I Introduction

Swedish labour law is regulated in different legislative acts and by collective agreements. The most important piece of legislation is the Swedish Employment Protection Act, which covers most employees with the exception of top management. Certain provisions in the Act are mandatory whereas others can be waived by collective agreement. Other important pieces of legislation are the Co-Determination in the Workplace Act, the Working Hours Act, the Annual Leave Act, the Discrimination Act and the Work Environment Act.

Collective agreements are very common and cover a large part of the Swedish labour market. Employers can be bound by collective agreements if they become a member of an employers' organisation or enter into a collective agreement with a specific union. Swedish workers are highly unionised even though memberships have declined since the 1990s. About 70 per cent of all employees belong to a union.

Employment disputes are handled by either the Labour Court or the local district courts. Where the dismissal is contested and negotiations fail to resolve the matter, the case is usually pursued with the aid of the employee's union through the Labour Court in Stockholm, which acts as the court of first and final instance. However, if the employee is acting on his or her own, is not a union member or is not bound by a collective agreement, the district court is the first instance. Under some agreements, there are provisions for arbitration proceedings instead.

II Year in Review

i Requests for criminal records

Regarding job applications, there is a trend in Sweden that employers ask the applicant to get a copy of their own criminal record, even in branches where there are no requirements to do so. Owing to personal integrity issues, the authorities want to restrict the use of criminal records when it is not relevant. The government appointed a government inquiry (Dir. 2018:12), which was due to be completed in January 2019.

ii New Trade Secrets Act

A new Act on Trade Secrets entered into force on 1 July 2018. The Act implements EU Directive 2016/943 on the protection of undisclosed know-how and business information against their unlawful acquisition, use and disclosure.

The essence of the old Act will remain unchanged, but there are some alternations and supplements, including the following:

  1. a new legal definition of 'trade secrets' is included, clarifying the necessary components of a trade secret and that employees' personal experience and skills fall outside;
  2. the provisions regarding damages in cases of unauthorised infringements of trade secrets are extended;
  3. a court will now be permitted to decide that a person who has committed and participated in an infringement of trade secrets shall pay for the appropriate measures to disseminate information about the judgment; and
  4. the minimum penalty for grave cases of industrial espionage is increased to six months' imprisonment.

iii Annual pay survey

Amendments have been made to the Swedish Discrimination Act. In Sweden the employer must now carry out annual pay surveys. Employers with at least 10 employees are required to document their work on pay surveys. The employer shall analyse whether existing wage differences are directly or indirectly related to gender.

The analysis shall take particular regard of differences between women and men performing work that is regarded as equal:

  1. a group of employees performing work that is, or is usually regarded as, female-dominated, and a group of employees performing work that is deemed to be equivalent to such work but that is not, or usually not, regarded as female-dominated; and
  2. a group of employees performing work that is, or is usually regarded as, female-dominated, and a group of employees performing work that is not, or not usually regarded as, female-dominated but pays higher wages although the requirements of work are deemed lower.

The government has appointed an inquiry (Dir. 2018:99) to look into how the surveillance from the discrimination authorities over the compliance can be improved, and if amendments need to be made to the system concerning damages.

III SIGNIFICANT CASES

i Discrimination2

A woman had applied for a job as an interpreter. At the interview the woman refused to shake hands with the male interviewer. The reason for refusing was that her religion forbids her to shake hands with men; it would be a sin. The recruitment procedure was cancelled, and the woman sued the company arguing that she had been discriminated against indirectly.

The company argued that it had a policy that all employees should shake hands with each other. It argued that the policy is suitable and reasonable, and does not discriminate against Muslim women since most women do shake hands with men. The purpose of the policy was to counteract special treatment based on gender and that it would be uncomfortable for people not to have the handshake reciprocated.

The Labour Court concluded that by not employing women who do not shake hands with men, more Muslim women than other women cannot meet the requirements. Therefore, the policy discriminates against Muslim women, and is not suitable and reasonable. The woman was granted 80,000 kronor in damages.

ii Non-recruitment clause3

An employment contract for computer game developers contained a non-recruitment clause that stated that employees who leave the employer may not try to recruit or otherwise cause other employees to end their employment for two years after leaving.

