Swedish Labor Law

Swedish Labor Law

These are the highlights if you want to know more about the essential Tax Law in Sweden. This entry was drafted by Moll Wendén. Link to e-IURE Network.

This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case Moll Wendén is an excellent option in Sweden.

The employment contract

1.1       General

In Sweden, binding employment contracts can be made orally or in writing. However, under the provisions of the Swedish Employment Protection Act (1982:80), employers must provide each employee with a written statement of the terms and conditions of employment within one month after the commencement of the employment. The statement shall include the following details:

• name and address of the employer and the employee;
• the place of work and the commencement date;
• the employee’s position or work duties;
• the form of employment, i.e. if the employment is permanent, on trial or a fixed-term employment, including information on notice period and trial period for permanent employment, and conditions triggering termination of a fixed-term employment, such as the expiration date;
• wages and other benefits, including payment intervals;
• information on normal working hours and paid holidays;
• the applicable collective agreement (if any);
• conditions in relation to work to be performed outside Sweden, if such work is intended to last more than one month. Any amendment to such terms and conditions must also be communicated in writing to the employee within one month.

Such statements are not necessary for employments lasting less than three weeks.

1.2       Forms of employment

The main rule is that employment contracts are concluded for an indefinite term (permanent employment), unless otherwise agreed. Agreement can also be made on probationary employment with a trial period of up to six months. A probationary employment transforms into a permanent employment unless terminated according to certain procedures prior to the expiration of the trial period. Regulations regarding fixed-term employment is restrictive and complicated. The general rule, states that any fixed term contract will automatically be converted into a permanent employment if the employment through fixed-term contract cumulatively lasts 24 months in a given five-year period.

The given period (five years) may be extended if the fixed-term contracts are used in combination with substitute employments, paid internships or seasonal work. It is important to note that gaps up to six months between different types of employments does not affect the view of the employment period as “unified” and thus will lead to conversion into a permanent employment.

Wages and benefits

Wages and other financial benefits (except holiday pay) are not subject to any legislation in Sweden, not even regarding minimum pay rates. Considering the pervasiveness of collective agreements, especially regarding blue-collar workers, the collective agreements in practice constitute de facto minimum rates, leaving little room for individual agreements. White-collar workers on the other hand predominantly negotiate wages and other benefits locally either through their union or individually. In the absence of any collective agreement, wages are negotiated between the employer and the individual employee. Compensation for overtime hours is extensively regulated in most collective agreements.

Trade unions and collective agreements

General

Trade unions play a very important role in Sweden. The legal relationship between employer and employee is to a large extent regulated in collective agreements. The Swedish Co-Determination at Work Act (1976:580) contains the general provisions governing the relations between the employer and the unions. The Act sets forth the rights of employers and employees to associate in and act through organisations without interference by the other party. Moreover, the Act includes the basic provisions in relation to conclusion, interpretation and termination of collective agreements as well as the legal implications of such agreements. Collective agreements are legally binding on the signatory parties as well as members of such organisations. Moreover, collective agreements take priority over individual employment contracts. Breach of a collective agreement may result in liability for the employer to pay damages (including punitive damages). When a collective agreement is concluded, the parties to it, in principle, cannot legally take industrial action in relation to any issue covered by the agreement.

A trade union that has concluded a collective agreement with the employer acquires a privileged position at the work place, including rights to negotiate and receive information in relation to redundancies and many other issues that may occur. At workplaces where the employer is bound by a collective agreement with a trade union, terms and conditions of the collective agreement apply directly to employees being members of the relevant trade union and it is a common understanding that the employer generally must also provide non-members the same wages and other terms and conditions as the collective agreement provides. Moreover, collective agreements frequently affect employers not bound by such agreements. The reason being that industry-wide collective agreements are generally held to set standards to be applied at all workplaces in that particular sector.

European Works Council

The European Works Council Directive (2009/38/EG) has been implemented in Sweden by the adoption of the European Works Council Act (2011:427). Accordingly, Swedish employers qualifying to set up a European Works Council must comply with specific consultation requirements on a European level.

