Practice Area Articles
Sweden
February 05, 2024
By Paul Hastings Professional
Back to International Employment Law
KEY DEVELOPMENTS FOR 2024
Recent amendments to the Swedish Employment Protection Act
In October 2022, the Swedish Employment Protection Act underwent significant changes aimed at enhancing flexibility, adaptability, and job security. In terms of priority rules exemptions, irrespective of the workforce size, every employer can exempt three employees from the priority rules during redundancy terminations. However, a three month lock has been implemented to prevent frequent use of this exception by the employer. Importantly, deviation from these rules is feasible through a collective bargaining agreement. For employers bound by such an agreement, additional exemptions are often possible. Separately, although redundancy remains unaffected, there are changes for cases where terminations have occurred due to personal reasons. Here, the employer is no longer obligated to make a future forecast of whether the employee will continue to breach his/her obligations in the employment. As a main rule, the employer will only need to make one relocation offer. In essence, there is no substantial deviation from what applies today. Additionally, personal interests, like maintenance obligations or challenges in securing new employment, should not be considered in case of terminations for personal reasons. While the new rules entered into force in October 2022, the impact and applicability of these regulations are still uncertain, especially since there is no case law involving them. Thus, it is anticipated that the labour court will provide more guidance on how the rules shall be applied in practice during 2024.
EU directives on minimum wage and pay transparency
EU directives have historically had a significant impact on the labour law of member states, including Swedish labour law. Recently, the EU adopted two directives: the Minimum Wage Directive (EU) No. 2022/2041 and the Pay Transparency Directive (EU) No. 2023/970. According to an inquiry presented by the Government in June 2023, Swedish legislation is compliant with the Minimum Wage Directive. Therefore, no changes are expected regarding this directive. The Pay Transparency Directive aims to combat pay discrimination and unjustified gender pay gaps by setting minimum requirements. The directive mandates member states to introduce rules to increase pay transparency in workplaces and employ stricter enforcement mechanisms. For example, job seekers should have access to information about the salary range for a position, and employers should not ask job seekers about their salary history. For existing employees, the employer’s criteria for determining salaries and salary trends should be made available. Employers with more than 100 employees should also report on the gender pay gap according to different parameters to the authority responsible for compiling and publishing such information. Regarding the Pay Transparency Directive, the Swedish Government has appointed a special investigator to examine how the directive should be implemented in Swedish law. The investigator will analyse the compatibility of Swedish law with the directive, the adaptation of the Swedish model, etc., to meet the requirements of the directive, and to examine any possible legislative changes needed. The investigation will be concluded and published no later than 31 May 2024. The directive will likely lead to some amendments to Swedish labour law, and we continue to follow the developments.
New investigation on expanded opportunities to maintain a good work environment
In August 2022, a new investigation was published regarding proposed amendments to the Swedish Work Environment Act. One proposed amendment seeks to expand the responsibility of employers to ensure a good working environment for workers in situations where they have limited or no control, such as when workers are employed by subcontractors, work at home, or use digital platforms. Another proposed amendment aims to introduce sanctions for violations of certain regulations related to psychosocial risks, such as stress, violence, and harassment. A further amendment shall clarify that employers should use occupational health services as part of their systematic work environment management, and to increase the quality and availability of such services. The new rules are scheduled to come into effect on 1 July 2024.
KEY DEVELOPMENTS FOR 2023
Changes to the Swedish Employment Protection Act
On 1 October 2022, new changes in the Swedish Employment Protection Act came into force. These changes are the most substantial that have occurred in modern time in Swedish labour law. The changes to the legal employment landscape that will come out this reform will be significant during 2023 and onwards. The new legislation includes changes to several aspects of employment protection.