The Labour Court ruled that the clause was unreasonable and therefore not valid. When evaluating if a clause is valid or not, the purpose of the clause, the impact it will have on the employee and if the employee will be granted compensation must be considered. In this case, the specific clause affected all employees in the workforce, and employees who had been employed after the affected employee had stopped working. The Court mentioned that a non-recruitment clause could be valid if the actions mentioned were prohibited for a short period of time (e.g., six months); as it was two years in this clause, it was ruled invalid.

iii Vacation without permission4

An employee had requested holiday for one week, which was not granted by the employer. The employee took the holiday anyway. During the dispute, the employer argued that the employee had quit his employment when leaving, and that there was also an objective ground for dismissal. The court concluded that the employee had not himself left employment, but by going on holiday without approval, the employer could dismiss the employee.

IV BASICS OF ENTERING AN EMPLOYMENT relationship

i Employment relationship

There is no mandatory requirement that an employment agreement must be in writing (verbal agreements are also valid), but it is recommended. However, within one month of starting his or her employment, the employee must be informed, in writing, of important terms and conditions relating to his or her employment. The information must contain at least the following details:

  1. the names and addresses of the employer and employee, the date of employment and the address of the workplace;
  2. a brief specification or description of the employee's work duties and professional designation or title;
  3. whether the employment is applicable for an indefinite term or is temporary or probationary, and the applicable notice of termination period;
  4. starting salary, other benefits and when the salary will be paid;
  5. the length of the employee's paid annual leave and the length of the employer's normal workday and week; and
  6. applicable collective agreements, if any.

The terms and conditions of employment can be regulated by law, by collective agreement or by the individual employment agreement. As a general rule, the employer may not single-handedly change the terms and conditions of employment, and any changes are to be negotiated with the union.

Employment agreements are generally entered into for an indefinite term. Fixed-term employment is only acceptable in certain situations for a certain length of time. There are several non-permanent employment forms:

  1. general fixed-term employment;
  2. substitute employment;
  3. seasonal work;
  4. post-retirement employment; and
  5. probationary employment.

The main rule in respect of fixed-term employment is that it cannot be terminated by the parties during the agreed term. As is the case with employment for an indefinite term, an employer must have objective grounds for termination of the employment. There are a number of other forms of employment under various collective agreements in the Swedish labour market.

ii Probationary period

Probationary employment is permitted for a maximum period of six months, but the probationary period may not exceed this.

Unless the parties agree otherwise, the probationary employment may be prematurely discontinued and the terminating party need not state any cause. The employer does not have to show objective grounds but it cannot terminate the probationary employment for reasons that are discriminatory or contrary to generally accepted standards in the labour market.

If the employer intends to give notice of termination of probationary employment, either prematurely or at the end of the probationary employment, it must give 14 days' notice in advance. If the employee is a member of a union, notification must be given to the union at the same time. The employee and the local branch of the union are entitled to consultations with the employer regarding the intended decision. Confirmation of termination of the probationary employment must thereafter be provided to the employee.

iii Establishing a presence

It is possible for a foreign company to hire an employee in Sweden without having a subsidiary, branch office or other infrastructure in Sweden (e.g., the employee works from a home office). If the foreign company pays salaries, it has to be registered with the tax authority as an employer.

If the business is carried out permanently with local employees, the foreign company must open a branch or a subsidiary. A branch is a foreign company's local office in Sweden with its own administration and corporate identity number. The branch must have a managing director who represents it, and it must be registered with the Swedish Companies Registration Office. A branch is not part of the company – it is a separate legal person, and is subject to Swedish law and Swedish regulatory decisions with regard to legal relationships that arise in connection with business activities in Sweden. A branch does not have its own share capital, and its assets and liabilities are part of the company's total assets and liabilities.

A limited company can be started in Sweden, but it must have at least 50,000 kronor in share capital. It must also be registered with the Swedish Companies Registration Office.

