This country-specific Q&A provides an overview to employment and labour law in Sweden.
It will cover termination of employment, procedures, protection for workers, compensation as well as insight and opinion on the most common difficulties employers face and any upcoming legal changes planned..
This Q&A is part of the global guide to Employment & Labour. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/employment-labour-law/
Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful?
Employers may terminate an employment with or without notice. The Swedish Employment Protection Act (“EPA”) sets forth that termination of an employment with notice requires objective grounds to be deemed valid.
A distinction of objective grounds is made between termination due to redundancy and termination due to reasons related to the employee personally. Redundancy covers all reasons attributable to the employer, e.g., shortage of work, restructuring due to downsizing or restructuring due to new technology. Personal reasons are all reasons attributable to the employee, such as the employee’s performance or conduct.
Redundancy is normally considered to be an objective ground and it is easy to prove while the assessments whether an objective ground due to personal reasons is at hand is much more complicated and difficult to determine. A termination due to personal reasons or redundancy will not be considered based on objective grounds if there are other alternatives than a termination available to the employer, such as relocating the employee to other positions in the workplace.
The employer is entitled to terminate an employment without notice, summary dismissal, if the employee is in severe breach of his obligations as an employee. This may be at hand if the employee acts disloyally (e.g. working for competitors during the employment) or commits criminal actions against the employer.
Please note that neither a termination of employment due to personal reasons, nor a summary dismissal can be made based solely on circumstances older than two months.
A termination of employment without objective grounds at hand or summary dismissal, which lacks legal grounds may be declared invalid by a court upon request by the employee.
What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?
The Swedish Co-Determination Act (“CDA”) does not make a distinction between different kinds of redundancies. Thus, the rules concerning redundancies are always triggered, irrespective if one employee or a larger number of employees are affected.
However, a notification to the Swedish Public Employment Service (“ES”) must be made prior to termination when at least five employees are affected by a redundancy. This also applies if the total number of terminations are expected to be 20 or more during a 90-day period. The notice period to the ES is two months if up to 25 employees are affected, four months if 26-100 are affected and six months if more than 100 are affected.
What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?
Sweden has implemented the Transfer of Undertakings Directive. Thus, a transfer of a business does not constitute, per se, objective grounds for terminating an employment. The EPA sets forth a general prohibition of terminations due to transfer of a business. A violation of this prohibition may give cause for a court to declare the termination invalid upon request from the employee.
What, if any, is the minimum notice period to terminate employment?
The minimum notice period for an employee is one month. The minimum notice period for the employer is also one month, but varies depending on the length of service. The minimum notice periods required by law (for employments entered into after year 1997) are as follows:
0-2 years of service - one months’ notice
2-4 years of service - two months’ notice
4-6 years of service - three months’ notice
6-8 years of service - four months’ notice
8-10 years of service - five months’ notice
10 years of service or more - six months’ notice
Please note that an applicable collective bargaining agreement may set forth longer notice periods.
Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?
The provisions in the EPA regarding termination and notice periods are mandatory. However, the employer and the employee may agree to terminate the employment by mutual agreement where the employee normally agrees to end his employment against compensation.
Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to say at home and not participate in any work?
The main rule for private employers is that they under certain circumstances may unilaterally release the employee from performing work during the notice period. This lies within the employer’s right to direct the work at the workplace. However, the EPA prohibits the employer from suspending the employee from work during a dispute regarding the validity of a termination of the employment.
Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, describe the requirements of that procedure or procedures.
The EPA and the CDA set forth rules regarding the process of termination and summary dismissal. The procedure differentiates depending on whether the termination is based on personal reasons or redundancy.
When there is a redundancy at the workplace, the basic principle is that the employee with the longest length of service will be entitled to stay the longest. The employer must select the employees to be terminated on a ‘last in, first out’ basis meaning that an employee, whose role is redundant has a right to be relocated to a position held by an employee with less seniority of employment. Employers with 10 or less employees is entitled to exempt two key employees from this order of priority. Prior to termination due to redundancy, the employer is obligated to conduct consultations under the CDA. This is mandatory if the employer is bound by a collective bargaining agreement or if any of the affected employees are members of a union. Thus, if there is no collective bargaining agreement, the employer must ask the affected employees whether they are members of a union.
