Three questions about the reformed Swedish labour law

1. What are the main changes?

Objective grounds becomes objective reasons

The changes in Employment Protection Act aim to increase predictability in the event of dismissals with notice and imply, among other things, that a dismissal with notice must be based on objective reasons instead of objective grounds. It is not just a question of changing an established concept but making it easier for employers to assess whether a dismissal with notice for personal reasons is objectively justified or not. The fact that a dismissal with notice should be based on objective reasons means that the focus should be on the seriousness of the employee's breach of the employment contract. An overall assessment must still be made, but the employer should no longer consider the employee's interest in retaining employment or the likelihood of a similar event happening again. Furthermore, it is proposed that the rules on objective reasons could be deviated from by the parties on the labour market through collective bargaining agreements. The change shall not affect the assessment of whether there are objective reasons for dismissal with notice due to redundancy.

One redeployment offer is sufficient

A dismissal with notice shall constitute the ultimate measure taken by an employer, which means that there are no objective grounds for dismissal if it is reasonable to require the employer to offer the employee another job with the employer. The employer must in other words fulfil an obligation to investigate redeployment options. This redeployment obligation only applies to vacant positions and the employee is thus not entitled to a redeployment that leads to someone else losing their job. The new regulations clarify that an employer will only have to make one redeployment offer in order to fulfil the redeployment obligation prior to a dismissal with notice for personal reasons. However, in certain situations, the employer will be obliged to investigate further redeployment opportunities, e.g. when a long time has passed since the first redeployment was made. Similar to what is proposed to apply to objective reasons for dismissal with notice, the rules on redeployment obligations are proposed to be semi dispositive in such a way that the parties on the labour market are able to dispose over the redeployment obligations through collective bargaining agreements.

The employment does not continue during a dispute

Under current legislation, an employee who has been dismissed with notice and who believes the dismissal is wrong can submit a request to have the dismissal declared invalid by a court. A consequence of such a request is that the employment continues during the course of the dispute, which in turn entails an obligation for the employer to pay salary and benefits during the course of the dispute. The employer may also not suspend the employee from the workplace while the dispute is ongoing. Even if the employer were to succeed in the dispute, it is not possible for the employer to recover the salary and benefits paid during the litigation period. Under the new rules, the employment will no longer continue during a dispute. Thus, the employment expires at the end of the notice period even if the employee brings a request for invalidation. The employer will also be able to suspend the employee from the workplace during the notice period. Special possibilities to bring a claim for invalidation of the dismissal with notice will remain for trade union representatives at the workplace.

All employers may exclude three persons from the order of priority

In a redundancy situation, an employer needs to draw up an order of priority list with all employees and then make the employees redundant on a last-in-first-out basis. According to the new legislation, there will be a possibility for all employers to exclude three persons from the order of priority list in case of a redundancy situation. According to current provisions, this option only exists for smaller employers with a maximum of 10 employees and only two persons can be excluded. An employer who exercises the option to exclude employees from the order of priority list must wait three months before new exclusions can be made, regardless of how many people have been excluded. It shall still to be possible to deviate from the rules regarding order of priority by means of collective bargaining agreements.

Full-time as the norm and general fixed-term employment becomes special fixed-term employment

Employment contracts shall be for full-time, unless otherwise agreed. If the employment contract is not for full-time, the employer must state reasons for this in writing upon the employee’s request. The information shall be provided within three weeks of the request being made.

According to current legislation, fixed-term employments are possible through general fixed-term employment, substitute employment and seasonal employment. It is possible to have a general fixed-term employment for up to two years over a five-year period, after which the employment will be automatically converted to an indefinite term employment. Under the new rules, general fixed-term employment will be replaced by special fixed-term employment. In addition, the time limit for when such employment becomes an indefinite term employment will be shortened to twelve months. An employee who has been employed in a special fixed-term employment for a total of more than nine months during the last three years shall also have a priority to re-employment in a special fixed-term employment. Employers concluding a contract regarding a special fixed-term employment must inform the employee in writing that he or she is employed in that form of employment. For employees who have had three or more special fixed-term employments in the same calendar month, the time between these employments shall also be counted for the purpose of establishing the total time in special fixed-term employment in order to prevent circumvention of the rules through many short fixed-term employments. Deviations from the rules on special fixed-term employments shall be possible in collective bargaining agreements.

Order of priority when ”slicing”

In the event of a reorganisation of a single operating unit involving redeployment to positions with reduced working hours (so-called slicing), the employer must make the redeployment offers in order so that employees with a longer time of employment are given priority to positions with a higher number of working hours. This applies provided that the employees in question have tasks that are equal. An employee who accepts a redeployment offer to a position with a lower number of working hours shall be entitled to a transition period during which the employee may retain his or her old working hours and benefits. The transition period shall be equal to the notice period that would have applied in the event of dismissal with notice by the employer, but no longer than three months. It shall be permitted to deviate from the rules on order of priority when “slicing” and transition time by means of collective bargaining agreements.  

