Legislation and agencies

Primary and secondary legislation

What are the main statutes and regulations relating to employment?

Swedish employment law is regulated by statutes and case law as well as by collective agreements concluded with trade unions. Collective agreements are of great importance and they often contain regulations deviating from statutory provisions.

Regulations regarding employment protection are found in the Employment Protection Act. Employees whose duties and conditions of employment are such that they may be deemed to occupy a managerial or comparable position are excluded from the Employment Protection Act.

The Co-Determination Act contains the general provisions governing the relationship between employers and trade unions in such areas as association, information, negotiations and labour stability obligations.

Other essential statutes are the Discrimination Act, the Annual Leave Act, the Personal Data Act, the Parental Leave Act, the Working Hours Act, the Working Environment Act and the Sick Pay Act.

Protected employee categories

Is there any law prohibiting discrimination or harassment in employment? If so, what categories are regulated under the law?

The anti-discrimination legislation consists of the Discrimination Act, which prohibits both direct and indirect discrimination as well as harassment in working life based on sex, ethnicity, religion or other belief, disability, sexual orientation, transgender identity or expression and age.

Under Swedish law, employers may neither discriminate against part-time or fixed-term employees, nor treat an applicant or an employee unfairly on grounds related to parental leave. Trade union representatives are also protected from discrimination based on their union activities.

Enforcement agencies

What are the primary government agencies or other entities responsible for the enforcement of employment statutes and regulations?

The Ministry of Employment is responsible for labour market policy and working life policy. All issues concerning labour legislation, work environment, working hours, salary formation, discrimination and equality fall within the scope of the Ministry.

The economic and legal treatment of employees is supervised by the labour market parties. The Labour Court is the final court for settling labour disputes.

The Equality Ombudsman monitors compliance with the Discrimination Act.

The Working Environment Authority’s task is to supervise employers’ compliance with the Working Environment Act and the Working Hours Act. It is also the authority responsible for matters regarding foreign workers posted in Sweden.

Worker representation

Legal basis

Is there any legislation mandating or allowing the establishment of employees’ representatives in the workplace?

Normally, the local trade unions elect one or more representatives to represent the employees at a workplace, under the provisions of the Trade Union Representatives Act. Employees who are trade union representatives may not be prevented from carrying out union work during working hours, may not be discriminated against owing to their union activities and are entitled to a reasonable leave of absence to carry out their union activities.

The Board Representation Act entitles employees of private companies bound by collective agreements employing at least 25 workers to appoint two ordinary and two deputy employee representatives to the board of directors. Employees of companies that have at least 1,000 employees and are engaged in different industries are entitled to appoint three ordinary and three deputy employee representatives to the board of directors. This entitlement to board representation may not result in the number of employee representatives exceeding the number of board members.

Sweden has implemented the Works Council Directive and the Directive establishing a general framework for informing and consulting employees in the European Community.

Powers of representatives

What are their powers?

Elected local trade union representatives represent the union members in, for example, negotiations, wage revision and information briefings at the workplace. There is no statutory time limit regulating the amount of leave a representative is entitled to for union work as long as the leave is reasonable in relation to the extent of the activities. However, collective agreements may contain restrictions and specific information regarding leave. Union representatives have a reinforced statutory employment protection set out in the Trade Union Representatives Act. The representatives are given priority in a redundancy situation, notwithstanding the rules of seniority (‘last in, first out’) that normally apply. The priority rules only apply if the representative is of particular importance for the union activity at the workplace. Elected union representatives are, if needed in order to carry out their union activities, entitled to a room or space at the workplace.

Representatives who are appointed to the board of directors have the same powers and liabilities, such as voting rights, as the other board members. However, employee representatives are not allowed to participate in questions regarding collective bargaining agreements, industrial actions, etc.

Background information on applicants

Background checks

Are there any restrictions or prohibitions against background checks on applicants? Does it make a difference if an employer conducts its own checks or hires a third party?