Termination of employment

4.1       General

Dismissal on part of the employer must have just cause in order to be valid. Reasons for dismissal can be divided into two main categories, one being redundancy, the other being the employee’s personal conduct. Certain employees, primarily those holding a managerial position, are not protected by the mandatory minimum requirements on employment protection in case of for example dismissal. If an employee who has been dismissed without just cause brings action against the employer, the Labour Court may declare the dismissal invalid and order the employer to pay damages, which may be considerable.

4.2       Dismissal for redundancy

The employer decides whether a redundancy situation is at hand or not. In principle, no distinction is made in Sweden between collective redundancies involving a large number of employees, and a redundancy situation involving only one single employee. Notice of termination by the employer must be given to the employee in writing and include detailed information on what the employee shall observe if he or she wishes to challenge the termination or claim damages. The notice must also state whether or not the employee has a right to re-employment if a vacancy should arise within a certain period of time.

When notice of termination is given by the employer, an employee having concluded an employment agreement subsequent to 31 December 1996 has a mandatory notice period of between 1 and 6 months depending on his total period of employment with the employer. For employees having entered into an employment contract prior to 1 January 1997, the notice period is instead determined on the basis of the employee’s age.

In a redundancy situation, the employer is obliged to pay salary and all other benefits to the employee during the notice period even if the employee is relieved from his duty to work. The employer is, however, entitled to deduct income which employee receives from another employment during the notice period.

An employer must prior to a decision regarding important alterations of the business operations, on his own initiative, negotiate with all trade unions to which he is bound by collective agreement provided that such unions have at least one member employed by the employer. A decision, which may result in redundancies, is always considered to be of a nature that requires prior negotiations. Employers who are not subject to any collective agreement are obliged to negotiate with all trade unions having at least one member employed by such employer, if an intended decision may result in redundancies.

The obligation to negotiate with the unions implies that negotiations must not only be initiated but also finalised prior to a decision by the employer to restructure and subsequently terminate the employment contracts with employees affected. Provisions on the negotiation procedure are often included in local or central collective agreements. The negotiations are intended to result in an agreement and include an obligation for both parties to present motivated proposals for a solution of the subject matter of the negotiation. The Labour Court may award damages to the unions if it is held that the employer has failed to fulfil the obligation to negotiate.

In a redundancy situation, the employer is primarily obliged to find alternative work for the employees within the company. This means that the employer must offer any vacant positions to employees threatened to be made redundant, provided that they have the basic qualifications to resume such positions. Furthermore, the employer shall observe rules regarding seniority, the rule of first in – last out applies. Collective agreements frequently supersede the legal requirements regarding e.g. notice period, seniority rules and rights to re-employment. Especially the collective agreements for salaried employees generally provide for notice periods exceeding the legal minimum requirements.

4.3       Dismissal for personal reasons

According to the Employment Protection Act, an employee may be dismissed for personal reasons in either of two ways. Firstly, dismissal can be made with notice where the same notice periods and other requirements apply as outlined above in relation to dismissal for redundancy. The second alternative is immediate dismissal without notice. Both options require the employer to have just cause for the action taken. Accordingly, the employer must substantiate a failure by the employee to comply with his obligations under the employment in such a material manner that the employer is not obliged to maintain the employment relationship. As the meaning of “just cause” is not defined in the Act, there are numerous precedents from the Labour Court to take into consideration. It should be emphasised that in order to arrive at a just cause for dismissal for personal reasons, the employer has the full burden of proof to prove both the employee’s failure to comply with material contractual obligations and his awareness that such failure was not acceptable to the employer.

Dismissal with notice can validly be made for a number of reasons, including repeated late arrivals, disobedience, harassment, competing activities or other acts of disloyalty, negligence in performance, and acts subject to criminal liability. However, dismissal with notice is the last resort for the employer, and cannot validly be made unless the employer has given the employee a reasonable chance to improve and also exhausted the possibilities to transfer the employee to another position. Dismissal without notice is reserved for severe breaches of the obligations under the employment contract, such as wilful and repeated disobedience of orders, criminal acts directed against the employer, and other acts involving a serious breach of material responsibilities under the employment contract.