Companies that hire labour shall be obliged to offer employment

Companies hiring labour (e.g., from temporary work agencies) shall offer permanent employment to employees who have been placed as hired labour with the company in the same operating unit for a total of more than 24 months over a period of 36 months. The offer shall be made no later than one month from the time limit being exceeded and shall be answered no later than at the time determined by the company. However, the employee must be given a reasonable time to consider the offer. If the employee accepts the offer, the employment with the temporary work agency automatically expires when the employment with the client company commences. However, the client company may choose to pay the employee compensation corresponding to two months' salary instead of offering employment. In that case, the payment shall be made within the same time as the offer of permanent employment would have been made.  

New laws on transition student support and basic transition and skills support

It will be possible for more adult professionals to improve their skills and strengthen their position on the labour market. Therefore, a new state and parallel student aid will be introduced to improve the conditions for adults to finance studies. The support will be called transition student support and consists of a transition study allowance and a transition student loan. Furthermore, basic provisions on transition student aid will be included in a new law. 

Employees up to a certain age shall be entitled to transition student allowance and transition student loans provided that they meet certain requirements regarding establishment on the labour market in terms of working hours during certain framework periods. 

Basic transition and skills support will also be introduced, aimed at strengthening the future position of individuals on the Swedish labour market. The support shall consist of basic public support to individuals who are not covered by collective agreements or can be supported through a transition organisation and a state compensation to employers that finance transition organisations.

2. What do the changes mean for me as an employer?

It is expected to be somewhat easier for employers to determine when there are objective reasons for dismissal with notice due to personal reasons. Furthermore, as a starting point, the employer does not need to offer further redeployments to an employee who has already been redeployed for personal reasons. However, since deviations from the provisions of the Act may be made in collective bargaining agreements, employers bound by collective bargaining agreements must carefully check such potential deviations. 

It will be easier for employers to anticipate costs in the event of a dismissal with notice. Since an employment will no longer continue during a dispute over invalidity, the employer also does not have to pay salary during that period. Instead, the employee shall during that time be entitled to unemployment benefits from the state. Under current rules, an employer is obliged to pay salary and benefits as usual during the course of the dispute, which in a worst-case scenario can take several years. However, in the case of summary dismissal, the employment normally ends at the time of dismissal even if an action for invalidation is brought by the employee, which is why many employers have chosen to simply summarily dismiss the employee instead of going ahead with a dismissal with notice for personal reasons in order to avoid the risk of the employment continuing during the course of the dispute. The change will provide great relief for employers regarding the ability to proceed with a dismissal with notice for personal reasons without risking high costs even if they know that they have sufficient reasons for dismissal with notice. 

In the event of dismissal with notice due to redundancy, each employer can exclude three people from the order of priority list, which will make it easier for employers to retain particularly important skills in the company in the event of a reorganisation or downsizing. The current possibility to exclude two persons from the order of priority list has only applied to small companies, which is why this change will mean greater flexibility for larger companies in the event of redundancy. It will still be up to the employer to decide who should be excluded and the employer's decision will not be subject to judicial review unless the decision was made on e.g., discriminatory grounds. However, since deviations from the provisions of the Act may be made in collective bargaining agreements, employers bound by collective bargaining agreements must carefully check such possible deviations. 

The possibility of having an employee employed in special fixed-term employment will be restricted as the limit is now shortened from two years to one year. In addition, the time between employments will be taken into consideration if an employee has three or more special fixed-term employments during the same calendar month. This entails a strict limitation on the possibility of having so-called on-demand employments for a longer period where the employment begins at the beginning of the working day and ends at the end of the working day. 

3. When will the new rules come into force and is there anything in particular we should be thinking about right now?

The majority of the amendments will enter into force as early as 30 June 2022 but will not apply until 1 October 2022. The new Act on Transition Student Support will also enter into force on 30 June 2022 and will be applied for the first time to studies starting after 31 December 2022.

Employers should review their employment contract templates because the new rules in the Employment Protection Act imply, among other things, an obligation to clarify a lower number of working hours than full-time as full-time will become the norm. If an employee is employed in a special fixed-term contract, the employer must also inform about this, so it is important that the new form of employment appears on the employment contract or other written information. 

It is also important to keep track of any general fixed-term employment contracts that the employer is bound by. For general fixed-term employment contracts already in progress when the new rules come into force on 1 October 2022, a limit of two years will continue to apply under the old rules. However, when assessing whether a special fixed-term employment relationship has been converted into a permanent employment relationship under the new rules, previous length of service in general fixed-term employment relationships may also be taken into account in the case of time spent in general fixed-term employment contracts from 1 March 2022. This will be important to consider before signing new contracts for special fixed-term employment contracts after 1 October 2022 with employees who previously held one or more general fixed-term contracts. 

Employers who hire labour need to keep track of deadlines for when an offer of employment must be made or compensation paid. When calculating the time that the employee has been placed with the client company, any time before 1 October 2022 can be disregarded. Employers do not need to start counting hiring time right now, but it may be good to review the agreements and contract templates used when hiring labor. In particular, clauses on solicitation prohibitions may need to be reviewed as the new rules introduce an obligation for client companies to offer employment to hired persons. It may also be a good idea to regulate the cost of the two monthly salaries in the agreement between the leasing and hiring companies. 

Do not hesitate to contact us at Deloitte Legal if you have questions about the new rules or need help adapting your business to the new requirements. 

*The information should not be seen as advisory or exhaustive. For advice in specific situations, please contact us through the channels listed below.