All employers will as of 1 October 2022 be able to exempt employees that are of significant importance to the future of the business from the priority order in a redundancy situation. In the past, only employers with ten employees or less has had this option. The number of employees that an employer can exempt is now three employees (or more under certain collective bargaining agreements). Furthermore, the rules regarding termination due to personal reasons has been somewhat simplified and an employee will no longer remain employed during a dispute regarding the validity of the termination of employment. Lastly, the fixed term employment category “general fixed term employment” (Sw. allmän visstidsanställning) is now replaced with “special fixed term employment” (Sw. särskild visstidsanställning) and the maximum period in such employment is limited to twelve months during a five-year period. Moreover, an employee in a special fixed term employment will also have a preferential right of employment for a new special fixed term employment after nine months of employment.
Amendments to the Swedish Agency Work Act
In addition to the changes mentioned above the reform also includes changes to the Swedish Agency Work Act (Sw. lag om uthyrning av arbetstagare). As from 1 October 2022, agency workers engaged to work in the same operating unit for 24 months during a 36-month period must be offered permanent employment with the entity engaging the agency worker. Alternatively, it is possible to pay financial compensation to the agency worker.
The new requirement will increase the engaging entity’s administrative burden in terms of keeping track of the agency workers’ time of engagement, as well as potentially increased costs. Furthermore, the changes will likely trigger changes in the way agency companies operate, how their agreements are structured and how their services will be used.
Suggested changes regarding platform companies’ work environment responsibility
An increased work environment responsibility for “platform-workers” (i.e. people performing work by using digital platforms) has become a hot topic in Sweden. Ever since EU published their proposal on a Directive on improving working conditions in platform work (the “Platform Work Directive”), the Swedish government and authorities have investigated which platforms on the Swedish market that should have a work environment responsibility over the individuals providing services on their platform.
In August 2022, the Swedish Government Office came with an official report that suggested that typical “platform companies” should have work environment responsibility over individuals providing services on their platform and that changes are needed in the Swedish Work Environment Act. In the report, the Government Office criticises the Platform Work Directive and argues, among other things, that it is problematic that there is an “employment presumption” for platform workers and that the EU therefore defines what an employee is. It is stated in the report that it should not be up to the EU to define what an employee is and that this threatens the Swedish labour market model. In line with this criticism, the government proposes that Sweden should proceed with its own legislation. The changes in the Swedish Work Environment Act are suggested to come into force on 1 July 2024.
KEY DEVELOPMENTS FOR 2022
Legislative changes in light of EU Whistleblowing Directive
On 17 December 2021, the new Whistleblowing Act came into force in Sweden, implementing the EU Whistleblowing Directive. However, Swedish companies with over 250 employees had until July 2022 to establish internal reporting channels, and the deadline for Swedish companies with between 50-250 employees is December 2023.
There has been much debate on the implementation of the internal reporting channels, and the fact that EU member states have interpreted the obligations differently. In Sweden, companies with between 50-250 employees must set up internal reporting channels but companies with more than 250 employees have to set up their own reporting channels and related procedures. This means that large companies need to handle most of the features of the internal reporting channel independently.
Further, whistleblowers are not only protected when reporting misconduct relating to the areas mentioned in the EU Whistleblowing Directive, but also when reporting something that may be in the public interest. Therefore, the Swedish Whistleblowing Act goes further than the EU Whistleblowing Directive in terms of the material scope.
Companies should review their Whistleblowing policy and other public information regarding whistleblowing in order to ensure they remain compliant with the new legislation. Ahead of the deadlines for establishing internal reporting channels, we also recommend reviewing existing reporting channels and procedures in light of the new requirements. If no such reporting channels exist, companies should review their ability to establish such a system.
Legislative changes in light of EU Directive on transparent and predictable working conditions
The Swedish Government issued an investigation on how the EU Directive on transparent and predictable working conditions (the "Directive") should be implemented in Sweden. The Directive aims to improve working conditions by promoting clearer and more predictable terms and conditions of employment. The legislation entered into force on 29 June 2022.
