Changes to the Swedish Employment Protection Act and other labour laws

In recent years, the modernisation and reform of Swedish labour law has been a constant topic in the political debate. Earlier this year, Government Bill 2021/22:176, entitled "Flexibility, adaptability and security in the labour market", was presented. The bill, which is based on an agreement between the social partners, proposes legislative changes to a total of 21 labour laws. On 8 June 2022, the Swedish Parliament voted through the proposal, which will bring major changes to Swedish labour law. The majority of the proposed changes will enter into force on 30 June 2022 and will apply for the first time on 1 October 2022. In this detailed analysis, we will outline the most important changes to the Employment Protection Act (1982:80) ("EPA") and the Agency Work Act (2012:854).

From objective grounds to objective reasons

The bill highlights the need for greater predictability when a termination is made on personal reasons and when it is legally valid. Therefore, it is proposed to amend the rules on termination in the Employment Protection Act, replacing the concept of "objective grounds" with "objective reasons".

In the case of termination due to personal reasons, the change from objective grounds to objective reasons results in an increased focus on whether the employee has sufficiently seriously breached his/her obligations under the employment agreement. An employer considering termination for personal reasons will no longer have to balance the employee's personal interest in retaining his or her job. Nor should the employer be required to make any forecast whether the employee is likely to breach his or her employment obligations in the future.

In addition, the redeployment rules are amended. If the employer has previously redeployed the employee to another job due to circumstances relating to the employee personally, the starting point is that the employer has fulfilled its redeployment obligation. However, exceptions shall be made where there are special circumstances.

Important news in this respect is that the rules governing termination on objective reasons are optional, changes can be made in collective bargaining agreements at a central level. This means that the social partners have the possibility to decide what constitutes sufficient reasons for a valid termination. It also means that the assessment may be different in different sectors in the future.

Extended exceptions in the order of priority rules

The current regulation only allows employers with up to ten employees to exclude two employees from the order of priority in the event of termination due to lack of work. Under the new regulation, all employers will be entitled to exclude up to three workers from the order of priority in the event of termination due to lack of work, if the employer considers them to be of importance for the continuation of the business. If such exception has been made, no further exceptions will be allowed in the case of a termination occurring within three months of the first termination.

The purpose of the new regulation is to increase the ability of organisations to retain key employees during reorganisation. It is still permitted to decide other rules about order of priority in a collective bargaining agreement.

Employment is terminated during a dispute

Under the new regulation, an employment is terminated at the end of the notice period, notwithstanding that there is a dispute about the validity of the termination. The aim is to make the employer’s costs more predictable in the event of dismissal. In order to ensure that employees who wish to challenge a dismissal are not left without income during the course of any civil proceedings, the employee will be able to apply for unemployment benefits during the course of any litigation.

If a court sets aside a dismissal, the employee will be entitled to continue the employment under the same conditions as applied prior to the wrongful dismissal. In this case, the employer will be obliged to pay wages and other benefits that have not been paid during the course of the litigation. In addition, the general damages for wrongful dismissal or redundancy will be increased to discourage employers from unjustified dismissals.

Specific fixed-term employment replaces general fixed-term employment

The terminology of one of the fixed-term employment forms is changed from the general fixed-term employment to a specific fixed-term employment ("SFTE"). The new rules aim to strengthen the position of fixed-term workers in the labour market.

The rules change the time at which the fixed-term employment becomes a permanent employment. A fixed-term employment becomes a permanent employment after more than 12 months of fixed-term employments during: (i) a five-year period; or (ii) a period of successive fixed-term contracts. In addition, new calculation rules are introduced whereupon if an employee has three or more periods of SFTE in a calendar month, the time between is also counted as a period of employment.

If the employee has been employed on a fixed-term employment for nine months in the last three years, the employee will have a priority right to a new fixed-term employment. This will improve the chances of employees eventually obtaining a permanent employment.

Full-time is standard

As a general rule, employment agreements will continue to be considered full-time, unless otherwise agreed. If it is unclear what the employer and employee have agreed, it should be to the detriment of the party claiming anything other than full-time.

In addition, employers are obliged to provide a written explanation of the reason for not offering a full-time job if the employee so requests. The information must be provided within three weeks of the request from the employee.

A temporary agency employee should be offered full-time

The new regulation in the Agency Work Act means that client companies must offer permanent employment to hired employees who have been placed at the same unit for a total of two years over a maximum period of three years. If the employee accepts the offer, his/her employment with the staffing company will end without any specific action when the employment with the client company begins.

If the client company does not wish to offer the agency worker a permanent employment, the client company may choose instead to pay the worker compensation equivalent to two months' salary.

The purpose is to give long-term hired workers a better chance of obtaining permanent employment with a client company that they have worked for over a longer period. The new rules will be subject to derogation in collective bargaining agreements.

Concluding comments

The reforms outlined above are not the only changes. A new finance scheme for transition and retraining will be implemented, which will supplement the regular study loans and finance studies that can strengthen workers' future position in the labour market. In addition, a new basic retraining and skills support system will be introduced to help people develop their skills on an ongoing basis throughout their working lives. The aim is that the new rules in the Employment Protection Act and other legislation will jointly create a more modern and better balanced Swedish labour market.

It may be noted that there will be a number of transitional provisions that all employers will need to pay particular attention to in the near future. The transitional provisions will be relevant, among other things, when a SFTE is converted into a permanent employment.

Finally, we note that many of the changes aim to increase predictability and clarity in the relationship between employer and employee. Whether or not this will be the case in practice remains to be seen in the coming years.