An applicant’s personal data is protected by Swedish law. Employers have limited possibilities of obtaining information from registers containing information regarding applicants, such as medical information and criminal records. Hiring a third party to do the background check does not change the restrictions.

An applicant can, on the other hand, present information about themselves, if the employer should request it. An applicant is not obliged to comply with such a request. Further, according to the EU General Data Protection Regulation (Regulation (EU) 2016/679), an employer is generally never allowed to process such presented personal data regarding criminal convictions and offences. Applicants to positions such as teachers and day-care teachers, however, may be obliged to provide an extract from their criminal records before an employment agreement is entered into.

Medical examinations

Are there any restrictions or prohibitions against requiring a medical examination as a condition of employment?

There is no comprehensive regulation under Swedish law regarding an applicant’s obligation to undergo medical tests. Apart from the prohibition of discrimination and that an applicant may never be required to take a genetic test as a condition of employment, there are no other legal limitations to requiring an applicant to undergo a medical examination. An employer may refuse to hire an applicant who does not submit to an examination. However, an employer must act in accordance with good labour market practice and may not select applicants who shall undergo medical examinations on grounds that could constitute discrimination. Further, any processing of personal data from a medical examination must be in accordance with the legislation concerning data protection.

Drug and alcohol testing

Are there any restrictions or prohibitions against drug and alcohol testing of applicants?

There are no legal limitations to require an applicant to undergo a drug or alcohol test, and an employer can refuse to hire an applicant who does not submit to such a test. An employer must, however, act in accordance with good labour market practice. The employer may not select applicants who shall undergo a drug or alcohol test on grounds that could constitute discrimination. Further, any processing of personal data from such testing must be in accordance with the legislation concerning data protection.

Hiring of employees

Preference and discrimination

Are there any legal requirements to give preference in hiring to, or not to discriminate against, particular people or groups of people?

Employers are generally free to hire whomever they please provided that they do not discriminate on grounds stipulated in the Discrimination Act or on grounds related to parental leave. However, affirmative discrimination may be legitimate when the aim is to improve equality between the sexes.

Employees whose employment has been terminated as a consequence of redundancy shall have rights of priority for re-employment in the business in which they were previously employed, according to the Employment Protection Act. An employer who wishes to recruit within the operating unit may be obliged to offer the position to a person with a right to priority. The priority is contingent upon the employee having been employed by the employer for a total of more than 12 months during the previous three years. The right to priority applies during the notice period and thereafter until nine months from the date that the employment ceased.

Must there be a written employment contract? If yes, what essential terms are required to be evidenced in writing?

An employment agreement does not have to take any specific form; however, Sweden has implemented Council Directive 91/533/EEC on an employer’s obligation to inform employees of the conditions applicable to the contract or employment relationship. The employer must provide certain information in writing concerning the principal terms of the employment. This information must be provided to the employee within one month of the commencement of the employment.

The information should include the following:

  • the name and address of the employer and the employee;
  • the commencement date;
  • the place of work;
  • the duties and title;
  • whether the employment is fixed or for an indefinite term;
  • the length of the probationary period;
  • the notice periods;
  • payment and other employment benefits;
  • the length of paid annual leave;
  • the length of a normal workday or workweek; and
  • applicable collective agreements.

To what extent are fixed-term employment contracts permissible?

The general rule is that an employment agreement is for an indefinite period unless otherwise agreed. The Employment Protection Act allows for general fixed-term employment when the employer is in need of fixed-term employees. A fixed-term employment agreement may also be concluded for a temporary substitute employment and for a seasonal employment.

If, during the previous five years, an employee has been employed either for a general fixed-term employment for in aggregate more than two years or as a substitute for in aggregate more than two years, the employment is transformed into indefinite-term employment. A general fixed-term employment may also be transformed into an indefinite-term employment if the employee has been employed in different fixed-term employments after each other.

Collective agreements may contain regulations deviating from the statutory rules governing fixed-term employment.

Probationary period

What is the maximum probationary period permitted by law?

