Introduction
Interpreting the Short-Time Work Allowance Act
Comment
In March 2020, the Swedish legislature activated and revised a law for the first time that provides companies that are suffering from temporary financial difficulties because of the covid-19 pandemic with the possibility of applying for financial support from the government. This support would partially cover costs for employees.
During the pandemic, a support system has partly relieved employees of their work duties without changing their salaries. The purpose of the Short-Time Work Allowance Act (2013:948) (the Act) has been, among other things, to avoid employment terminations and company bankruptcies as a result of temporary financial difficulties caused by the pandemic. Amendments to the law have been made as the pandemic has continued, including prolonging general support periods.
While the support system is a national matter, the Act and the financial support application will still be of importance for international company groups, among other enterprises, that are operating in Sweden under Swedish company regulations.
The procedure for companies applying for support has been to file an application with the Agency for Economic and Regional Growth (NUTEK). The NUTEK then makes a preliminary decision on the entitlement to support and sets a preliminary amount if the conditions for support have been fulfilled. A successful application obliges the company in question to provide the NUTEK with a continuance report for the preliminary granted support in relation to each employee.
Since this support system has been used for first time with regard to the Act during the ongoing covid-19 crisis, the information on when the reports shall be submitted has varied and it has been presented differently by various media outlets. This has occasionally caused confusion and misunderstandings among the companies that are entitled to the financial support.
Interpreting the Short-Time Work Allowance Act
At the same time, section 30 of the Act includes a rule that states that a company is obliged to repay all financial support received if the company submits the status reports too late. The purpose of this rule is to achieve efficiency and to incentivise employers to submit their status reports to the NUTEK.
This rule has caused major issues in practice. The NUTEK has been strict in its application of the repayment-upon-delay rule and referred to statements from the legislature when the law was originally drafted in 2013. The rule entitles the NUTEK to reclaim preliminary granted financial support only due to the delay and without assessing the employer's entitlement to support.
The way that section 30 of the Act has been interpreted has received substantial public criticism. Consequently, companies, employers' interest organisations, the NUTEK and the government have demanded changes to the legislation. The major criticism has been that the interpretation of section 30 conflicts with the entire purpose of the Act, which intends to help companies to survive the pandemic and prevent job losses. Additionally, it is also disproportionate to require repayment for limited delays and/or delays that are excusable.
On this basis, in September 2021, the government suggested revisions to the Act in order to maintain and protect its purpose and to achieve proportionality and foreseeability in its interpretation. The government has stressed the need for urgent changes. The legislature has, therefore, suggested that employers that have been instructed by the NUTEK to repay financial support due to delays will be given another chance to submit the status reports for a full assessment and should not be obliged to repay the support only because of the delay. This change will have a retroactive effect and include the support period from 16 March 2020 to 30 June 2021. Parliament enacted the changes on 20 October 2021, and they will enter into force on 1 January 2022. Changes are also suggested for the future handling of status reports, which will prohibit the NUTEK from requiring the repayment of granted support due to delays without a prior order issued to the employers to submit their reports. These changes have also been enacted and entered into force on 1 November 2021.
It remains to be seen how the law amendments will be handled in practice, as well as how and from when employers will be able to resubmit the status reports. The amendments are likely to raise new practical and legal issues in terms of handling:
- repayment decisions that have been made;
- decisions that have active appeals but are yet to be tried in court; and
- repayments that have already been completed.
For further information on this topic please contact Viktoria Hybbinette or Justus Pettersson at Wistrand by telephone (+46 31 771 21 00) or email ([email protected] or [email protected]). The Wistrand website can be accessed at www.wistrand.se.