In October 2003, a district court in Norway made a controversial ruling in an ownership transfer case brought against the SAS airline by over 300 employees of its ground handling subsidiary, SGS. The case concerned the maintenance of the employment rights of these workers, who had previously been employed by the Braathens airline before its takeover by SAS.
On 15 October 2003, a district court issued a controversial ruling in an ownership transfer case brought by 368 employees of Scandinavian Ground Handling Service (SGS). The case concerned the maintenance of employment rights and prerogatives as a result of the takeover of the Norwegian airline Braathens by Scandinavian Airline Systems (SAS) (NO0111125N). The ruling is significant in that it draws the legal boundaries of what constitutes a transfer of ownership under the terms of the Act relating to Worker Protection and the Working Environment (Arbeidsmiljøloven, AML).
SAS and Braathens were previously competitors in Norwegian domestic aviation, but following a long period of financial difficulties, Braathens was taken over by SAS in 2001. The purchase led to a merger of the two companies’ support functions. Their ground handling activities were in effect merged into a new subsidiary of SAS, SGS. In this process, almost 1,000 Braathens employees were made redundant prior to the transfer, of whom 368 were offered new jobs with SGS. However, in accepting the offer of employment at SGS, the employees lost significant employment rights (in terms of wage levels, working time and seniority) accumulated through previous employment at Braathens. Arguing that this was an act of discrimination between previous employees of Braathens and those of SAS, and as such a breach of the provisions concerning transfers of ownership in the AML, the employees filed a lawsuit against the new owner, SAS. They demanded equal treatment and the same employment protection as the other SAS employees at SGS. The case was brought before the court on behalf of the employees by the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) and the Confederation of Vocational Unions (Yrkesorganisasjonenes Sentralforbund, YS).
The court considered whether or not the transfer of Braathens’ equipment and employees to SGS constituted a transfer of ownership according to the conditions of EU Directive 77/187/EEC on the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses (now consolidated in Directive 2001/23/EC), which was incorporated into the AML in 1994. Based on legal precedents from the European Court of Justice, the majority of the court's judges ruled that the transfer involved such a small number of employees and equipment that it cannot be seen to fall within the scope of the Directive (as implemented in legal practice). Less than 20% of the Braathens’ ground handling activity (employees and equipment) was transferred to SGS, and this must thus be seen as an act of outsourcing rather than a transfer of ownership. Thus 326 of the employees concerned were not entitled to have their accumulated rights and prerogatives transferred to SGS. However, in relation to the other 42 employees, the court ruled that, taking into consideration the fact that they were employed in two locations where SAS/SGS previously did not have ground handling activity, they were in fact subject to a transfer of ownership, and as such their accumulated rights had to be upheld by SAS. A minority of the court (one judge) was in favour of the employees in both cases.
The employees and their trade unions have appealed against the ruling to a higher court. The case has attracted considerable interest in the media – both before and after the ruling – and is seen as illustrating the vulnerable position of employees in relation to this type of takeover. The trade unions concerned argue that – if the ruling is maintained in the court of appeal – it implies a significant weakening of the rights and employment protection of Norwegian employees.