, the Supreme Court noted that there is some overlap between the two exemptions. Whether a position is "leading" must be assessed on a case-by-case basis, with reference to its function, area of work and responsibilities. Salary and title may be relevant factors, but are not decisive.
Our assessment of the judgment
In our view, the judgment significantly narrows the exception for particularly independent positions compared with how it has previously been understood and applied in practice. The employees' control over their own working hours and workload is now the key criterion, while factors such as responsibility, salary and freedom in how the work is performed carry less weight than before. The scope of the exemption for "leading positions", on the other hand, appears unchanged, and is still based on an overall assessment in which several factors are relevant.
We expect to see more claims going forward, both for reclassification of positions and for overtime compensation. The judgment illustrates that incorrect classification can quickly become costly, and that a CEO and board members may be held personally liable.
We recommend that employers map all positions currently exempted from the working time regulations, and conduct individual assessments of each position based on what the role involves in practice and the framework conditions that apply to it – including external framework conditions outside the employer's control. Key questions are whether the employee in fact controls their working hours and workload.
Where a position does not meet the criteria for being "particularly independent", the employer should consider either reclassifying it so that the employee is entitled to overtime pay, or adjusting the framework conditions so that the criteria are met. Employers do have meaningful scope to act here, for example by reviewing how work is organised internally so that employees have genuine control over their own working hours. In practice, this could mean giving employees more freedom over when the work is performed and how much work they take on, allowing them to turn down assignments, relying less on internal deadlines so that employees can prioritise their own work more freely, and ensuring adequate staffing so that employees are in a position to delegate work when needed.
Although the judgment limits the employer's ability to exempt employees from the working time regulations, the working time regulations still offer considerable flexibility that can be utilised. Average-calculation of working hours provides flexibility, and collective bargaining agreements combined with a written agreement on working hours may provide more room for manoeuvre than the Working Environment Act alone. When hiring, the company should have routines for assessing whether the position is to be exempted, and for documenting the assessment.
Regardless of classification, the requirement that working hours be arranged in a sound and responsible manner applies to everyone. The Supreme Court further emphasised in the judgment that the general working environment requirements in Chapter 4 of the Working Environment Act apply to all positions. The company should therefore have procedures to identify whether exempted employees are exposed to an excessive workload over time. A good working environment with a manageable workload also reduces the risk of conflicts, disputes and claims.
