The new Act on Specific Protection from Negative Repercussions for Employees that Report Serious Irregularities enters into force on 1 January 2017

As previously reported (please see Employment & Benefits Review, July 2016 issue), the new Act on Specific Protection from Negative Repercussions for Employees that Report Serious Irregularities (Sw: Lag om särskilt skydd mot repressalier för arbetstagare som slår larm om allvarliga missförhållanden) will enter into force on 1 January 2017.

The aim of the Act is to ensure improved protection for employees, including temp agency workers, who report serious irregularities in the employer's business (or, in the case of temp agency workers, the business of the company using the services of the temp agency). In order to fulfill that purpose, under specific circumstances, employers are prohibited from subjecting employees who report serious irregularities to negative repercussions. Employers who act in breach of this prohibition may be liable to pay financial and punitive damages to the relevant employee.

Essentially, the rules prohibit the employer from subjecting an employee to negative repercussions due to the employee having reported serious irregularities to the employer (either to a representative of the employer or by using existing whistle-blowing procedures) or his/her trade union. The prohibition also applies if the employee reports serious irregularities to public authorities and the media, provided that the employee reported the irregularities to the employer first and that the employer failed to take reasonable action.

"Serious irregularities" are defined as criminal acts that are punishable by a prison sentence, or "equivalent irregularities". According to the legislator, inter alia, non-compliance with specific rules that apply to the business, corrupt behavior, causing risks to personal health and safety, conducting activities that are hazardous to the environment, wrongful use of public resources and non-compliance with the company's code of conduct are all examples of conduct that could, depending on the relevant circumstances, constitute a serious irregularity.

The meaning of "subjecting the employee to negative repercussions" is not defined in the Act. According to the legislator, examples of the employer subjecting the employee to negative repercussions include dismissal, transfer to another position, subjecting the employee to an extraordinary work load, removing benefits, bullying, etc. It is clear that omissions (such as not putting up an employee for promotion, not allowing the employee to participate in training or a bonus program, or not continuing the employee's fixed-term contract) may also fall under the regulations in the Act.

It is important to note that the Act does not give employees the right to disclose serious irregularities in all cases. If the employee is not permitted to disclose the information due to a statutory or contractual obligation to keep the information confidential, the effect of the Act is not to make such statutory or contractual restrictions unenforceable. According to the legislator, this means that the employer may still be entitled to take legal action against the employee based on legislation such as the Trade Secrets Act (Sw: Lag om skydd för företagshemligheter) or confidentiality provisions in a contract, provided that the employee's reporting of serious irregularities is in breach of such obligations. Furthermore, according to the legislator, whether or not any such legal action may be considered a "negative repercussion" will have to be assessed on a case-by-case basis.

In our view, the additional protection afforded to employees is limited in relation to the rules that already apply. Employees that are permanently employed are already protected from dismissal if they report serious irregularities (as is envisaged under the new Act), as an employer must have objective grounds for any dismissal. That said, it is clear that a number of more informal actions that a company, or the company's representatives at lower levels within the organization, could take, may result in the company incurring liability in damages. While we assume that most companies are already acting in a professional manner, all companies are advised to ensure that reports of serious irregularities, and the employees who make them, are dealt with in a professional and appropriate manner. Employers would be well advised to ensure that whistle-blowing procedures are in place and that employees are informed of their existence, to ensure that operational and legal risks within the organization can be identified and dealt with quickly and appropriately. Furthermore, to avoid sensitive information being disclosed to third parties, companies are encouraged to inform their employees that the Act does not give employees the right to report serious irregularities to public authorities, the media or even trade unions if such disclosure is in breach of statutory or contractual confidentiality obligations.

Comments from a Finnish perspective: There is no specific employment protection for whistleblowers against negative repercussions under Finnish law, and no similar legislation is in the pipeline. As in Sweden, existing Finnish employment legislation already provides protection for employees against unlawful dismissal. As a rule, reporting irregularities in the employer's business appropriately would not constitute reasonable grounds for dismissal, but would need to be assessed on a case-by-case basis. The employer is also obliged to treat its employees equally. Accordingly, the employer may not, as a rule, subject an employee to any other negative repercussions if they make a complaint or take action to safeguard their rights.

The Swedish Labour Court rules on claims that employers were in breach of the freedom of association

Under Section 8 of the Co-Determination Act (Sw: Medbestämmandelagen), if an employer takes action against an employee with the purpose of harming the employee due to the employee having exercised his or her right to freedom of association or with the purpose of inducing the employee not to exercise his or her right to freedom of association, this will constitute a violation of the employee's and the trade union's freedom of association. The employer's actions may include dismissal, the threat or notice of dismissal, transfer to another position, making an offer conditional on the employee not involving their trade union, and the removal of benefits.

In two recent cases from the Swedish Labour Court, the court has ruled on alleged infringements of Section 8 of the Co-Determination Act. In AD 2016 no. 61, the court considered whether statements made during negotiations regarding an employee's dismissal could constitute a violation of the employee's and its trade union's freedom of association. During a meeting with the employee, the employer representatives stated that the employee could not be represented by her trade union in potential future negotiations regarding her dismissal. The court noted that it was unclear whether the statements could per se be considered an "action". The court never determined that issue, as it concluded that it was clear from the circumstances that the statements were not intended to induce the employee not to involve her trade union in the matter and the employer had therefore not acted in breach of the Co-Determination Act.

Additionally, in another recent case from the Swedish Labour Court (AD 2016 no. 54), the court considered whether statements made by the employer's representative during a staff meeting constituted a violation of the Co-Determination Act. During the staff meeting, the employer's representative disclosed information concerning a request from the trade union to consult with the employer regarding an ongoing dispute between the employer and the employee. By doing so, the employer's representative disclosed potentially sensitive information about the employee's private life. The court stated that the employer's representative's actions were remarkable and that it was questionable whether they were compatible with the employer's duty of loyalty towards the employee. However, the court noted that the purpose of the employer's representative's statements were not to harm the employee due to the employee having involved her trade union in the ongoing conflict. Rather, the purpose was to convince the other employees that the employer had not acted improperly in the underlying dispute. As such, no violation of the employee's freedom of association had occurred.

While, as the cases show, it is permissible for employers to criticize a trade union's actions and position in a dispute or negotiations, employer's representatives should be careful not to make negative remarks about employees involving their trade union. Depending on their wording, such remarks may be interpreted as a threat of taking action against the employee due to the employee involving his or her trade union. Further, while an employer may, when negotiating a voluntary termination agreement with the employee, refuse to meet with the employee's trade union, it is important to be clear that the employer will not take any adverse action if the employee involves his or her trade union, e.g. by discussing any offers made, as trying to influence an employee not to involve the trade union in such a situation may constitute a breach of the Co-Determination Act.

Comments on the Directive from a Finnish perspective: Freedom of association is set forth in the Constitution of Finland. An employer that breaches the professional freedom of association may be fined. In addition, placing an employee in an unfavorable position or subjecting an employee to negative repercussions due to his/her trade union activity is also prohibited under the Finnish Non-Discrimination Act (Fi: yhdenvertaisuuslaki). In Finland, an employee does not have a statutory right to bring a shop steward or a trade union lawyer to negotiations concerning a voluntary termination agreement, but an employee is entitled to be accompanied by e.g. a trade union lawyer or a shop steward when being heard on the reasons for the dismissal on individual grounds. As membership in a trade union is deemed to be sensitive private information, the employer is not entitled to disclose information revealing whether or not an employee is a member of a trade union.