The Swedish investigation concluded that under the Swedish Employment Protection Act, it will be mandatory for employers to provide additional terms and conditions of employment in writing. This includes conditions for a probationary period, a definition of over-time work and the remuneration for such overtime work (if any). Moreover, employers may not, as a general rule, unilaterally prohibit side engagements or jobs. However, employers may exceptionally prohibit side jobs in agreement with the employee, e.g. if such job competes with the employer in a way that causes harm, or is otherwise disloyal or harmful for the employer's business.
Companies should review their template employment agreements in light of the new legal requirements, and seek to implement them in new employments and in connection with any salary reviews for current employees, for example. In addition, companies should review their policies for side activities (if any).
Legislative changes in light of EU Directive on work-life balance for parents and carers
The Swedish Government has issued an investigation with a proposal on how the EU Directive on work-life balance for parents and carers should be implemented in Sweden. The legislation implementing the directive took effect on 2 August 2022. The Directive provides employees with rights to e.g. parental leave, other care leaves and absence due to force majeure. Furthermore, employees may request adaption of their work pattern through remote work, flexible working hours or part-time work.
In Sweden, the Government has suggested that changes should be made in relation to flexible working arrangements. For example, parents with a child under the age of eight or someone who is a carer of a relative who is ill should be entitled to flexible work if possible.
We recommend that employers review their policies on parental leave, other care leaves and flexible working arrangements, in light of the new requirements.
KEY DEVELOPMENTS FOR 2021
Developments regarding Whistleblowing directive
The European Union adopted a directive in 2019 in order to unify the regulation of protection of whistleblowers amongst member states (the Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law, the "Directive"). In 2020, a Government Committee, appointed by the Swedish Government, published a report that investigated the implementation of the Directive into Swedish law (the "Proposal"). In the Proposal, the Government Committee suggested that the Directive be implemented by way of a new law with effect from 2022 and 2023. This law would replace the act currently in force, i.e. the Swedish Act on Special Protection for Workers Against Reprisals for Whistleblowing Concerning Serious Irregularities (2016:749).
It should be noted that no formal decision has been taken regarding the Proposal and that it will be subject to a legislative process before finally decided upon by the Swedish Parliament. However, we believe that companies in Sweden will start implementing adequate changes in their organisations, in order to be prepared once the new legislation enters into force. For example, as both the Directive and the Proposal introduce (i) a requirement for companies with over 50 employees to establish an effective internal system for reporting and follow‑up (i.e., a whistleblowing hotline/procedure), and (ii) that such a whistleblowing hotline/procedure must protect the whistleblower's identity; it is recommended that companies prepare and/or take action to ensure that such requirements are met.
Case law concerning unfavourable treatment of employee on parental leave
In a recent case from the Swedish Labour Court, an administrator employed by the Swedish Social Insurance Agency (Sw. Försäkringskassan) was informed by his employer that his probationary employment was terminated on the grounds that the employer had an insufficient basis to assess his performance due to the fact that he was on parental leave during the probationary period. The administrator became a parent approximately one month into the probationary period and had to be on parental leave for longer than expected, due to his wife's postnatal depression. When the employee's parental leave was further extended due to his wife's illness, his employment was terminated by the employer.
The Swedish Labour Court ruled that an employee, who at the time of their parental leave is employed on a probationary basis, may be entitled to an extension of the probationary period if the employer has been unable to assess the employee's performance due to the parental leave. Otherwise, the employer risks being in violation of the prohibition of unfavourable treatment of employees on parental leave under the Swedish Parental Leave Act. Under these circumstances, the probationary period may exceed the statutory maximum length of six months, which applies otherwise.
Focus on employer responsibility for ensuring sufficient work environment for its employees
In accordance with the Swedish Work Environment Act (Sw. Arbetsmiljölagen), the employer has the main responsibility for ensuring that work performed by its employees can be carried out without risk of ill health or accidents. Due to the COVID‑19 pandemic, employees are recommended to work remotely, if possible. However, the employer is still responsible for ensuring that the work can be carried out without risk of ill health or accidents. In order to help employers ensure an adequate work environment for its employees, the Swedish Government has instructed the Swedish Work Environment Authority (the "Authority") (Sw. Arbetsmiljöverket) to investigate and provide employers with information regarding organisational and social risks in work environment caused by the changes that have been implemented in workplaces due to the COVID‑19 pandemic. The information should mainly focus on risk in work environment for employees that work in the healthcare sector and employees that work remotely, e.g., performing their work duties from their home.