The Employment Protection Act permits probationary employment for a period of no more than six months. The probationary period may not be extended at the discretion of the employer, nor with the consent of the employee. If the employment is not terminated at the expiry of the probationary period, the employment will automatically become employment for an indefinite term.

Classification as contractor or employee

What are the primary factors that distinguish an independent contractor from an employee?

Under Swedish law, there are no explicit definitions of independent contractors or employees. An assessment must be made in each individual case by taking all relevant circumstances into consideration. In general, an independent contractor is economically independent. In contrast to an employee, the independent contractor is, inter alia, often responsible for materials and equipment, free to determine his or her working hours and place of work, may have more than one principal, and the remuneration is performance related.

Temporary agency staffing

Is there any legislation governing temporary staffing through recruitment agencies?

Sweden has implemented the Temporary Agency Work Directive through the Agency Work Act. The Act applies to workers who are employed by temporary-work agencies for the purpose of being temporarily assigned to work for a customer under the latter’s supervision and direction. A temporary work agency shall, for the duration of the worker’s assignment, guarantee the worker at least the same basic working and employment conditions as would apply if they had been employed directly by that customer to carry out the same job. Deviations from this equal treatment provision may be made through a collective agreement concluded or approved by a central employee organisation.

A temporary work agency is further prohibited from preventing a worker from accepting employment with a customer for which he or she is working or has worked as well as receiving remuneration from a worker in exchange for arranging for them to be placed at a customer or because a worker concludes a contract of employment with a customer.

A customer engaging temporary staff is obliged to give a worker access to collective facilities and amenities under the same conditions as workers employed directly by the customer and also to inform temporary workers of any vacant permanent positions and probationary employment available. A temporary work agency and a customer shall pay damages for the loss and violation occurred by breaches of the Agency Work Act.

Foreign workers

Visas

Are there any numerical limitations on short-term visas? Are visas available for employees transferring from one corporate entity in one jurisdiction to a related entity in another jurisdiction?

EU and EEA citizens do not need a visa and they have the right to work in Sweden without work and residence permits. People who have a residence permit in an EU country, but are not EU citizens, can apply to obtain the status of long-term resident in that country. They thereby enjoy certain rights that are similar to those of EU citizens.

If a citizen from a country that is not part of the European Union wants to work in Sweden, he or she will need a work permit. If the employment is for a period longer than three months, he or she will also need a residence permit. If the employment is for a period shorter than three months, he or she may need a visa in addition to a work permit, depending on the employee’s country of residence. There are, however, some exemptions from the requirement to hold a work permit for employees within certain professional categories who only plan to work for a short time in Sweden. The requirement for a work permit also applies to employees posted from another country as well as those who move within a company group to work. However, if the employee is resident in another EU or EEA member state and has been posted from there, no work permit is required.

The Posting of Workers Act applies to posted workers in Sweden.

Spouses

Are spouses of authorised workers entitled to work?

Family members may be granted residence permits for the same period that the employee has been granted residence and work permits. If the employment is to be for more than six months, family members can also be granted work permits. Family members include husband or wife, or common law spouse and unmarried children that have not attained the age of 21.

Family members of EU or EEA citizens are entitled to begin working immediately.

General rules

What are the rules for employing foreign workers and what are the sanctions for employing a foreign worker that does not have a right to work in the jurisdiction?

Generally, citizens of countries outside the European Union must have a work permit to work in Sweden. For a person to get such a permit, the employer must have prepared an offer of employment and advertised the job in Sweden and the European Union for 10 days (this applies to new recruitments). It is also required that the terms of employment are equal to or better than those provided under a Swedish collective agreement or those that are customary for the occupation or sector. The employee must also earn enough from the employment to be able to support him or herself, the gross salary should be at least 13,000 Swedish kronor per month, and the relevant trade union must have been given the opportunity to express an opinion on the terms of employment.

Employers who intentionally or negligently employ foreign workers without work permits may be sentenced to a fine or to imprisonment for a maximum period of one year according to the Foreigners Act. The employer will also have to pay a special charge.

