Swedish legislator: New sanctions under the Swedish Work Environment Act and Working Time Act

The Swedish Work Environment Act (Sw: Arbetsmiljölagen) and Working Time Act (Sw: Arbetstidslagen) have, as from 1 July 2014, been amended to introduce a new sanction system, based on administrative penalty fees, to exist parallel with the criminal sanctions system already in place. The sanctions under the new system will be applicable to breaches of a number of regulations issued by the Work Environment Authority, mainly concerning especially dangerous work and work environments, but also provisions of the Working Time Act, applicable to most businesses in Sweden.

Under the new system, the Work Environment Authority may, after a breach has been established by the Authority, issue a summary imposition of a penalty fee that the company can either accept or appeal to the Administrative Courts. The penalty fees pertaining to breaches of work environment regulations are differentiated and amount to between SEK 5,000 and 1,000,000, depending on the seriousness of the breach and the number of employees employed within the legal entity. A legal entity employing more than 500 employees will always pay the maximum penalty fee in the relevant risk category. The penalty fee for a breach of the Working Time Act will be one per cent of the annual price base amount (Sw: Prisbasbelopp, SEK 44,400 for 2014) per hour worked in excess of the allowed working time.

With the introduction of the new system, the risk of being exposed to sanctions due to a breach of the relevant regulations or the provisions of the Working Time Act may be expected to increase. The role of the courts and the prosecutors has been restricted and the Work Environment Authority will not have to establish negligent behavior of representatives for the legal entity deemed to have breached the relevant provisions. This is expected to lead to an increase in the number of cases where penalty fees are levied on companies. Furthermore, the size of the penalty fees may be expected to rise in relation to those fines imposed under the criminal sanctions system. To ensure that these changes will not have a negative impact on its business, a company should take actions to ensure that the whole organization is aware of and follows the applicable work environment and working time regulations. Action plans and clear reporting requirements are important tools in order to ensure that deficiencies are identified and handled in due time.

Swedish Labour Court: Advice on how the transferor should handle redundancy when an insourcing situation may constitute a transfer of an undertaking

Imagine that a company (“transferee” below), that previously outsourced a part of its business, decides to insource the function in question. Furthermore, imagine that the company that until then performed the outsourced function, (“transferor” below) is of the opinion that the insourcing will constitute a transfer of undertaking under Section 6 b of the Swedish Employment Protection Act (Sw: Lag om anställningsskydd) and would like to act accordingly while the transferee is of the opposite opinion. If the insourcing does constitute a transfer of undertaking, the employees affected will transfer to the transferee and the transferor may, as a rule, not terminate the employments until post transfer, whereas, if the insourcing does not constitute a transfer of undertaking, the transferor is free to initiate normal redundancy procedures. It is often very difficult for the transferor to assess in advance whether the insourcing constitutes a transfer of an undertaking, in particular as the transferor and the transferee may not have any contractual relation post insourcing and/or opposing interests as regards the issue at hand. Naturally, the transferor wishes to avoid having a redundant workforce post insourcing, but due to the uncertainty in advance of whether the insourcing constitutes a transfer of undertaking and the legal obligations associated with such a transfer, in practice, the transferor may only have two rather bad options. The transferor can either terminate the employees, in order to initiate the notice periods and avoid post insourcing redundancies, but at the same time risk being liable to pay damages to unions and affected employees if a court determines that the insourcing did in fact constitute a transfer of undertaking. The other option is to wait until the insourcing is completed and then, if the employees affected were not taken on by the transferee, initiate normal redundancy procedures, leaving the transferor with a redundant work force (and associated pay-roll costs) for an extended period post insourcing.

The issue at hand has been addressed by the Swedish Labour Court in a statement obiter dictum in a relatively recent ruling (AD 2014 No 46). The Labour Court suggests that the transferor should enter into agreements with each and every employee affected, to the effect that the employees undertake to not claim employment with the transferor following the insourcing.

This solution has several advantages for the transferor. If the insourcing does constitute a transfer of undertaking, the employees will transfer as normal, by operation of law, and continue their employments with the transferee. If this is not the case, the employments will terminate and the employer avoids having to retain the employees for an extended period post insourcing. However, care should be exercised if contemplating this course of action. The Labour Court’s statement is made obiter dictum and it is not certain to what extent the Labour Court will uphold its position in this regard. Furthermore, the Labour Court’s statement does not address how to handle such important issues as redundant employees’ right to be transferred to other positions within the employer’s business and the principle of seniority in redundancy situations (both of which were not an issue in the case the Labour Court ruled on). Accordingly, the solution suggested by the Labour Court should not be implemented without careful consideration but could be an option worth exploring as a transferor.

Swedish Supreme Court: Clarification on how to determine the size of punitive damages under the Swedish Discrimination Act

In two rulings given the same day (Judgments of 26 June 2014 in cases T 3592-13 and T 5507-12), the Swedish Supreme Court (Sw: Högsta domstolen) clarified the basic principles of how to determine the size of punitive damages (Sw: Diskrimineringsersättning) under the Swedish Discrimination Act (Sw:Diskrimineringslagen). In the first case, a bus driver had made an offensive remark regarding the ethnicity to two passengers on the bus; in the second case, a patient contacted a health center to have a medical exam but was initially referred to a different health center on account of her sexual orientation; she was later accepted at the first health center. The Court awarded the plaintiffs in the first case SEK 25,000 and in the second case SEK 10,000, well short of the SEK 100,000 that the plaintiffs, represented by the Equality Ombudsman (Sw: Diskrimineringsombudsmannen), had claimed.

The Court elaborates extensively on such issues as general principles for determining the size of punitive damages under the Swedish Discrimination Act, the minimum level of punitive damages in cases of minor discriminatory violations (the Court finds that the minimum level should be SEK 10,000) and possible non-monetary redress that may be offered the violated party by the employer of the violating party. However, the most important conclusion that can be drawn from the Court’s reasoning in the two cases is that the Court has maintained its jurisprudence, laid down in NJA 2006 s. 170, that punitive damages under the Swedish Discrimination Act should be determined with regard to how punitive damages are determined in other areas of Swedish law. As punitive damages are, in general, low in Sweden compared to many other countries, seldom reaching over SEK 200,000, the financial exposure for companies from clients and customers claiming to have been discriminated by the company, or its employees, will remain relatively small. Furthermore, while the cases concern discrimination regarding access to services and health care, the Court’s reasoning may be construed as to imply the upholding of the current levels of punitive damages also in cases of discrimination in the working life. This, of course, does not mean that companies should not actively implement anti-discrimination policies and educate their employees. The effects on internal and external goodwill, caused by a discrimination matter, may be considerable.