For terminations due to personal reasons, the employer must notify the employee and the employee’s union about the potential termination two weeks in advance. For a summary dismissal, such notice must be sent to the affected parties one week prior to the dismissal. The employee and the union may, within one week from receiving the notice, request consultations with the employer concerning the dismissal.
The notice of termination or the summary dismissal must be in writing and should be handed over to the employee in person. If this is not possible, the notification may be sent as a registered letter by mail. The notice of termination must include information regarding the employee’s right to contend the validity of the termination, his possibilities to claim damages and the limitation periods for such claims. It must also include information on potential priority to right of re-employment.
If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?
An employer, which is incompliant with the rules of the EPA and the CDA, may be liable to pay both economic and general damages to the employee. The economic damages can amount up to 16 monthly salaries (if the employee has been employed with the employer for less than five years), 24 monthly salaries (if the employee has been employed with the employer for more than five but less than 10 years) and 32 monthly salaries (if the employee has been employed with the employer for more than 10 years). The general damages are usually deemed low. Violations of the formal rules of the EPA and the CDA may also imply an obligation for the employer to pay general damages to the concerned union.
How, if at all, are collective agreements relevant to the termination of employment?
The collective bargaining agreements may be relevant in a number of situations. It may set forth longer notice periods than those stipulated by law or the employment agreement. The occurrence of a collective bargaining agreement may also be a decisive factor for whether the employer is obligated to call for consultations prior to a termination. Additionally, a collective bargaining agreement also set out a particular order of negotiations or consultations applicable to the employer. Moreover, the collective bargaining agreement can permit exceptions from the rules regarding the order of terminations in redundancy situations through a special order of seniority agreement. Other than the areas mentioned above, a collective bargaining agreement may set out other terms, such as, inter alia, severance pay.
Does the employer have to obtain the permission of or inform a third party (eg local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?
According to Swedish law, no prior approval from a government agency is required when terminating employees. However, as stated in question 2 above, the employer is obligated to inform the ES when conducting redundancy terminations of five or more employees. If the employer fails to inform the ES it may be liable to pay a fine of up to SEK 500 per affected employee per commenced week.
What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?
According to the Swedish Discrimination Act, it is unlawful to discriminate against, both directly and indirectly, job applicants and employees on the grounds of sex, sexual identity, sexual orientation, ethnic origin, religion or religious beliefs, mental or physical identity and age. Discrimination is prohibited both at the recruitment stage, during the course of the employment and in connection with the termination of employment.
What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?
When discriminated against, an employee may put forward a claim for both economic and general damages. The general damages, also called compensation for discrimination, constitutes remuneration for the violation of the law.
Further, any condition found in an individual agreement or collective bargaining agreement, which is discriminating against someone according to the Swedish Discrimination Act, may be declared invalid if the person discriminated against demand it.
Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?
Several regulations set out prohibitions against unfair terminations of employment. Regarding employees on parental leave, the Swedish Parental Leave Act sets forth that an employment may not be terminated based on grounds related to parental leave. The same applies to employees on leave due to studies according to the Employee´s Right to Educational Leave Act. If an employer terminates or summarily dismisses the employment of an employee on parental or study leave due to reasons that is in correlation with the leave, the termination or the summary dismissal shall be declared invalid.
According to the Trade Union Representatives Act, union representatives have additional protection against negative changes regarding their employment or terms of employment based on their assignment as union representative. Further, they may be exempted from the order of priority of termination in redundancy situations.
Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?
Swedish law sets forth protection for whistle blowers through the Whistleblowing Act. The legislation prohibits employers to take disciplinary measures against employees who disclose severe misconducts within the business of the employer. An employer who acts in breach of the legislation may be obligated to pay damages in accordance with the maximum amounts set out in the EPA, please see question 8 above. Further, termination or summary dismissal based on whistleblowing from the employee may be declared invalid due to lack of legal grounds for terminating the employment.
