Employer has not abused its managerial prerogative

A municipal chief executive was required to resign from her position in accordance with a severance agreement under section 15‑16 subsection 2 of the Working Environment Act. She argued that the municipality had handled the matter incorrectly and that the decision was based on incorrect facts. She therefore claimed compensation.

The Supreme Court considered which rules apply when an employer decides that the top executive must step down in accordance with a severance agreement.

The Supreme Court held that an agreed resignation in return for severance pay is not the same as a “dismissal” in the employment-law sense. The decision requiring the employee to step down is therefore not subject to the procedural rules in the Public Administration Act concerning individual decisions, see section 2 subsection 2.

However, the courts may assess whether the decision requiring the employee to step down in return for severance pay constitutes an abuse of the employer’s managerial prerogative, including whether it appears arbitrary or based on irrelevant considerations. If the decision is based on specific grounds, the courts may assess whether it rests on substantially incorrect facts.

The Supreme Court found that the municipality had not abused its managerial prerogative, and that the decision did not rest on materially incorrect factual assumptions. The unwritten administrative‑law principles did not impose stricter requirements in this case than the general standard of reasonableness, and were therefore not discussed further.

The judgment clarifies the legal position concerning an employer’s authority to terminate an employment relationship through an agreement on resignation with severance pay.

Read the whole judgment (Norwegian only) (PDF)

Areas of law: Employment law. Section 15-16 of the Working Environment Act. Section 2 subsection 2 of the Public Administration Act.

Key paragraphs: 60, 70, 73, 74, 80

Justices: Arntzen, Sivertsen, Lund, Poulsen, Steen