Termination of employment

Grounds for termination

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

Employers may dismiss employees either with or without notice. As regards dismissals without notice, see question 38. A dismissal with notice must be based on objective grounds. Objective grounds are not defined by statute or case law, but can be either for objective reasons or subjective personal reasons. Objective reasons are dismissals based on redundancy, shortage of work or the economic situation of the employer, while subjective personal reasons are all dismissals that are not based on redundancy, shortage of work or the economic situation of the employer, such as the employee’s conduct or performance.

An overall assessment of all the factors involved must be made when determining whether objective grounds for dismissal exist. A dismissal with notice will never be considered as based on objective grounds if there were other alternatives available to the employer, such as relocating the employee elsewhere within the business.

When the labour force has to be made redundant owing to objective reasons, the basic principle to be applied is that the employee with the longest aggregate period of employment with the company should be entitled to stay the longest. The employer must select those to be dismissed on a ‘last in, first out’ basis. One condition for continued employment is that the employee has sufficient qualifications for one of the available positions that may be offered.

Notice

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

An employer must provide a prior notice of termination before dismissing an employee. The employer must observe certain formal rules set out in the Employment Protection Act when serving a notice of termination to an employee. Notices shall always be made in writing and must state the procedure to be followed by the employee in the event the employee wishes to claim that the notice of termination is invalid or to claim damages as a consequence of the termination. The notice shall also state whether or not the employee enjoys rights of priority for re-employment.

The provisions in the Employment Protection Act regarding termination of employment are mandatory; however, the employer and the employee may agree to terminate the employment. Accordingly, it may be possible to reach an exit agreement stipulating payment in lieu of notice.

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

Dismissal without notice is lawful only where the employee has committed a fundamental breach of the employment agreement, such as gross misconduct by disloyalty in working for competitors, and should be implemented only in exceptional cases.

Severance pay

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

There are no statutory provisions regarding severance pay. However, an employee may be entitled to severance pay in accordance with an employment agreement, a collective agreement or an exit agreement.

Procedure

Are there any procedural requirements for dismissing an employee?

The procedure for dismissing employees is laid down in the Employment Protection Act and varies to some extent depending on whether the termination is owing to objective reasons or subjective personal reasons.

Prior to terminating an employment agreement owing to objective reasons, the employer may be obliged to conduct negotiations under the Co-Determination Act. If an employer is bound by a collective agreement, the Co-Determination Act limits the scope of mandatory negotiations in advance to matters involving ‘significant changes in the employer’s activities’ or ‘significant changes in working or employment conditions for employees’. A cutback in operations owing to redundancy is considered as such a matter.

An employer who is not bound by a collective agreement is obliged to negotiate with a trade union where a matter specifically relates to the working or employment conditions of an employee who is also a member of the union in question. Hence, if the employer means to dismiss such an employee, he or she shall request negotiations. Further, the employer shall be obliged to negotiate with all affected employee organisations in all matters relating to dismissals based on redundancy.

Prior to terminating an employment agreement for subjective personal reasons, the employer must notify the concerned employee in writing and, if the employee is a union member, the trade union, two weeks in advance. If an employer wants to dismiss an employee without notice, the information must be given one week before the dismissal. The employee or the trade union may, within one week of receiving the information, request consultation with the employer concerning the dismissal.

According to Swedish law, no prior approval from a government agency is required for dismissing employees.

Employee protections

In what circumstances are employees protected from dismissal?

According to the Employment Protection Act, employees are protected from dismissals when there are no objective grounds for a dismissal. A dismissal with notice will never be considered based on objective grounds if there were other alternatives available to the employer, such as redeploying the employee elsewhere within the business. Thus, before notice of termination is given, the employer must investigate whether there are any vacant positions within the employer’s business that the employee can be relocated to.

Dismissals that are considered discriminating according to the Discrimination Act are prohibited. Further, several other regulations protect employees from unfair dismissals. For instance, an employee may not be dismissed on grounds related to parental leave or leave of absence for educational purposes.

Mass terminations and collective dismissals

Are there special rules for mass terminations or collective dismissals?

The Co-Determination Act does not recognise the term ‘collective redundancies’. In contrast to many other European countries where the obligation to consult collectively is triggered only if there are several redundancies, the provisions on obligations to consult according to the Co-Determination Act are applicable even if the redundancy concerns only one employee (see questions 36 and 40).

A notification to the Swedish Public Employment Service shall be made if at least five employees are affected by a decision on terminations owing to shortage of work. This also applies if the total number of notices of termination is expected to be 20 or more during a 90-day period.

Class and collective actions

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

The right to resort to industrial actions is a constitutional right and laid down in the Instrument of Government. This right only applies to trade unions, employers or employer’s organisations. Restrictions of this right are set forth in the Co-Determination Act. The Co-Determination Act stipulates that an employer and an employee who are bound by a collective bargaining agreement may not initiate or participate in an industrial action, where an organisation is party to that agreement and that organisation has not duly sanctioned the action. Further, the action may not be in breach of a provision regarding a labour-stability obligation in a collective bargaining agreement or aim to:

  • exert pressure in a dispute over the validity of a collective bargaining agreement, its existence, or its correct interpretation, or in a dispute as to whether a particular action is contrary to the agreement or to the Co-Determination Act;
  • bring about an amendment to the agreement;
  • effect a provision that is intended to enter into force upon termination of the agreement; or
  • aid someone else who is not permitted to implement an industrial action. Industrial actions that have been taken contrary to the above are unlawful.

The above does not prevent employees from participating in a blockade duly ordered by a trade union for the purpose of exacting payment of pay or any other remuneration for work that has been performed that is clearly due.

Mandatory retirement age

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

An employee has a statutory right to work until the age of 67. However, according to several collective pension systems, an employee may choose to retire and receive pension benefits at the age of 65. If the employee has chosen to work until the age of 67, the employer may terminate the employment at the end of the month in which the employee reaches 67 by observing a notice period of at least one month. Notice of termination must be made in writing. It is also possible for an employer and an employee who has reached the age of 67 to enter into an employment agreement for a fixed term. If an employee continues to work after the age of 67 and no fixed-term employment agreement is concluded, the employer must prove that it has objective grounds to terminate the employment. The notice period in such cases is only one month.