Insights | March 31, 2022

Proposed changes to the Swedish Employment Protection Act

In January 2019, four political parties agreed to reform the Swedish employment legislation in order to accommodate today's labor market (Sw. Januariavtalet). The legislation process following this agreement has been back and forth, and has resulted in several different reports. In this article, we provide an overview of the process.

On 22 January 2022, a legislation proposal was finally put forth  to the Council on Legislation (Sw. Lagrådet). The proposal includes broad changes relating to termination of employment, order of priority (Sw. turordning), employment disputes, special fixed-term employment, and temporary agency work, as summarized below.

In its official report from 3 March 2022, the Counsel on Legislation generally expressed  skepticism, for example as to whether the proposed changes will achieve the desired effects in practice. It also stated that the proposed wording of the legislation does not reflect the objectives mentioned in the preparatory works. Despite the comments from the Council of Legislation, the preparatory work has, without any material changes, been put forward to the Parliament and is expected to be voted upon 8 June 2022.

The changes are proposed to enter into force on 30 June 2022, although some provisions of the legislation will not take effect until later.

Termination of employment

Objective grounds vs. objective reasons

In order for an employer to terminate an employee’s employment, objective grounds (Sw. saklig grund) are required. It is now proposed that objective grounds be changed to objective reasons (Sw. sakliga skäl) for the purpose of clarifying that the focus should be on the severity of the breach of contract, and that the employer’s assessment of whether or not a termination is valid should be based on the circumstances at the time of the termination. Furthermore, no consideration should be given to the employee’s personal interests in remaining employed and no prognosis will be required regarding to risks that the employee will not fulfill their obligations in the future. Rather, the sole focus will be on the employee’s violation of the employment agreement.

Relieved redeployment obligation

It is also proposed that the employer’s obligation to redeploy (Sw. omplacering) should be more limited. It is sufficient that the employer seeks to redeploy the employee once. Hence, if an employee has been redeployed due to personal reasons and breaches their employment agreement once again, the employer will not, as a general rule, be required to consider redeployment of the employee again.

Order of priority

Any employer is given the possibility to exempt employees from the order of priority list

It is proposed that any employer, regardless of number of employees, should be allowed to exempt up to three employees from the order of priority list. As today, the requirement is that such employees are considered of significant importance to the business. As a limitation, no additional exemptions are allowed within three months of the first terminations.

Today, only employers with ten or less employees are permitted to exempt up to two employees in a redundancy situation. As the proposed legislation will apply to all employers, regardless of size, and permits up to three exempted employees, this is a considerable extension.

Extended use of order of priority list in case of reduced working hours

In addition, an entirely new rule is introduced in relation to redundancy. It is proposed that employers must apply the order of priority list in case of a reorganization which results in reduced working hours for some employees. Hence, the employees with the shortest period of employment with the employer will have their hours reduced, and the employer cannot freely choose to whom they should offer reduced working hours. In addition, the reduction in hours must be prioritized according to the lowest degree of working hours. Hence, the employee with the shortest period of employment must be offered the least number of hours, if the number of hours is reduced as a result of a reorganization.

Employment disputes regarding the validity of the termination of employment

Employment will not continue in the event of a dispute

Another suggested change is that the employment relationship should not continue during a dispute regarding the validity of the termination of employment. This is a substantial change in relation to the current legislation, as it means that the employer would no longer be required to pay salary, etc. during the dispute. In addition, it should no longer be possible to decide, by way of an interim judgement, that the employment will continue until the dispute is finally settled.

If the termination is considered invalid, the employment would continue as if the termination never took place. If so, the employer would be required to pay salary and benefits retroactively for the time the dispute was ongoing. In addition, the period in which the dispute took place would have to be included when calculating the employee’s total period of employment. If the employer has neither objective reasons for termination, nor grounds for immediate dismissal, it is suggested that the punitive damages for wrongful termination and dismissal be increased to approximately SEK 135,000 and SEK 190,000 respectively. As an alternative, if the employee has brought a claim for annulment in the case of a wrongful dismissal, but the employer had objective reasons for termination but not grounds for immediate dismissal, the damages should be approximately SEK 90,000.

Special fixed-term employment

The qualification period for fixed-term employees to be re-employed is suggested to be reduced from 12 months to nine months within a three-year period. It is also suggested that the words ‘general fixed-term’ (Sw. allmän visstid) be replaced by the words ‘special fixed-term’ (Sw. särskild visstid) to emphasize that the standard period of employment should always be an indefinite-term.

Temporary agency work

Obligation to offer employment for an indefinite term

It is further proposed that an employer that engages agency workers must offer agency workers, who have been engaged by the such employer for at least 24 months during a period of 36 months, employment at the company for an indefinite term. If the agency worker accepts the offer, their employment with the agency company ends without any further action necessary.

As an alternative, the hiring company may offer the agency worker a compensation payment, instead of a permanent employment. Such compensation must correspond to two months’ salary.

If the hiring company fails to comply with these obligations, the agency worker must make a claim within four months calculated, from the date on which the hiring company should have made the offer to the worker (i.e. after 24 months’ engagement). Specific categories of employees may be exempted from this rule, and deviations may be agreed upon in a collective bargaining agreement.

Recommendations to employers at this stage

We recommend employers to closely monitor the development of the legislation process, and to review for example:

• If the employer engages agency workers, and for how long they have been engaged in the business, and seek to renegotiate existing contracts with staffing agencies if necessary,
• To implement a process for documenting redeployment offers given to employees due to violations of the employment agreement, to be able to prove that such offers have been given,
• Set up a process for coordination and information sharing within a legal entity, if the possibility to exempt employees from the order of priority has been used during the last three months, and
• Be aware that down-sizing by way of reducing employees’ working hours will be subject to limitation following the new legislation.

Roschier’s Employment team continues to follow the developments in the area. Should you have any questions regarding the potential impact on your business or in general, do not hesitate to contact us.

This article, first published 7 March 2022, was updated on 31 March 2022.