Swedish Employment Law Changes Seek Employee Protections

​Sweden recently implemented major changes in employment law touching on workforce reductions, firing disputes, fixed-term employment and staffing agency workers.

Significant updates to the Swedish Employment Protection Act (EPA) provide new protections to workers and benefits for employers.

"The new EPA brings about multiple new changes for both employers and employees," said Paula Hogéus, global labor and employment law leader at EY in Stockholm.

"The new EPA implies a careful balance of interests between employers' needs for flexibility and employees' needs for employment protection," said Hogéus, who noted lawmakers revised procedures for handling termination disputes and strengthened rights for employees with fixed-term employment.

The previous legislation was considered too inflexible for employers, said Anna Jerndorf, an attorney with TM & Partners in Stockholm.

"What is very special with this new legislation is that it is based on an agreement between the largest employer organizations and trade unions so it was very much a codification of that agreement," Jerndorf said.

'Last In, First Out' Exemptions

Employers now have more flexibility in making exemptions to seniority rules during a layoff. The new EPA gives all employers the right to exempt three employees from the "last in, first out" rule. Previously, organizations with up to 10 employees could exempt up to two people from the rule.

This right applies for each operating unit within the company, Jerndorf noted. Companies bound by collective bargaining agreements may be able to make other exceptions to this order of priority.

Termination Disputes

Employers no longer have to pay employees during disputes over the validity of a job termination for personal reasons, such as performance problems.

Previously, an employee was entitled to pay and benefits during a formal dispute over a termination, that is, throughout negotiations and court proceedings, Hogéus said. Under the new EPA, employment will be terminated when the notice period ends, even during a formal dispute, she added.

If, however, the court finds the termination was invalid, the employee will be entitled to compensation for salary and benefits for the dispute period, Hogéus said. This change reduces the risk for an employer, given that under previous rules, a protracted dispute could have resulted in significant salary payments no matter the outcome, she explained.

In return for this change, Jerndorf noted, the new law increases general damages for employees.

Basis for Termination

The updated law also requires employers to provide "objective reasons" rather than the previous "objective grounds" for a termination for personal reasons. This change aims to make the circumstances for such terminations more predictable.

The change seeks to clarify that when making such terminations, employers should focus on the performance issues or misconduct at hand, rather than the employee's interests in staying employed or how the employee might perform in the future. Employers and unions may be able to customize these definitions through collective bargaining agreements.

In addition, an employer need make only one relocation offer before terminating an underperforming employee under the new rules.

Fixed-Term Employment

New rules covering fixed-term employment seek to give a boost to these workers and replaced "general fixed-term employment" with a new employment category, "special fixed-term employment."

Under the new rules, a special fixed-term employment automatically converts into a permanent employment either when the employee has worked for more than 12 months during a five-year period, or when the employee has had successive special fixed-term employment, substitute employment or seasonal employment engagements.

Previously, a general fixed-term employment converted into a permanent employment after 24 months.

Also, for employees with at least three special fixed-term employments in a calendar month, the periods between the engagements count as employment when calculating service length, Hogéus noted.

Staffing Agency Employees

Swedish lawmakers also amended the Agency Work Act, which applies to workers employed by staffing agencies.

Under the new rules, client companies must offer permanent employment to such workers once they've been placed at the same operating unit for at least two years in a three-year period or offer the employee compensation equal to two months' salary, Jerndorf said.

Transparent Work Conditions

Sweden also has implemented the new European Union Directive on Transparent and Predictable Working Conditions in the Employment Protection Act, Jerndorf noted. The new rules apply to all employment contracts entered into on or after June 29.

"The directive provides rights for employees to more foreseeable and secure work terms and entails a far-reaching and increased obligation for employers to provide written information to employees," she explained. "The directive affects all employers, and employers must update their employment contracts going forward."

The directive gives employees in the EU rights to more-complete information on their jobs, early and in writing, according to the European Commission, and to work for another employer unless restricted based on justifiable objective grounds. It seeks to give employees more predictability in their work conditions and times.

Björn Rustare, an attorney with DLA Piper in Stockholm, said that as of June 29, employers in Sweden now must specify such information as the termination process, salary payment method and how their work time will be measured when their regular workday or week is unpredictable.

Dinah Wisenberg Brin is a reporter and writer based in Philadelphia.