The changes in the Swedish Employment Protection Act you need to know about

Swedish labour legislation has recently undergone a historic transformation, which is the most dramatic since 1982. The goal of the reform has been to establish increased flexibility, adaptability and security in the labour market by better adapting and balancing employees’ capabilities to business operations. The new Swedish Employment Protection Act (Sw. Lagen (1982:80) om anställningsskydd) became fully effective from 1st October 2022.

This article will primarily introduce the most important changes employers should be aware of as a result of extensive amendments and the introduction of Government Bill 2021/22:176.

Enhanced information requirements

Swedish labour law already provides for an obligation of the employer to inform the employee of the principal terms of work. The new law, however, introduces enhanced information requirements, and that the information elements that are specific for each employee must be provided individually in writing within seven days from the employment commencement date.

Exemptions introduced to the order of priority

Terminations for business reasons will allow employers, regardless of the number of employees at the company, to exclude three employees who are deemed to be of special importance to the business from the first-in-last-out-rule.  The employees to be retained are chosen discretionarily by the employer. This means that normally, the decision cannot be legally questioned if it is not based on a discriminatory basis or undue reasons. Thus, employers’ flexibility increases in comparison with previous legislation which required the employer to strictly follow the last-in-first-out rule that only allowed employers with a maximum of 10 employees to exempt two people.

Possibilities of making an exemption to the rule are however limited by a 3-month ban. An employer who has made use of the exemption during termination of employment due to redundancy is obliged to wait three months before further exemptions can be made.

Dismissals shall be based on objective reasons

Employment terminations due to personal reasons lacked predictability under the prior rules. Oftentimes, it was not clear whether an employer had grounds to dismiss an employee or not. Consequently, the terminology was amended by the legislator and the new rules regarding dismissal due to personal reasons require that the employer can present “objective reasons” instead of the previously used term “objective grounds”. What constitutes objective reasons is an assessment made based on all relevant circumstances in each case, taking into account the significance of the nature of the breach of contract and whether the employee knew or should have known the meaning of their obligations.  An employee's work performance and interest in retaining the employment will no longer have an overall significance for the determination of whether grounds for termination are at hand. The requirement for less intrusive measures as an alternative to dismissal remains and includes inter alia warnings and redeployment. It will however be sufficient for the employer to consider offering an employee redeployment once, in the event of an employment breach relating to personal reasons, which previously has been the case in the event of a shortage of work, but not where there have been personal reasons involved.

Employment shall cease during dispute

Under previous rules, employees were entitled to remain in employment with full pay for the entire duration of litigation in which the employee claimed invalid dismissal. As a consequence, litigations of invalid dismissals became very costly for employers. The introduction of the new legislation discontinues the right for employees to continue employment during a litigation process. Instead, employees are referred to apply for compensation from an unemployment insurance fund to be able to obtain an income once the employment ceases.

If a court concludes wrongful dismissal and declares the termination invalid, the employee may be entitled to continued employment. Since employment as a rule terminates upon dismissal, the general damages, in the event of a court annulling an incorrect termination, have been recommended to be between SEK 135,000 to 190,000. The size of the damages applies to all employers, regardless of the size of the company.

General fixed-term employment has been replaced with special fixed-term employment

The introduction of the term special fixed-term employment is expected to strengthen the position of time-limited employment in the labour market by reducing the qualification time for a transition to permanent employment. A fixed-term employee with over 12 months of tenure (instead of the previous 24 months) during a reference period of five years, will automatically transform to permanent employment. The time between employments within the same calendar month, if an employee has had three or more special fixed-term employments during that calendar month, shall also be calculated as time of employment.

A fixed-term employee who has worked for a total of 9 months within a three-year reference period must be offered priority for a new special fixed-term employment, however, the priority does not apply to positions that involve permanent employment.

Presumption of full-time employment

The new regulation has clarified that employment will continue to apply full-time unless otherwise agreed. If an employee is not employed on a full-time basis, a written declaration will be required from the employer, and such is to be provided within three weeks from the date of request.

Employers may not prohibit secondary occupations

As a general rule according to the new regulations, an employer can no longer prevent employees from taking additional employment elsewhere, unless such employment impairs the employee’s ability to perform their responsibilities and duties, competes with the employer’s business or is otherwise harmful to the employer.  Furthermore, the employer cannot subject the employee to detrimental treatment due to their additional employment.

Extended security for agency workers

The future of an agency worker's position in the labour market is expected to become more secure, as the new laws now provide them with an opportunity to obtain permanent employment at the customer company they have been rendering their services to. Client companies that hire agency workers will be obliged to offer the staffing companies' employees (i.e the agency workers) permanent employment provided that the agency worker has worked for at least two years (during a reference period of three years) with the customer company. As an alternative, the customer company can pay compensation corresponding to two month's salary to the agency workers if it does not want to offer the employee permanent employment.

Adjustment and support to increase employment opportunities

A new student grant has been introduced for employees who require a stronger position in the labour market. The idea behind this new change is to make it possible to further develop and broaden expertise for all employees between the ages of 27 to 60 years old for a more sustainable and successful working life span in the future. An applicant may receive a grant of up to 80 percent of their salary with an opportunity to take an additional loan.

Concluding comments

The practical effects and impact of the new legislation remain to be seen and will be made clear after the 1st of October 2022 once the courts will start to produce case law based on the new law. Expectations are that the amendments will provide for more balanced interests between employers and employees, as well as broader opportunities for adjustment and professional development. It is also clear that employers are required to make changes and review their business routines and administration. 

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