Resident labour market test

Is a labour market test required as a precursor to a short or long-term visa?

No, it is up to the employer to decide whether there is a need to employ a foreign worker.

Terms of employment

Working hours

Are there any restrictions or limitations on working hours and may an employee opt out of such restrictions or limitations?

According to the Working Hours Act, regular working hours may not exceed 40 hours per week. Where the nature of the work or working conditions generally so demand, working hours may amount to an average of 40 hours per week for a period of no more than four weeks. Where an employee is demanded to be at the employer’s disposal at the workplace to carry out work if necessary, on-call hours may not be more than 48 hours over a four-week period or 50 hours over a calendar month.

Overtime comprises working hours in excess of regular working hours and on-call hours. Where additional working hours are required, overtime hours may not exceed 48 hours over a period of four weeks or 50 hours over a calendar month, subject to a maximum of 200 hours per calendar year. Deviations from certain regulations in the Working Hours Act can be made by collective agreement but not in individual employment agreements.

Overtime pay

What categories of workers are entitled to overtime pay and how is it calculated?

Statutory law does not contain regulations regarding overtime pay. Overtime pay is normally provided for in collective agreements. In general, employees may choose to receive overtime pay in terms of money or compensatory leave. If no collective agreement exists, the employee is not entitled to overtime pay unless agreed upon.

Can employees contractually waive the right to overtime pay?

The right to overtime pay is not regulated in statutory law. If no collective agreement exists, the employee is not entitled to overtime pay unless agreed upon. If a collective agreement exists and provides a right to overtime pay, it may contain provisions making it possible for the employee to waive the right to overtime pay and instead get compensation in the form of compensatory leave. However, such waiver usually only applies to employees who have flexible working hours or if special reasons are at hand. Thus, unless otherwise provided for in collective agreement, employees can contractually waive the right to overtime pay.

Vacation and holidays

Is there any legislation establishing the right to annual vacation and holidays?

Vacation entitlement is regulated by the Annual Leave Act, which distinguishes between unpaid and paid vacation, and between a ‘vacation year’ (1 April to 31 March) and a ‘qualifying year’ (the 12-month period prior to the vacation year). An employee earns his or her entitlement to paid vacation during the qualifying year and is entitled to use his or her paid vacation during the vacation year. The basic vacation entitlement is 25 paid days per year. Collective agreements or employment agreements normally contain rules entitling employees to a longer period of annual leave, in particular for white-collar employees not entitled to overtime pay.

Employees are entitled to take a continuous four-week vacation during June to August unless there are circumstances justifying other arrangements. Employees who have been given a period of notice of termination of less than six months cannot be required to take their vacation entitlement during the notice period unless they agree to do so. Under certain conditions, employees are entitled to exchange annual leave that has already been scheduled to, for example, sick leave or parental leave. It is possible for employees to carry over their entitlement to paid, but not unpaid, vacation days to the next vacation year, but only if the employee has earned more than 20 days of paid vacation, and only for those days that exceed 20 days.

Deviations from certain regulations in the Annual Leave Act can be made by collective agreement.

Sick leave and sick pay

Is there any legislation establishing the right to sick leave or sick pay?

According to the Sick Pay Act, an employee is entitled to sick pay from the employer during the first 14 calendar days of each period of absence owing to sickness. The employee is entitled to 80 per cent of his or her employment benefits in the form of sick pay. However, the sick pay is subject to a qualifying deduction corresponding to 20 per cent of the employee’s entitlement of sick pay based on the employee’s benefits for an average working week.

To receive sick pay, the employee must notify the employer of the sickness immediately, and for the employer to be liable to pay sick pay from the eighth calendar day of the period of sickness, the employee must present a doctor’s certificate. The employee may, in exceptional cases, be obliged to produce a doctor’s certificate on the first day of sickness. Upon returning to work, the employee must confirm in writing that he or she has been absent owing to sickness.

