Celebrating International Labour Day
In a far-reaching reform, the Employment Protection Act, a cornerstone of Swedish Employment Law that governs termination of employment and other protection for employees, is changing. What do employers need to know and do, and what happens next?
Termination reasons
Before the reform, an employer had to have ‘objective grounds’ for terminating employment. These fell into two categories:
- personal reasons, such as misconduct or performance issues;
- changes to the business, such as redundancies, downsizing or lack of work.
Following the reform, ‘objective grounds’ are now replaced with ‘objective reasons’. This only affects the ‘personal reasons’ category. The distinction shifts the employer’s responsibility away from trying to assess the scope for improvement (or otherwise) in an employee’s conduct or performance in future, toward an assessment of how serious the breach of the employment agreement is. One attempt at relocation (to a new role or location) will be considered sufficient.
The aim is to make the assessment of terminations for personal reasons more predictable.
It is possible to derogate from the new rules in a collective bargaining agreement.
Redundancy and last-in-first-out
In Sweden employers enjoy considerable freedom to terminate employment for business-related reasons.
Initially, the employer must investigate if it is possible to relocate the affected employees, primarily to vacant positions within the organisation (for which they are appropriately qualified). After that, redundancies must follow a seniority list; last-in-first-out. The exempted employees must have satisfactory qualifications and the redundancy process must include consultations with trade unions.
What’s changing?
Under the old rules, employers could exempt two employees to the current priority rules (last-in-first-out) if they have a maximum of ten employees. Under the new rules, they are allowed to exempt three employees, regardless of the size of the organisation. The employees must be of ‘particular importance for the future activities’.
If the employer makes an exemption, it cannot do so again within three months.
It is possible to derogate from these rules in a collective bargaining agreement.
Disputes over termination
Under the old rules, where an employee disputed their termination, they had the right to remain employed and receive ordinary salary and employment benefits during the dispute.
Under the new rules, employment will terminate at the end of the notice period regardless of any dispute. It will no longer be possible for a terminated employee to claim reinstatement during the court procedure.
It is not possible to derogate from this rule in a collective bargaining agreement.
Local trade union representatives are exempted from this rule and can remain in post in the event of a disputed termination, but only if their role is of particular importance for the union activity at the workplace.
However punitive damages for unlawful dismissal are increased:
- summary dismissal: from SEK 125 000 to SEK 190 000;
- termination: from SEK 80 000 to SEK 135 000.
Priority for reduced working hours
Under the old rules, employers could choose who should receive an offer to relocate to a different role with reduced working hours without applying the last in first out rule.
Under the new rules, in the event of a reorganisation that results in reduced working hours for certain employees, employers must apply priority rules: the employees with the least seniority must be offered the least number of hours.
The employees must work in the same department and have the same working tasks and the relocation must mean a reduction of working hours only.
An employee who accepts a reduced employment rate is entitled to a transition period. The transition period begins to run when the employee accepts the offer. It corresponds to the employee’s notice period but cannot be longer than three months.
It is possible to derogate from these rules in a collective bargaining agreement.
Special fixed-term employment
Under the old rules, fixed-term employment became indefinite after two years. The new rules introduce ‘special fixed-term employment’. Employees in special fixed-term employment will be entitled to indefinite term employment after 12 months either:
- during a five-year period; or
- during a period when the employee has had consecutive periods of fixed-term employments i.e., special fixed-term employment, temporary substitute employment or seasonal work.
Temporary substitute employment still becomes indefinite after two years.
If an employee has been in special fixed-term employment for more than nine months during the last three years, s/he has a priority right to reemployment in a new special fixed-term employment.
The period between the employed periods will also be treated as a period of employment, if the individual has three or more periods of employment during the same month.
It is possible to derogate from these rules in a collective bargaining agreement.
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Full-time work is the new normal
Employments will be presumed to full time if nothing else has been agreed upon. Employees can have an expectation of full-time work, and where this is not possible, the employer must provide reasons to the employee on request. This information must be given three weeks from the date of the request.
It is not possible to derogate from this rule in a collective bargaining agreement.
Agency workers
Previously, there was an only obligation to inform agency workers about indefinite term employment available at the customer company.
Under the new rules, agency workers must be offered indefinite term employment when engaged by the customer for at least 24 months during a period of 36 months. The employer may set a deadline for an offer; but it must be reasonable.
If the agency worker accepts, employment through the agency ceases when the employee starts the new employment. The customer company can choose to pay compensation of two monthly salaries instead of offering an employment. This payment must be made no later than when the offer of employment should have been given.
It is possible to derogate from these rules in a collective bargaining agreement.
What next?
The new rules entered into force on 30 June 2022 and apply for the first time from 1 October 2022. There are specific rules for fixed-term employment.
In the event of a dispute regarding a dismissal, the old rules apply until 1 October 2022, if the employer has sent a request to consult or a notification regarding the intended dismissal. In the event of dismissal due to redundancy, previous priority rules apply if the employer has requested a consultation before 1 October 2022.
Other new rules
As a result of implementation of the EU Directive on transparent and predictable working conditions, new information requirements also took effect on 29 June 2022, meaning new employment contracts must be amended.
Employers must now provide written information about all conditions that are essential to the employment relationship. The employer must for example inform employees about the rules that must be followed when the employment relationship is to terminated
The information requirements also apply to those in managerial positions (up to and including the CEO).
The employer cannot prohibit an employee from having employment with another employer during the period of employment with it, with some exceptions.
Notes for employers
Employers should:
- investigate any special rules that may apply if bound by collective bargaining agreements;
- implement and assess current procedures in order to make sure the procedures align with law;
- review the new rules on special fixed-term and agency workers;
- set up a process for coordination and information sharing within a legal entity, if the option of exempting employees from the order of priority has been used during the last three months.
