European court rules on Norwegian staffing agency restrictions

The background of the case is Norwegian legislative changes that restrict access to hiring from staffing agencies. The main dispute between several staffing agencies and the Norwegian state concerns the question of whether the tightening of these hiring rules violates the EEA Agreement and infringes the fundamental freedoms set out in that Agreement. 

In April 2023, Norway introduced significant restrictions on the ability to hire labour from temporary employment agencies. For the construction industry in several regions, hiring from agencies 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, right of establishment, and labour rights. The case will be heard by Oslo District Court, which asked the EFTA Court for an advisory opinion on the interpretation of the EEA rules. 

The EFTA Court’s assessment covers several questions of application of the EEA Agreement: 

Freedom to provide services  

The EFTA Court emphasised that the EEA Agreement’s provision on freedom to provide services 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. 

Right of establishment  

For staffing agencies with foreign owners (which is the case for one of the plaintiff staffing agencies), the EFTA 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 the EEA Agreement. The Court emphasised that this right protects both initial establishment and ongoing operations. 

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. 

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. 

The EFTA Court’s decision sets a precedent for similar cases throughout the EEA. The 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.