practice area articles
By Jenny Welander Wadström, Mathilda Wahlgren and Elin Osbeck
Back to International Employment Law
KEY DEVELOPMENTS FOR 2020
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.