The employer has the obligation to pay social security contributions and withhold tax on paid salary for the employee.

V Restrictive covenants

The employee has a duty of loyalty that, in general, entails a prohibition against competing activities during the term of employment. Even the preparation of competing activities is unlawful. The duty to be loyal expires when the employment terminates.

Thereafter a non-competition clause is required. This clause must be carefully considered and updated periodically as it is not binding if considered too far-reaching. An unreasonable non-competition clause may be adjusted or declared invalid by the court. Any sanction in the form of a penalty may be subject to adjustment. In an employment contract, the employer's interest in protecting its know-how must be weighed against the employee's interest in an unrestricted ability to participate in gainful activity.

In 1969 an agreement was reached regarding non-competition clauses in employment agreements. This agreement applies to clauses that were entered into prior to 1 December 2015. A new modernised agreement is applicable to clauses after 1 December 2015, but technically only for employers who are bound by collective agreements. However, it is assumed that the agreement will affect the whole Swedish labour market, even for parties not bound by the agreement.

In general, for a non-competition clause to be valid it should only be applied to top management or employees that possess certain sensitive information, it should be limited to what is necessary and compensation corresponding to a minimum of 60 per cent of the employee's salary must be paid during the undertaking period. The term may exceed 18 months only if special reasons exist.

In recent years it has become more common to use non-solicitation clauses (preventing employees from encouraging customers, suppliers and other employees to leave the employer) rather than non-competition clauses as the employer does not normally have to compensate the employee for the undertaking.

vi Wages

i Working time

Working hours are governed by the Working Hours Act but are also regulated to a large extent by collective agreements. Working hours in Sweden are normally 40 hours per week, and a week is defined as a period of seven days. The Working Hours Act is the key statute in this context. The Swedish Work Environment Authority is the supervisory authority to monitor compliance with the Act. If the employer breaks the law it risks incurring fines, among other penalties.

ii Overtime

Overtime is time worked in full-time employment in excess of working hours and on-call time. General overtime may be worked when there is a special need for increased working hours. As a main rule, overtime is restricted to a maximum of 48 hours during a four-week period, or 50 hours per calendar month. However, not more than 200 overtime hours may be worked during a calendar year.

Extra overtime may be worked when there are special reasons. No more than 150 overtime hours may be worked as extra overtime. The general overtime should be used before extra overtime is being used. Examples of special reasons are the loss of an employee with certain qualifications or skills, illness or an unforeseen increase in workload. The employer is obliged to record extra overtime.

Overtime is also regulated by collective agreement. It is usually paid at a rate of
50 to 100 per cent more than the normal wage, but can also be exchanged for free time or additional holidays. It often depends on the time and day of the overtime.

iii Minimum wage

Unlike most countries in the European Union, Sweden does not have a minimum wage. Wages are regulated by collective agreements between employers and the unions. The agreements often regulate the starting wages within that field.

VII Foreign workers

i Foreign workers

Regulations concerning immigration and foreign nationals in Sweden are found in the Aliens Act, among others.

Citizens from the European Union and European Economic Area as a main rule do not need a work permit or residence permit to work in Sweden. Citizens from other countries normally need both a work permit and a residence permit in order to work and live in Sweden.

ii Posted workers

A posted employee is a person who has been sent by his or her employer to another country to work for a limited period of time. If the person has been sent to Sweden, he or she is covered by certain provisions in Swedish law and collective agreements during the period of employment. Since 1 June 2017 there are new rules regarding posting in Sweden. The purpose of the changes to the legislation is to strengthen the position of collective agreements in order for the Swedish labour market model to function better in terms of protection of posted employees.

The work and employment conditions that unions can demand through industrial actions are limited to minimum wage and other minimum conditions, referred to as core rights. Employers who post employees are obligated, upon request by a union, to appoint a representative who is authorised to negotiate and enter into collective agreements. Foreign employers must report postings and designate a contact person to a registry at the Work Environment Authority when they send employees to work in Sweden.