What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?
There are no statutory provisions regarding severance pay. However, an employee may be entitled to severance pay in accordance with an employment agreement, a collective agreement or a compromise agreement. If an employment is terminated through a compromise agreement, the employee normally agrees to end his employment against some extra compensation in addition to the notice period. The extra compensation is normally paid due to the fact that the employer lacks an objective ground to terminate the employment. Decisive factors for the compensation are normally the length of the employment and the possibilities for the employee to find a new job. However, please note that this is decided through negotiations between the employer, the employee and potentially the employee’s union.
Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.
An employee may waive his contractual rights. As a general rule, an employee cannot waive rights laid down in mandatory law. However, an employee may under certain circumstances waive mandatory rights, e.g., where a dispute has arisen regarding the mandatory right. Please note that an employee cannot waive rights set forth in the Swedish Discrimination Act.
Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.
It is possible to restrict the employee from working for competitors through post-termination restriction covenants set out in the employment agreement or as a separate agreement. The post-termination restriction covenants are only valid if certain conditions are met. In principle, the post-termination restriction covenants should only be used when the employee’s position require such restriction, i.e. if there is an aggravated risk that the employee handles, and is able to reveal, trade secrets. In addition to the above, post-termination restrictions are only enforceable if they are reasonable.
The duration of a non-competition covenant should normally be nine months and shall not exceed 18 months. A non-competition covenant may be considered unfair if the employee does not receive compensation for the inconvenience the covenant imposes on the employee. According to an authoritative collective bargaining agreement and market practice, employees are entitled to the difference between their salary at the time of the expiry of their employment and the income they may earn from a new non-competing employment. This compensation is however capped at 60 per cent of the salary at the expiry of the employment.
A non-competition covenant is usually combined with a contractual penalty. The penalty is normally set between three and six monthly salaries for each breach.
Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?
Information relating to the employer’s business is protected by the Act on the Protection of Trade Secrets. The Act defines a trade secret as information concerning the business or industrial relations of a person conducting business or industrial activities, which that person wants to keep secret and which the divulgation of is likely to cause damage as regards competition. An employee who wilfully or through negligence exploits or reveals an employer’s trade secret of which the employee has been informed during the course of the employment under such circumstances that the employee understood, or ought to have understood, that the employee was not allowed to reveal it, shall compensate the damage caused by the action. This only applies after the expiry of an employment if special reasons are at hand, e.g., if the former employee immediately starts working for a competitor and uses trade secrets belonging to the former employer in the new employment.
Further, an employer may require the employee to enter in to an agreement of confidentiality. This may be included in the employment agreement as a provision or as a separate agreement.
Are employers obliged to provide references to new employers if these are requested?
The employer is obligated to provide the employee with references in connection with the expiry of the employment. This obligation is considered to be a general principle and thus not set out in Swedish legislation. The obligation may also follow from a collective bargaining agreement. The employee can demand that the reference shall include information regarding length of service and the work tasks conducted by the employee. Further, the employee may require that the reference include a verdict regarding the employee’s performance and the reason for the termination of the employment.
What, in your opinion, are the most common difficulties faced by employers when terminating employment and how do you consider employers can mitigate these?
Our clients often encounter difficulties in cases when an employee is not functioning at the workplace due to personal reasons, often due to poor performance. The requirement of objective grounds to terminate an employment is set high and thus, it is required that a number of aggravating circumstances are at hand to be able to terminate an employment based on objective grounds. In addition, the employers are obligated to take comprehensive measures to facilitate the performance for the employee. Termination by summary dismissal requires a gross negligence of the employee and such behaviour is rarely at hand when it comes to employees with deficient performance.
Thus, clients often finds it difficult to end these kinds of employments in a constructive way. In the situations described above, the best way forward is often to enter into discussions regarding a compromise agreement. Given the maximum damages described under question 8, which should been seen as worst case-scenario damages, it can be rather expensive to terminate a long-term employment relationship.
Are any legal changes planned that are likely to impact on the way employers approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?