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 apart from 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. When a 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 Increasing retirement age

Pensions in Sweden vary widely depending on the age at which a person retires. The pension system has three components: a pension paid by the state, a complementary pension paid by the employer and, optionally, private pension savings.

With effect from 1 January 2020, the minimum age at which a state pension may be drawn has changed from 61 to 62 years, and the right to retain employment (known as the LAS age) has changed from 67 to 68 years.

In 2023, retirement ages will change again – the minimum state pension age to 63 and the LAS age to 69. The age limit for the guaranteed pension, which is paid to people who have had little or no pension-qualifying income during their working lives, will also change from 65 to 66 years.

ii Parental leave and allowance entitlements for common law spouses

As of 1 July 2019, a common law spouse may take time off work to take care of a partner's child and is entitled to a parental allowance from the government. (See also Section IX.)

iii New requirements on rehabilitation plans

When an employee is expected to be absent from work for more than 60 days because of sickness, the employer is obliged to prepare a written plan for the employee's return to work (a rehabilitation plan). This plan must be prepared within 30 days of the first day of the employee's sick leave; however, failure to prepare a rehabilitation plan is not associated with any specific sanction. The purpose of the rehabilitation plan is to support the work carried out in the workplace to enable the employee to return to work.

III SIGNIFICANT CASES

i Information from the manager2

This court case arose from a situation concerning redundancy. A manager had informed five employees that a previous period of employment would be credited to them, without having a mandate to make such a decision. Further, the reliance on this information by the employees was not justified since they had contented themselves with just an oral representation of the matter without needing to provide information regarding the duration of employment and without ensuring that the arrangement had been verified at a more senior level of the organisation.

The case shows the importance of having detailed processes in place within the workplace regarding the decisions that may be made by managers at different levels of seniority.

ii Gender discrimination3

A consulting firm terminated a probationary employment of a woman. She had been on sick leave during a certain part of the probationary period owing to being pregnant, and later bore a child. The court had to decide whether the employee had been directly discriminated against when her employment was terminated. The court ruled that the chronological connection between being placed on sick leave and the termination of the probationary employment did not constitute cause to presume that the termination was related to considerations regarding future problems for the employer because of the pregnancy. Consequently, the employer had not discriminated against the employee.

iii Working remotely without reporting4

A person had been employed for many years, most recently from home. When working from home, the employee had not submitted the required weekly reports to the employer on a large number of occasions and had also mismanaged his communications by email and other means. In addition, he had been impolite to his immediate line manager several times. The court concluded that the employer had proved that the employee had mismanaged himself with consequent damage for the employer, and that the employer had repeatedly informed the employee about the risks associated with continuing with this type of behaviour. Objective grounds were found for termination of the employment for personal reasons.

IV BASICS OF ENTERING INTO 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 period for notice of termination;
  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 an 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 forms of non-permanent employment:

  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; no probationary period may exceed six months.

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 an employer intends to give notice of termination of probationary employment, either prematurely or at the end of the probationary period, the employer must give 14 days' notice. 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, however, 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 entity, 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 to withhold tax on paid salary for the employee.

V Restrictive covenants

An 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 who 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.

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 an employer breaks the law, it risks incurring fines and 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. General overtime should be used before extra overtime is 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 when the overtime is worked.

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. These agreements often regulate the starting wages within a particular field.

VII Foreign workers

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

As a general rule, citizens from the European Union and the European Economic Area 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 if they wish to work and live in Sweden.

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 during the period of employment by certain provisions in Swedish law and collective agreements. New rules regarding posting in Sweden were implemented on 1 June 2017. The purpose of the changes to the legislation was to strengthen the position of collective agreements to enable 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 action are limited to minimum wage and other minimum conditions, referred to as core rights. Employers who post employees are obliged, 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 when a termination situation arises.

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 PARENTAL LEAVE

Parental benefit is money a person in Sweden receives to be able to stay at home with a child instead of working. Parental benefits are available for 240 days per parent, thus a total of 480 days. It is possible to transfer up to 150 days to the other parent. However, 90 sickness benefit qualifying days are reserved for each parent.

How much the parent receives in benefit will depend on his or her sickness benefit qualifying income. Leave from work is normally not paid by the employer, but some collective bargain agreements top up the salary from the base level that the government pays to the parent.

Employees on parental leave may not be dismissed solely for being on parental leave.

X 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 first language.

XI Employee representation

i Workplace representation

The unions in Sweden provide employee representation at work. They 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 an employer. If 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, people who work for companies with more than 25 employees have the right to elect two board members and two deputies. However, the employee representatives on the board can never be in the majority. The employee representatives 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 a union meeting at the company, appointment by the union or a ballot of the membership.

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.

XII 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. Since May 2018, the Authority has only issued sanctions in a few cases (among others, concerning facial recognition in schools).

i Requirements for registration

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

Certain employers, such as authorities and companies whose core business is to monitor people, need to appoint a data protection officer and report the contact details of that officer to the Swedish Data Protection Authority.

An employer is required to report any personal data breach 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 that is part of the European Union, regardless of where the processing takes place.

iii Sensitive data

Any information relating to a person that can be used to identify the person, whether directly or indirectly, is defined as personal data – from a name, a photograph, an email address, bank account 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, the processing of 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 for carrying out obligations under employment, social security or social protection law, or a collective agreement.

iv Background checks

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

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

Collective agreements may contain different rules.

XIII Discontinuing employment

i Objective grounds for termination of employment

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

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

ii Dismissal

Dismissal is the termination of a contract based on grounds relating to an individual employee, and may be given with or without a notice period. Dismissal without a notice period may be justified only if an 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 for the employer to 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 is 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 opportunities 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 legitimate orders;
  2. repeated negligence;
  3. disloyalty to the employer, for example by competing secretly with him or her or revealing important business secrets;
  4. an 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 in advance. If the employee is a member of a trade union, the employer shall also give notice to the local organisation to which the employee belongs.

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.

When 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 being 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, subject to the employee having 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 an available post.

If there are no other vacant 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 length of service 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 that the affected employee is competent to carry out, held by employees who have worked for a shorter time within the operation unit: 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, a short list must be 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 separate lists for blue-collar workers and 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 particular 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 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 hold consultations 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 carry out consultations with the union in the prescribed manner.

An employer must give an 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 is 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.

The rules about the length of the period of notice are likely to be different in a collective agreement and in an employment agreement. In the latter case, only deviations in favour of the employee are binding.

An employee who has left an 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 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 charge.

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 shortage of work, be given priority to further work irrespective of the order of priority.

XIV 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 a case, the first employer can terminate his or her employment because of redundancy.

When determining whether or not a transfer of an 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, namely:

  1. the type of business;
  2. the transfer of tangible assets;
  3. the value of intangible assets at the time of the transfer;
  4. whether the majority of employees are transferred;
  5. whether the customers are taken over;
  6. the degree of similarity of the business and its activities before and after the transfer; and
  7. the period, if any, during which activites were suspended.

XV Outlook

The government decided in April 2019 to appoint a special investigator to look into modernisation of the Swedish labour law. The inquiry is due to be presented to the government by 31 May 2020 and be implemented by 2021. In short, the special investigator shall prepare legislative proposals on extended exemptions from the rules on the order of priority, employers' responsibility for competence development and lower termination costs. The inquiry is based on the January Agreement, a political agreement between the Social Democrats, the Centre Party, the Liberals and the Green Party.


Footnotes

1 Jessica Stålhammar is a partner at Wesslau Söderqvist Advokatbyrå.

2 Case AD 2019 No. 9.

3 Case AD 2018 No. 74.

4 Case AD 2018 No. 2.