VIII Global policies

There are no specific rules governing internal company policies, though there are a few policies that are statutory. However, it is recommended to enforce written policies on numerous workplace subjects such as IT, travelling, leave, sideline work, and alcohol and drugs. The employer must follow up on any non-compliance to be able to use it in a termination situation.

The policies can, for example, be distributed by attachment to the employment agreement, by email or an intranet site. If there is a collective agreement at the workplace, the employer must discuss and negotiate with the unions before the rules are implemented.

IX Translation

The employment agreement and other related documents are not required to be in Swedish. However, it is very important that the employee fully understands the employment contract. Best practice is to make these documents available in the employee's main language.

X Employee representation

i Workplace representation

In Sweden, the unions provide employee representation at work. The unions operate under their own rules and there are no statutory regulations that lay down how trade union representatives should be chosen. In contrast to many other European countries, there is no works council structure in Sweden.

There is no rule about the number of union representatives that should be involved in negotiations with the employer. Where there is no local union club at a workplace, the union can appoint a specified individual as the union contact for negotiations.

ii Board representation

Under the Act on Board Representation for Employees in Private Employment, employees in companies with more than 25 employees have the right to elect two board members and the same number of deputies. The employee representatives, however, can never be in the majority. The employee representatives on the board are chosen by the local union, with which the employer has a collective agreement. They can be chosen in a number of ways, including election at the union meeting in the company, appointment by the union or a membership ballot.

On most issues, board members representing employees have the same rights as those representing the shareholders of the company. However, they cannot take part in discussions relating to collective bargaining or industrial action, or other issues where there is a clear conflict of interest between the company and the union. Employee members on the board, like other board members, are required to act in the best interests of the company.

XI Data protection

The General Data Protection Regulation (GDPR) is an EU regulation that serves to protect the personal data of anyone in the European Union. It entered into force on 25 May 2018 and must be complied with. It applies to any organisation globally that handles the personal data of people in the European Union.

Sweden is currently enacting additional legislation regarding the GDPR. The Swedish Data Protection Authority is the supervisory agency. At the time of writing, in 2018 it had conducted 400 inspections of organisations, authorities and private companies, of which 60 have received injunctions.

i Requirements for registration

Employers do not have to register with the Swedish Data Protection Authority in order to be allowed to process personal data, but the employer needs to process personal data lawfully and the data must be collected for a specific reason. The processing of personal data is legitimate when done in accordance with the GDPR, including when the process is necessary in order to fulfil an agreement or to fulfil a legal requirement.

Some employers need to appoint a data protection officer and report the contact details of the data protection officer to the Swedish Data Protection Authority.

If there is a personal data breach the employer is required to report this to the Swedish Data Protection Authority within 72 hours.

ii Cross-border data transfers

The provisions of the GDPR must be complied with when transferring any personal data. It applies to the processing of personal data in the context of the activities of an establishment of the European Union, regardless of whether the processing takes place in the European Union or not.

iii Sensitive data

Any information related to a person that can be used to directly or indirectly identify the person is defined as personal data. It can be anything from a name, a photograph, an email address, bank details, posts on social networking websites, medical information to a computer IP address. Some personal data is categorised as sensitive personal data, for example racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, the processing of genetic data and biometric data for the purpose of uniquely identifying a person, data concerning health or data concerning a person's sex life or sexual orientation. As general rule processing sensitive data is prohibited. Despite this, an employer is allowed to process sensitive personal data if certain conditions apply, including if the employer has prior and explicit consent from the employee. The employer also has grounds for processing sensitive data if it is necessary in order to carry out obligations under the employment, social security or social protection law, or a collective agreement.

iv Background checks

The employer is not permitted to obtain an extract from the criminal register itself. However, the employer can ask the employee to provide it with such an extract from the criminal record database.

Credit checks are only allowed if the employer has a legitimate reason to conduct the check, including, for example, when the employer needs a risk assessment with a financial perspective.

Collective agreements may contain different rules.