KEY DEVELOPMENTS FOR 2020
Whistleblowing Directive
The European Union has recently adopted a Directive in order to unify the regulation of protection of whistleblowers amongst member states (Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law). The purpose of this Directive is to ensure that employees in both public and private organisations who report breaches of Union law are sufficiently protected against retaliation from their employers.
Sweden adopted the Whistleblowing Act in 2016 to protect whistleblowers from retaliatory action by their employer where they have raised concerns with the employer/trade union in the first instance related to criminal and other offences. However, the EU Directive is more extensive than the current Swedish legislation, and the implementation of the Directive will therefore require legislative changes in Swedish law going forward. The key difference between the Directive and the existing Whistleblowing Act is that the Directive requires companies with more than 50 employees to establish an effective internal reporting system (i.e., a whistleblower system) which must protect the whistleblower's identity. There are currently ongoing discussions in Sweden regarding what changes the implementation will lead to, and the Swedish Government has issued an investigation to review what amendments are necessary in order to ensure compliance with the Directive. All member states are required to have sufficiently implemented the Directive by 17 December 2021.
Modernisation of Swedish employment law
The Swedish Government has recently issued an investigation of how Swedish employment law can be modernised and adapted to today's labour market. The outcome of the investigation was presented in a report in May 2020 and is currently the focus of extensive political discussions. The report focuses on, amongst other things, extending the exceptions to the priority rules in the Swedish Employment Protection Act (Sw. lagen om anställningsskydd) (the "EPA"). This would, in effect, make it easier for employers to deviate from the 'last-in-first-out' principle in redundancy cases. The report also suggests that a legal obligation is imposed on employers to offer adequate competence development to its employees. Moreover, the report focuses on how to reduce employers' costs associated with the termination of employees in smaller businesses.
It is anticipated that the proposed amendments will be implemented in Swedish law no later than 2021. However, it should be noted that if the Swedish social partners come to an agreement reflecting the abovementioned aims of the policy agreement and the proposed changes, the Government will instead propose new legislation in accordance with the proposals of the social partners. The possible agreement between the social partners is currently under discussion and a liberalisation of Swedish employment law is anticipated, even if the details of the future amendments are yet to be determined.
Recording of working hours
The European Court of Justice (the "CJEU") has recently rendered a judgment in case C-55/18 CCOO regarding employees' rights to fair and just working conditions. The key issue in this case was whether Spanish national law, which requires employers to keep track of employees' overtime work, but not their working time in its entirety, sufficiently implements the EU's Working Time Directive 2003/88/EC (the "Directive"). The CJEU stated that a requirement to only record overtime hours does not provide employees with an effective means of ensuring that the maximum weekly working time is not exceeded, or that the minimum daily and weekly rest periods are observed under all circumstances.
The Directive has been implemented in Sweden by way of the Swedish Working Time Act (Sw. Arbetstidslagen), and, as was the case in accordance with Spanish law, the Swedish regulation only requires employers to monitor its employees' overtime work and not their regular working time. The case has been up for discussion in Sweden due to the similarity of the Spanish and Swedish regulations. As the Spanish regulation was deemed insufficient, there is a risk that the Swedish regulation would be viewed the same way and amendments to the Swedish legislation implementing the Directive may, therefore, be necessary in the future. Amendments have not yet been proposed, but employers in Sweden are advised to review their internal processes for recording of working hours and to keep track of any such legislative development.
KEY DEVELOPMENTS FOR 2019
The gig economy
The development and expansion of the "gig economy" or "on-demand economy" is accelerating in the Swedish labour market, even though the gig economy represents a low percentage of the Swedish economy.