After the initial 14 days of sickness, statutory sickness benefits are paid by the Social Insurance Office. Employees are entitled to 364 days of statutory sickness benefits during a period of 15 months, including the days with sick pay from the employer. In certain situations, prolonged sickness benefits may be granted. Sickness benefits are primarily paid under the condition that the ability to work is at least reduced partly by sickness.

Leave of absence

In what circumstances may an employee take a leave of absence? What is the maximum duration of such leave and does an employee receive pay during the leave?

The provisions for parental leave and parental benefit are laid down in the Parental Leave Act and the Social Insurance Code. A parent is entitled to full leave for the care of a child until the child reaches 18 months, irrespective of whether the parent receives parental benefit. In addition, a parent is entitled to full leave during the period when the parent receives full parental benefit from the Social Insurance Office. Parental benefit is paid to parents for a total of 480 days, with an additional 180 days for the birth of more than one child. If both the parents have custody, each of them is entitled to 240 days with parental benefit. A parent may transfer the right to parental benefit to the other parent except for 90 days. In addition, fathers are entitled to 10 days of paternity leave in connection with the birth. Further, a parent is entitled to parental leave and temporary parental benefit if their child is sick.

Employees who have been employed during the preceding six months, or for a total of at least 12 months during the preceding two years, have the right to educational leave in accordance with the Employee’s Right to Educational Leave Act.

The Right to Leave to Conduct a Business Operation Act entitles an employee to full leave from his or her work for at most six months to conduct him or herself, or through a legal entity, a business operation. However, the operation of the employee may not compete with the employer’s operation, nor may the leave involve significant inconvenience for the operation of the employer. An employee is entitled to leave only during one period with one employer.

Several other statutes under Swedish law entitle employees to leave in special situations. Employees are, for example, entitled to leave for taking care of closely related persons as well as for urgent family reasons, and immigrants have the right to leave for Swedish language education. Finally, collective agreements may contain regulations that entitle the employees to leave in special situations, with or without payment.

Mandatory employee benefits

What employee benefits are prescribed by law?

There is no overall legislation regarding employee benefits, but there are some statutory provisions that give the right to payment in certain specific areas. For example, the Annual Leave Act entitles employees to vacation pay, the Sick Pay Act prescribes the right to sick pay during periods of sickness, and the Employment Protection Act entitles employees to salary and other employment benefits during the notice period. Further, employers are obliged to pay social security tax on the employee’s salary and other employment benefits that, inter alia, include statutory pension contributions.

Part-time and fixed-term employees

Are there any special rules relating to part-time or fixed-term employees?

According to the Prohibition of Discrimination of Employees Working Part-time and Employees with Fixed-term Employment Act, an employer may not disfavour part-time or fixed-term employees by applying less beneficial salary or other terms and conditions of employment than the employer applies or should have applied for employees in a similar situation who work full-time or have an indefinite term employment respectively, unless the employer demonstrates that the disfavour is not related to the part-time work or indefinite-term employment of the person disfavoured. This prohibition does not apply if the application of the conditions is justified on reasonable grounds.

A part-time employee who has notified his or her employer that he or she desires to have employment at a higher occupation level, but at most full-time, has a priority right to such employment. This right is contingent upon the employer’s need of labour being satisfied by the part-time employee being employed at a higher occupation level and that the part-time employee is adequately qualified for the new work tasks. If these conditions are fulfilled, the employer must offer the employee a higher occupation level before employing a new employee.

Fixed-term employment may not be terminated prior to the end of the period of the employment, unless this option is stated in the employment agreement and the termination is based on objective grounds.

Sweden has implemented the Fixed-term Work Directive and the Part-time Work Directive.

Public disclosures

Must employers publish information on pay or other details about employees or the general workforce?

An employer is required to take proactive measures to promote equal rights and opportunities to prevent discrimination of employees in the workplace. When working with proactive measures, the employer shall examine the need for measures relating to working conditions, compensation and promotion of employees. Employers shall cooperate with employees, as well as with trade unions that are party to any applicable collective agreement, regarding proactive measures. The employer shall also provide trade unions with the information that is necessary for cooperation on proactive measures. There are no statutes that require the employer to keep their work with proactive measures publicly available; however, an employer may be required to submit information to the Equality Ombudsman, which supervises employers’ compliance under the Discrimination Act.