XII Discontinuing employment

i Objective grounds for termination of an employment

According to the Act on Security of Employment, dismissal of an employee must be based on objective grounds, which can consist of either personal reasons or shortage of work, which includes redundancy.

An employer who breaches the Act shall not only be liable to pay salary and other employment benefits to which the employee may be entitled, but also to pay damages. Damages may be payable not only for loss suffered (economic damages) but also for the offence that the violation may have caused (general damages).

ii Dismissal

Dismissal is the termination of a contract based on grounds related to the individual employee, and may be given with or without a notice period. Dismissal without a notice period may be justified only if the employee has grossly neglected his or her obligation to his or her employer – even then, it may not be based solely on circumstances known to the employer for more than two months before sending the obligatory information to the employee and the local union.

Dismissal of union members for gross misconduct, like other terminations, cannot be implemented while negotiations with employee representatives are taking place. When an employee is dismissed, with or without a notice period, a considerable burden of justification rests with the employer. Reasonable grounds for dismissal do not exist if it is considered reasonable that the employer relocate the employee.

Factors to take into account for objective grounds for dismissal are the nature of the business, the nature of the employee's assignment (especially if the employee was in a position of trust), the nature of the offence, the harm done to the employer, and the employee's age, length of service, prior performance and likely future conduct.

The courts also consider the measures taken by the employer to remedy the problem, for example by informing the employee of his or her chances to improve. As a rule, these warnings can be delivered by the employer on his or her own initiative. Objective grounds for dismissal recognised by the courts over the years include the following:

  1. wilful violation of work rules or legitimated orders;
  2. repeated negligence;
  3. disloyalty to the employer, for example by competing secretly with him or her or revealing important business secrets;
  4. inability to cooperate with colleagues;
  5. criminal activities at or outside work; and
  6. incompetence.

An employer who wishes to dismiss an employee by reason of circumstances that relate to the employee personally must notify the employee to this effect in advance. In cases of dismissal without notice, written notification shall be given at least one week in advance and for dismissal with notice, two weeks. If the employee is a member of a trade union, the employer shall also give notice to the local organisation of employees to which the employee belongs.

The employer must give the employee written notice of termination, which contains the date, the name of the employer and the employee, the reason for the termination, an explanation of how the employee shall act if he or she wants to declare the termination null and void, and information about preferential rights.

Where a declaration that the dismissal itself is invalid is not sought, but damages are, the employer must be told no later than four months after the events for which damages are claimed.

iii Redundancies

In general, when an employer decides to restrict its operations, it is accepted as redundancy. Therefore, the employer alone normally decides when redundancy exists as it freely makes decisions with regard to its own organisation.

Even if grounds exist for redundancy, there are steps to be taken before formal grounds exist. Prior to any redundancy dismissal, the employer must first try to relocate or transfer the employee to another post. Other free posts within the company must be offered to the employee, with the condition that the employee has sufficient qualifications for the post. If the employee is transferred, he or she should receive this offer in writing from the employer. If the employee declines the offer, the employer has fulfilled its transfer duty. If no offer can be made, the employer must be prepared to prove that an effort has been made to find a free post.

If there are no other free posts within the company and there are several employees who must leave, then the employer must set up a 'short list' concerning order of priority. The Swedish general rule states that the person who has worked the longest within the company may stay. Employees with a shorter time within the group of companies will instead be given notice. There can, however, be different rules in a collective agreement.

The order of priority right covers all the tasks for which the affected employee is competent to carry out held by employees who have worked for a shorter time within the company. Examples of an operation unit include a factory or a restaurant. A unit of this kind has a geographical nature and cannot exist at several venues. Within every operation unit there has to be a short list established for every collective agreement area, which consists of both organised and unorganised employees. If the employer has a collective agreement there will normally be one list for blue-collar workers and one list for office staff.

The redundancy can be either mathematical in nature or related to one person's tasks. At a workplace with 50 employees and where 10 per cent of the production has to be reduced, and the employees can replace each other, the last five employees will be given notice. If the lack of work applies to one person's work tasks then the transfer question must be focused on that person.

