The Swedish Court of Labour has recently ruled that a Lithuanian company acted in breach of the applicable Swedish collective bargaining agreement (CBA) when setting salaries for workers that it had posted to Sweden. Such postings are provided for under the Posting of Workers Act and in CBAs.
The company had included a certain posting compensation required under Lithuanian law when calculating the mandatory compensation levels for the workers that it posted to Sweden. However, as the company was operating under a Swedish CBA, it was obliged to comply with the rules of the CBA and in relation to the other party to the CBA; the Swedish Construction Worker's Federation (SCWF).
According to Lithuanian law, a company that posts workers to Sweden must pay a determined posting compensation and also compensate the posted workers for actual travel and housing. At the same time, the Sweden's Posting of Workers Act prescribes that compensation for actual costs following the posting of workers (ie, for travel and accommodation) shall not be considered when determining whether the posted workers have received the mandatory minimum salary. Under Swedish law, there are no minimum salary levels. Instead, such salary conditions can be set out in CBAs, as was true in this case.
In the case at hand, the parties had agreed that the posting company was obliged to adhere to the salary levels in the CBA. However, the parties disagreed as to whether the posting compensation provided for under Lithuanian law was to be included in the salary calculation under the CBA or not. The Lithuanian company was in favour of the inclusion of compensation, whereas the SCWF was not. The parties did agree, on the other hand, that the Lithuanian company's compensation was not a compensation for actual costs.
The Court reasoned that the Lithuanian company had voluntarily undertaken, under no threat of industrial actions, to abide by the CBA. The fact that the company also had to apply Lithuanian regulations was found not to have impacted the interpretation of the company's obligations towards the SCWF or the interpretation of the CBA. The Court further stated that EU law did not prohibit the company from voluntarily complying with the CBA while being bound by Lithuanian law – or indeed that there was anything to indicate that the CBA, rather than any domestic legal provision, would have to yield in a situation at risk of conflicting with EU law.
The key question was found to be whether the amount designated as posting compensation could be construed as salary or overtime payment under the CBA.
The parties agreed that the workers, according to the CBA, were entitled to an hourly wage of 161,04 kronor and overtime compensation of a further 50% thereof (ie, 80,52 kronor). The company had determined that the posting compensation of 310,50 kronor per day, which, according to the company, was being paid in accordance with Lithuanian law, had been a necessary factor in its calculation to ensure that all of the workers were paid in accordance with the CBA.
Salary specifications and the salary table of the SCWF were found to show that in several cases, when the Lithuanian posting compensation had not been added into the calculation, the workers had not received the hourly wage and overtime compensation owed to them in accordance with the CBA. Consequently, the company was found to have acted in breach of the salary provisions of the CBA and, as the company had been found not to have paid hourly wages and overtime compensation in accordance with the CBA, it was obliged to pay compensation (damages) to the SCWF.
The Court concluded that, regardless of which obligations the company may have had to the workers on any basis other than the CBA, the circumstances were such that the workers had not collectively incurred an actual loss when comparing their earnings to those provided for in the CBA (taking into account the posting compensation they had received).
It was, therefore, unclear whether the company had profited by misapplying the CBA. The Court stated, however, that it was in the interest of workers' associations that the employer fully adhered to the CBA, paying wages and overtime compensation. On this basis, the Court determined that the damages should amount to 100,000 kronor.
This amount also included other breaches relating to working time and overtime, as the Court gave consideration to the company's apparent effort to act in accordance with the CBA.
Prior to the Court's decision, the SCWF had petitioned the Court to order the company to pay 700,000 kronor in damages to the SCWF, as well as interest and compensation for court and legal fees. As the losing party, the Lithuanian company was ordered to pay compensation for the SCWF's litigation costs. However, as the SCWF had been awarded compensation amounting to only part of the 700,000 kronor that it had demanded, litigation costs were reduced by approximately 50%.
Posted worker compensation structures similar to the one applied by the Lithuanian company are also likely to exist in other companies operating in Sweden. As such, the Court's ruling in the above case could lead to changes within other businesses, and employers who send employees to carry out work in Sweden may find cause to revise their current posting compensation arrangements.
For further information on this topic please contact Viktoria Hybbinette or Jacob Öryd 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.