According to the Annual Accounts Act, larger companies shall publish information in the annual accounts on the total salary, bonuses, severance pay and pensions for the managing director, the board members and any similar executives. Information on the total salary paid to the rest of the employees shall also be published.

Post-employment restrictive covenants

Validity and enforceability

To what extent are post-termination covenants not to compete, solicit or deal valid and enforceable?

Post-termination covenants are valid under certain conditions. In principle, such covenants should be used only for employees whose position in the company makes such restrictions necessary. The period of a non-compete covenant should not exceed 18 months. There is no such limitation in time for non-solicitation covenants, but in general they adhere to the time limitations set forth in non-compete covenants. A non-compete covenant may be deemed unfair if the employee does not receive compensation for the inconvenience that the covenant causes.

Post-employment payments

Must an employer continue to pay the former employee while they are subject to post-employment restrictive covenants?

The main rule is that post-employment restrictive covenants are valid only if they are reasonable. When determining whether restrictive covenants are reasonable, many different factors must be taken into account; for example, if employees receive some kind of compensation for the restriction in the professional freedom that the covenants entail. According to collective agreements and market practice, employers are obliged to pay the difference between the employees’ salary by the expiry of employment, and the lower income that they may earn from new gainful activity. The compensation may not, however, exceed 60 per cent of the monthly income from the employer. A general assessment of a post-employment restrictive covenant’s reasonableness must be made in each individual case.

Liability for acts of employees

Extent of liability

In which circumstances may an employer be held liable for the acts or conduct of its employees?

The main principle is that the employer is responsible for all damage caused by the employee in the employment. For damage that an employee causes through fault or negligence in his or her employment, the employee is responsible only to the extent that there are exceptional circumstances with regard to the nature of the act, the employee’s position, the interest of the injured party and other circumstances, according to the Tort Liability Act.

Taxation of employees

Applicable taxes

What employment-related taxes are prescribed by law?

The employee’s obligation to pay preliminary income tax is prescribed in the Income Tax Act. The standard procedure is that the employer deducts the preliminary income tax from the employee’s salary, pays the tax to the Swedish tax authority and reports the preliminary income tax as well as the employer’s social security tax each month. Employers are obliged to pay social security tax on the employee’s gross salary and other gross employment benefits. For 2020, the social security tax amounts to 31.42 per cent.

Employee-created IP

Ownership rights

Is there any legislation addressing the parties’ rights with respect to employee inventions?

The Right to Employee Inventions Act regulates the employee’s and the employer’s right to employee inventions. As a main rule, the employee has the same right to the invention as other inventors unless otherwise stated. The employer may obtain the right to employee-created inventions, provided that the invention is created in connection with the employment and the employee’s main work task and that the utilisation of the invention falls within the employer’s area of activity. Within the private sector, there is a collective agreement regulating, inter alia, the employee’s right to compensation when the employer obtains the right to employee-created inventions.

Trade secrets and confidential information

Is there any legislation protecting trade secrets and other confidential business information?

The Act on Trade Secrets defines a trade secret as information concerning the business or industrial relations of a person conducting business or industrial activities that the person wants to keep secret and the divulgation of which would be likely to result in damage from the point of view of competition.

Anyone who wilfully or through negligence exploits, reveals or acquires unauthorised access to a trade secret of an employer of which he or she has been informed in the course of the employment under such circumstances that he or she understood, or ought to have understood, that he or she was not allowed to exploit, reveal or acquire it, shall compensate the damage resulting from the action. Where the action took place after the termination of the employment, this shall apply only if special reasons are at hand (eg, if the employee immediately starts working for a competitor and uses trade secrets belonging to the former employee in the new employment).