If the employee has worked for a long time within the company and there are others within the company who have worked less time, the employee – if he or she has sufficient qualifications – must be offered one of these jobs. The order of priority right covers all the tasks that the affected employee is competent to carry out and the employment held by employees who have worked for a shorter time within the company.

The term 'sufficient qualifications' means that the employee is able to carry out the work tasks immediately or after a short period of learning (up to three or four months).

According to the Co-Determination in the Workplace Act, employers have a general and extensive obligation to inform and consult with the workforce via the unions. There is no specific regulation that applies to undertakings with a certain number of employees. The union will be awarded substantial damages if the employer fails to consult with the union in the prescribed manner.

The employer must give the employee written notice of termination that contains the date, the names of the employer and the employee, the reason for the termination, an explanation of how the employee shall act if he or she wants to declare the termination null and void, and information about preferential rights.

During the period of notice the employee will receive a salary as if he or she was still working. An employee may not be given garden leave without his or her consent. The minimum statutory period of notice for both the employer and the employee is one month. The employee is entitled to the following minimum periods of notice:

  1. up to two years' employment: one month;
  2. two to three years' employment: two months;
  3. four to five years' employment: three months;
  4. six to seven years' employment: four months;
  5. eight to nine years' employment: five months; and
  6. 10 or more years' employment: six months.

There can be different rules about the length of the period of notice in a collective agreement or in the employment agreement. In the latter case, only deviations in favour of the employee are binding.

An employee who has left the employer because of shortage of work has the right of precedence, within his or her unit and collective agreement area, for nine months from the end of the employment. This right of precedence presupposes that the employment has lasted for at least 12 months, the employee has informed the employer about his or her interest and also that he or she has suitable qualifications for the new job.

The employer is obliged to notify the Labour Office of cutbacks in operations that will affect at least five employees. Certain formalities are required, and if the employer omits to notify the Labour Office it must pay a penalty fee.

If the employer claims shortage of work as the objective ground but the employee believes that other reasons have been taken into consideration instead, the employee can claim that the termination should be declared void. An employee who believes that the employer is in breach of the rules concerning the order of priority can only claim damages. If the violation consists of an employer's refusal to comply with a judgment, in which a court has declared a dismissal or summary dismissal invalid, then compensation must be paid according to the fixed sums stated in the Employment Protection Act, which vary according to the duration of the employment and the employee's age.

Employment disputes are often ended by a settlement agreement, where severance is paid because there is no objective ground for terminating the employment. Another relevant method is to negotiate the contents of the short list with the unions. Redundancies are very often settled by way of negotiated notices.

iv Protected categories

There is a special order of priority for union representatives, which is of great importance to the union.

In addition, employees who have been given special employment because of reduced work ability shall, in the case of dismissal owing to lack of work, be given priority to further work irrespective of the order of priority.

XIII Transfer of business

Upon the transfer of an undertaking, or part of an undertaking, from one employer to another, the Employment Protection Act sets forth that the rights and obligations pursuant to employment with the first employer are automatically transferred to the second employer. However, the first employer will be liable to the employee for any financial obligations relating to the period prior to the transfer.

As a rule, the first employer may not terminate employment prior to the transfer because of the transfer. However, an employee is entitled to object to a transfer of his or her employment and, in such case, the first employer can terminate his or her employment because of redundancy.

When determining whether or not a transfer of undertaking is at hand, the Swedish courts apply the same seven criteria that have been set forth by the Court of Justice of the European Union.

XIV Outlook

One of the hottest topics for 2019 will be the follow-up to compliance with the GDPR, and how the authorities will assess the impact of the Regulation at the national level.

In September 2018, Sweden held national elections. Owing to the outcome of the elections, Sweden has not been able to form a new permanent government, and the crisis will most likely end in new elections. Consequently, the outlook for 2019 is hard to predict.


Footnotes

1 Jessica Stålhammar is a partner at Wesslau Söderqvist Advokatbyrå.

2 Case AD 2018 No. 51.

3 Case AD 2018 No. 61.

4 Case AD 2018 No. 66.