The government issued a report in 2018 concerning issues relating to the Swedish tax system which analysed whether the regulation of specific tax applicable to individuals or legal entities conducting business, may lead to "false" self-employment, i.e. when an individual formally acts as an independent contractor but in reality should be regarded as an employee and taxed accordingly.
Even though this governmental report is at a fairly early stage of the legislative procedure, it should be noted that the need for legislative changes has been highlighted both as regards the responsibility for the work environment as well as changes in the tax system which might affect the relevant stakeholders in the industry. Since Sweden has a comparatively broad concept of what constitutes an "employee", it is likely that platform operators will be considered employees.
New case law on non-solicitation clauses
The Swedish Labour Court has recently ruled on two different cases regarding non-solicitation clauses that restrict the employee's ability to solicit and hire employees. In light of the recent rulings, it has now been clarified that an employer must firstly assess whether it has a legitimate interest in a non-solicitation clause being in place. If the employer does have such a legitimate interest, it may implement a non-solicitation clause, but the clause cannot go beyond what is considered reasonable. It is therefore advisable to formulate the non-solicitation clause in such a way that the relevant employee is only restricted from actively soliciting employees that the employee has worked with.
Furthermore, the restrictive period cannot go beyond what is considered reasonable which, according to the court, is also relatively short. In the aforementioned cases for example, the court held that a period of six months was unreasonable. Consequently, employers should carefully assess the length of time deemed necessary for them to restrict former employees from soliciting employees in order to protect their legitimate interest.
Handshakes and indirect discrimination – new case law from the Swedish Labour Court
In August 2018, the Swedish Labour Court issued a new ruling concerning indirect discrimination. In this case, the court found that a job applicant had been discriminated against for practising her religious faith by declining to shake hands with male colleagues. This is a religious act protected under the European Convention of Human Rights and EU law, and thus also protected under the Swedish Discrimination Act.
In all cases involving individual freedoms and rights, a balance must be struck between the interests of the employer and the employee. However, this new ruling from the court might entail a new approach from the Swedish Labour Court when it comes to certain religious acts, such as declining to shake hands or wearing a certain type of clothing, where the employee's religious belief could be held to prevail over the employer's interest in, for example, maintaining a neutral work environment.
KEY DEVELOPMENTS FOR 2018
Amendments to Posted Workers Legislation
On 1 June 2017, amendments were made to the Swedish Act on Posted Workers. The primary implication of the amendment is that the so called Swedish “lex laval” has been abolished. Consequently, Swedish trade unions are, following the amendment, entitled to demand a foreign employer to enter into a Swedish collective bargaining agreement when posting employees to Sweden. The terms and conditions which the foreign employer already applies in relation to the posted employees are irrelevant in this regard. However, the Swedish trade unions’ ability to bring industrial action against a foreign employer is limited to minimum terms and conditions of employment which are considered “core” as specified in the EU directive 96/71/EG. The main reason for the abolishment of lex laval is that there is no existing legislation regarding minimum wage in Sweden, whereas the Swedish collective bargaining agreements are crucial in terms of regulating the minimum wage-levels and other terms and conditions of the employment.
A New Trade Secrets Act
A new Act on the protection of trade secrets will come into force on 1 June 2018 to implement Directive (EU) 2016/943. The Act includes a provision on criminal liability for individuals who disclose trade secrets to which they have had lawful access due to employment or other similar basis – a situation that is not covered by the current act.
Sexual Harassment in the Workplace –Anticipated Case Law Developments
The global #MeToo-movement, was merely the beginning of a wave of sexual harassment cases, scandals and political discussions. Following an amendment of the Swedish Anti-Discrimination Act at the beginning of 2017, employers have a legal obligation to take proactive measurers in order to counteract sexual harassment in the workplace. Due to extensive attention sexual harassment has been given in Swedish media and press, it is likely that the Equality Ombudsman and the Swedish Work Environment Authority (Sw. arbetsmiljöverket) will continue to expand their supervision during 2018 of the regulations in this regard. In addition, it is likely that we will see an increase in case law regarding sexual harassment in the workplace.