The Act on Trade Secrets also contains provisions on penalties for trade espionage and unauthorised tampering with a trade secret. Further, anyone who has unlawfully discovered a trade secret may be prohibited by the courts, under penalty of a fine, from exploiting or revealing the trade secret. The courts may also order that documents or objects that a person is in possession of that contain the secret shall be surrendered to the person who has been the subject of the unlawful violation.

Data protection

Rules and obligations

Is there any legislation protecting employee privacy or personnel data? If so, what are an employer’s obligations under the legislation?

The EU General Data Protection Regulation (GDPR) is intended to protect individuals against violation of their personal integrity by processing of personal data. Accordingly, there are restrictions on employers’ use of data regarding employees, former employees and applicants.

According to the GDPR, there are certain basic requirements for any form of processing of information relating to a person who can be directly or indirectly identified by reference to the information. Personal data may only be processed if it is lawful and if the data is collected for specific, explicitly stated and justified purposes. The processing must be relevant and necessary for the purpose stipulated, and personal data may not be stored for longer than necessary with reference to the specified purposes. The GDPR also stipulates situations in which personal data may be processed in cases where the individual has not given his or her consent to the processing. For example, personal data may be processed to satisfy a purpose that concerns a legitimate interest of the employer, provided that this interest outweighs the interest of the registered person in protection against violation of personal integrity. Consent to processing should normally not be used as legal basis for processing employee data as it is normally not regarded as lawful consent given the disparity of the employee–employer relationship.

The Act on Complementary Regulations to the EU General Data Protection Regulation sets forth clarifying provisions for the processing of personal data in Sweden. For example, it states that sensitive personal data (ie, information about employees’ or applicants’ ethnic origin, political opinions, religious or philosophical beliefs, membership of a trade union or personal data concerning health or sexual preference, etc) may be processed by employers when necessary to fulfil obligations or to exercise rights under labour law. Further, according to this Act, fulfilling obligations according to a collective bargaining agreement constitutes a legal basis for processing.

Business transfers

Employee protections

Is there any legislation to protect employees in the event of a business transfer?

In conjunction with the transfer of a business from one employer to another, the rights and obligations under the employment agreements and employment relationships that existed at the time of the transfer to the new employer shall also be transferred. Notwithstanding the above, employment agreements and employment relationships shall not be transferred to a new employer if the employee opposes the transfer. The transfer of a business shall not, per se, constitute objective grounds for giving notice of termination of employment.

Under certain circumstances, the transferor’s collective agreement may be transferred to the transferee.

Before a decision regarding a transfer is taken, the employer may be obliged to negotiate with the trade unions concerned. The rules relating to the transfer of a business are not applicable to share transfers.

Sweden has implemented the Transfer of Undertakings Directive.

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.

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.

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 must 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 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.

Before 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.

Before 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.

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 

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 68. 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 68, the employer may terminate the employment at the end of the month in which the employee reaches 68 by observing a notice period of one month. Notice of termination must be made in writing. If an employee continues to work after the age of 68, the employer may at any time terminate the employment without objective grounds. The notice period in those cases is only one month.

Dispute resolution

Arbitration

May the parties agree to private arbitration of employment disputes?

The employer and the employee may agree in an employment agreement that any future disputes shall be settled by arbitration. Such a clause may be deemed unreasonably burdensome for the employee and set aside by the courts, in particular if the employee does not occupy a managerial or comparable position.

Dispute resolution regulations may also be specified in collective agreements.

Employee waiver of rights

May an employee agree to waive statutory and contractual rights to potential employment claims?

An employee may waive his or her contractual rights. As a general rule, an employee cannot waive rights laid down in mandatory law. An employee may, however, under certain circumstances, waive mandatory rights; for example, where a dispute has arisen regarding the mandatory right.

Limitation period

What are the limitation periods for bringing employment claims?

Several statutes contain limitation periods for bringing employment claims. Limitation periods are set forth, for example, in the Co-Determination Act, the Annual Leave Act and the Employment Protection Act. Further, the Limitations Act stipulates limitation periods for salary and pension claims.

