The EFTA Court’s Decision on Norwegian Hiring Rules

The background of the case is recent changes in Norwegian legislation that restrict access to hiring from staffing agencies. The main case before Oslo District Court between several staffing agencies and the Norwegian state concerns the question of whether the tightening of the hiring rules violates Article 36 of the EEA Agreement and infringes the fundamental freedoms of the EEA Agreement.

Background: Restrictions on the Norwegian hiring rules

In April 2023, Norway introduced significant restrictions on the ability to hire labour from temporary employment agencies. For the construction industry in Oslo, Viken and formerly Vestfold, hiring was completely banned. The restrictions have met with resistance from staffing agencies, which believe that the government’s measures violate EEA law. The Norwegian government, on the other hand, claims that the hiring restrictions are legal with reference to legitimate considerations such as protecting employees, preventing abuse and ensuring a well-functioning labour market.

Several staffing agencies have sued the state, claiming compensation for financial losses caused by the new rules. The staffing agencies claim that the restrictions violate the EEA Agreement’s provisions on the free movement of services (Article 36), right of establishment (Article 31), and labour rights (Article 28). The case will be heard by Oslo District Court, which has asked the EFTA Court for an advisory opinion on the interpretation of the EEA rules.

The EFTA Court’s assessment

The EFTA Court’s assessment covers several questions of principle:

1. Freedom to provide services under Article 36

The EFTA Court emphasised that Article 36 only applies if the matter has a cross-border element. In this case, where both the staffing agencies and their clients operate within a single EEA state, the provision on freedom to provide services does not apply. Even though some employees are nationals of other EEA countries, this is not sufficient for the provision to apply.

2. Right of establishment under Article 31

For staffing agencies with foreign owners, which is the case for one of the plaintiff staffing agencies, the Court found that the right of establishment may be relevant. Restrictions that make it more difficult or less attractive to operate in the host country may constitute a violation of Article 31. The Court emphasised that this right protects both initial establishment and ongoing operations.

3. Proportionality and legitimacy

National restrictions must be necessary, proportionate and justified by legitimate considerations such as the protection of workers, the prevention of abuse and the proper functioning of the labour market. The Court pointed out that it is the state’s responsibility to document how the rules actually achieve these objectives without going further than necessary.

Further process: Oslo District Court’s assessment

The EFTA Court did not take a direct position on whether the Norwegian hiring rules violate the EEA Agreement, but left this assessment to Oslo District Court, which in particular must assess:

• Whether the regulations may have an indirect discriminatory effect, in that they affect employees from other EEA countries more strongly than Norwegian employees.
• Whether the exceptions in the legislation, which allow certain types of hiring, undermine the purpose and consistency of the rules.

Consequences for employers

The EFTA Court’s decision sets a precedent for similar cases throughout the EEA. Oslo District Court’s assessment will be decisive for the future of the Norwegian regulations and for how national authorities balance labour market regulation with international obligations. The ruling clarifies that national measures affecting the right of establishment and labour mobility must be carefully balanced with EEA obligations.

In the meantime, affected businesses will have to deal with tighter regulations and explore alternative staffing solutions.