KEY DEVELOPMENTS FOR 2017
The industry-wide collective bargaining agreements will be renegotiated
During the industry-wide collective bargaining agreement renegotiations in 2016, the parties were unable to agree on a period longer than 12-13 months, meaning a new round of renegotiations will commence in 2017. The biggest bone of contention (as was the case in 2016) is likely to be the extent to which the Swedish export-oriented industries can sustain the wage increases that the trade unions request, given the low rate of inflation and the uncertainty of the development of the major European economies (Sweden’s main export market).
Further, certain employers’ associations and trade unions are challenging the normative influence of the industrimärke (the agreed wage increase for the traditional Swedish export-oriented industries) on wage increases in other industries.
However, it is not only wages that will be on the agenda. Unionen, the largest trade union for white-collar employees, has already confirmed that it will pursue its goal of ensuring that all its members have the option of partial early retirement (so called “flexpension”).
While, in global terms, Sweden generally experiences relatively little industrial action, or indeed threats of industrial action, it does tend to occur during the renegotiations relating to the industry-wide collective bargaining agreements. There could therefore be a period of volatility in 2017 until the new agreements are in place.
Sweden to introduce enhanced protection for whistle-blowers
On 1 January 2017, new legislation came into force which introduces a prohibition on employers taking action that is harmful to an employee on account of the employee’s disclosure of serious irregularities in the employer’s business. In order for an employee to be afforded protection under the Act, the employee must make disclosures in accordance with the provisions of the Act, which includes a requirement on employees to report irregularities internally in the first instance (via the employer’s internal reporting channels).
KEY DEVELOPMENTS FOR 2016
New rules on non-compete clauses in employment agreements came into effect
Formally introduced at the end of 2015, during 2016 employers have had to adapt to a new collective bargaining agreement regulating the use of non-compete clauses in relation to white-collar employees (the “2015 Agreement”). The 2015 Agreement has been adopted by all major employers’ associations and trade unions, meaning that it applies to a majority of employers operating in Sweden. Under the 2015 Agreement, non-compete clauses can only be used in agreements with employees that have access to the employer’s trade secrets and the means to compete by utilizing them, and the restricted period cannot exceed 18 months unless there are special circumstances. As under the previous agreement, employers must compensate employees for loss of income during the restricted period.
Wage increases determined in the renegotiated industry-wide collective bargaining agreements
As part of the renegotiations relating to the industry-wide collective bargaining agreements during 2016, the major employers’ associations and trade unions agreed on wage increases for a 12-13 month period. The industrimärke was set at 2.2% for a 12-month-period. The industrimärke is generally seen as establishing the cap on the collectively agreed wage increases in other industry sectors, and it seems that this cap was largely respected throughout the Swedish labour market.
Employers’ responsibility for psychosocial work environment
Following reports that long-term sick leave is increasingly being taken due to mental health problems, the work environment and employers’ responsibility to address psychosocial health risks have been very much in focus. In March 2016 the Swedish Work Environment Authority adopted a new regulation setting out the obligations for employers to create and maintain a sustainable work environment. Further, the Swedish government announced an increase in funds to recruit more health and safety inspectors (citing the need to ensure a sustainable work environment).
Amended legislation on fixed-term employment contracts addresses complaints from the European Commission
In May 2016, the legislation on fixed-term employment contracts was amended to address long-standing complaints from the European Commission that the Swedish legislation was in breach of the Fixed-Term Work Directive. The Commission’s complaints had been that Swedish legislation allowed for the perpetual continuation of a fixed-term employment by combining different types of fixed-term employment contracts. With the implementation of the new rules, such unlimited application of fixed-term employment contracts is no longer possible.
READ NEXT
Switzerland
February 05, 2024
For More Information