Holidays

According to the Swedish Holidays Act (1977:480), the minimum general holiday entitlement is twenty-five days’ holiday in each twelve-month period from April 1 to March 31 (“holiday year”). Unless otherwise agreed, the employee is normally entitled to exercise four weeks of holiday during the period June – August. The employee’s mandatory right to holiday pay is assessed on a pro-rata basis corresponding to the part of the preceding holiday year (“earning year”), that the employee was employed by the employer. The employee may save part of his paid holiday entitlement for a period of up to five years.

Working time

In Sweden, working time is mainly governed by the Swedish Working Time Act (1982:673). The ordinary working time is limited at forty hours per week. The requirements under the Act are mandatory, but may be overruled by a central collective agreement concluded by a central trade union and to a limited extent also by a local collective agreement. Save for a limited number of specific employees, mainly managing executives and uncontrolled employees, the Act applies to all work except work performed at sea (seamen) and in the employer’s household, which is subject to separate legislation.

• Sick pay

Under the Sick Pay Act (1991:1047), the employer has to pay eighty per cent of the employee’s salary and benefits during the first 14 days of a sick leave, save for a one day qualification period. If the sickness period exceeds 14 days, sickness allowance is payable to the employee under the National Social Insurance System. The employer is in such cases obligated to pay a fee to the National Social Insurance System corresponding to fifteen per cent of the employee’s benefit. Under many collective agreements employees are entitled to more favourable terms and conditions in relation to sick pay and to supplemental sickness allowance.

Parental leave

Under the Parental Leave Act (1995:684) parents with children below the age of one and a half year are entitled to full parental leave. The employee also has the right to reduce the working time by twenty-five per cent until the child is eight years old. In addition, parents are entitled to parental leave during such time they receive parental benefits from the National Social Insurance System. Such benefits are paid to the parents during 480 days. For children born after the 1 of January 2014 such benefits may be payed until the age of twelve. Regarding children born before that date, such benefits are payed until the child reaches the age of eight. In principle, the parents decide themselves who will exercise such parental benefits, but 90 days are reserved for each parent. Fathers may take an additional 10 days of leave in connection with the birth.

Board representation

Employees in limited companies and co-operative associations having at least 25 employees are entitled to appoint two board members and two deputy members to the board of directors. Such board members are appointed by the trade unions.

Confidentiality

In Sweden, trade secrets have primarily been protected by the provisions of the former Swedish Trade Secrets Protection Act (1990:409). On July 1st, 2018, a new Trade Secret Protection Act (the “Act”) entered into force in Sweden. The new Act is a result of the implementation of an EU directive on the protection of trade secrets. Through the new Act the protection of trade secrets has been further strengthened. This has been accomplished by letting more infringements of trade secrets being considered as unauthorised, by letting more infringements result in liability to pay damages, and by strengthening the protection of confidentiality of trade secrets in trial. Further, the new Act specifies that, within the definition of trade secrets, experiences and skills gained by employees in their normal course of employment shall not be included. The employee shall be free to use any obtained knowledge in the course of a new employment. In other words, the provisions protecting trade secrets from being disclosed by employees are in principle limited to the duration of the employment. Subsequent to the termination of the employment, only very severe breaches of the Act may result in a liability to pay damages for the employee. However, there are in principle no legal restrictions in terms of the enforceability of imposing wider obligations on confidentiality on the employee by mutual agreement, unless such restrictions are provided for in a collective agreement to which the employer is bound.

Non-discrimination rules

The Anti-discrimination law (2008:567) intends to promote equal rights for women and men regarding employment, conditions of employment and other conditions of work and also to provide opportunities for personal development in employment. The rights of ethnic minorities are also governed by the law. Furthermore, the law prohibits discrimination in the labour market of the disabled persons as well as discrimination based on sexual orientation, gender, ethnicity, religion and age. Generally, the non-discrimination legislation applies to employees, but also to the entire recruitment procedure, implying that refused applicants may seek relief even if the recruitment procedure does not result in a decision to hire.

Health and safety

The Working Environment Act (1977:1160) contains the basic provisions concerning occupational safety and health matters in Sweden. Moreover, the Act includes regulations on how employers and employees should co-operate on work environmental matters. The working environment in principal comprises all conditions at work places. The Act applies to the physical safety of employees but also to mental and psychological work conditions at workplaces generally. According to the Act, the responsibility for the working environment primarily rests with the employer. The employer is also responsible for rehabilitation of employees and continuous improvements of the working conditions.