Limitation periods are stipulated in the Employment Protection Act. An employee who intends to initiate proceedings to have a dismissal, with or without notice, declared invalid shall notify the employer of such intention no later than two weeks after notice of termination was given or dismissal without notice occurred. Where negotiations have been demanded within the notification period in respect of a matter governed by the Co-Determination Act, or by a collective bargaining agreement, proceedings must be commenced no more than two weeks after the conclusion of the negotiations. In circumstances other than those referred to above, proceedings shall be commenced within two weeks of the expiry of the notification period.

If an employee wants to claim damages based on the provisions in the Employment Protection Act, the opposite party must be notified within four months of the time of the tortious act or of the time the claim became payable. Where negotiations have been demanded within the notification period in respect of a matter governed by the Co-Determination Act or by a collective bargaining agreement, proceedings must be commenced no more than four months after the conclusion of the negotiations. In circumstances other than those referred to above, proceedings shall be commenced within four months of the expiry of the notification period.

In a dispute regarding a dismissal, an employee may remain in his or her employment during the judicial procedure.

Update and trends

Key developments of the past year

Are there any emerging trends or hot topics in labour and employment regulation in your jurisdiction? Are there current proposals to change the legislation?

A number of measures are planned to be implemented to help Swedish businesses to mitigate the financial difficulties that may ensue owing to the covid-19 pandemic. The measures include different forms of state-funded financial support to offer businesses an alternative to dismissals and to help reduce short-term liquidity issues.

State-funded financial support for short-term working arrangements was previously an option available for businesses only during times of particularly severe recession, but the government now proposes that such financial support shall be available for businesses to apply for should they temporarily face financial difficulties owing to the coronavirus. Businesses shall have the option to apply to the Swedish Agency for Economic and Regional Growth for approval for state-funded financial support when using short-term working arrangements. A short-term working arrangement is an alternative to dismissal, and it means that the business and its employees agree that the employees shall temporarily have reduced hours of work and salary. Employees can have their ordinary hours of work reduced by 20, 40 or 60 percent, and they may retain a higher salary than what would correspond to their new hours of work. The financial support from the state is meant to cover the additional cost that may arise.

Furthermore, the government proposes to temporarily adopt specific regulations regarding short-term working arrangements that apply during 2020. Short-term working arrangements subject to these specific regulations are referred to as ‘short-term lay-offs’ and shall entitle employees to retain more than 90 percent of their salary, even if their hours of work are reduced by 20, 40 or 60 percent. The state-funded financial support will cover most of the cost for the reduced working hours during this period, which entails that businesses may temporarily cut their salary costs by about half.

The financial support paid by the state is calculated based on the employee's ordinary salary; however, this does not consider any salary in excess of 44,000 Swedish kronor per month. The financial support will mainly be paid out for a period of up to six months, but an additional extension of up to three months' support will be possible should the financial difficulties subsist.

The new regulations came into effect on 7 April 2020 and apply retroactively from 16 March 2020. The new regulations on short-term working arrangements and short-term lay-offs will provide businesses with alternatives to dismissal should it be necessary to temporarily discontinue operations.

Further, the government proposed for the state to temporarily assume all costs in relation to sick pay paid out during April and May 2020. The temporary measure is intended to be carried out by extended application of present regulations regarding compensation payable by the state when businesses suffer extensive sick pay costs. This should entail that businesses will not be required to apply to receive any compensation and that compensation for sick pay will be based on the businesses’ declared social contributions and pay-as-you-earn forms.

The government has also proposed a temporary reduction of employers' social security contributions for the period from March 2020 to the end of June 2020. The only contribution paid will be the retirement (old age) pension, which will be paid at a rate of approximately 10 per cent. It is proposed that this reduction should apply for to up to 30 employees per company. Any salary exceeding 25,000 Swedish kronor per month will not be included in the reduction, and normal contributions must be paid for such salary. This reduction will entail a tax relief of up to 5,300 Swedish kronor per employee per month.