Proposed modernization of Swedish labour law

On 1 June 2020, the report with the proposed amendments to the Employment Protection Act was presented. The purpose of the proposal is to modernize the Swedish labour law to fit the current labour market better.

If the draft of the amended Employment Protection Act is passed in its current form, it will result in several substantial changes, including:

• When establishing the order of selection for redundancy, the so-called LIFO list, all employers, irrespective of size, will get to exempt five employees. If two or more employees have the same seniority, the employer will get to decide who shall be prioritized. In addition, the employer will no longer have to transfer a more senior employee to another employee’s position, if it will require a period of training for the new position. The employee must, therefore, have sufficient qualifications for the new position immediately to retain the employment.
• Employers will be obliged to offer reasonable skill development to employees who have been employed for at least six months. If the employer does not fulfil the responsibility, the employer will be responsible for paying damages to the employee. The damages shall be paid in the event of termination due to redundancy or if a fixed-term employment ends.
• Termination with notice shall apply immediately. The main rule will, therefore, be that the employment does not continue during the period of dispute if an employee makes a claim to have his or her termination with notice invalidated. If the employer has no more than fifteen employees, it will not be possible to invalidate a termination with notice that violates the Employment Protection Act.
• General fixed-term employees, whose employment has ended, will have a preferential right to re-employment when their employment has lasted for more than nine months, instead of the current twelve months, over a three-year period. When the employee is qualified for re-employment, he or she shall also have priority to any available permanent positions and probationary employments during the general fixed-term employment.

We have elaborated on some of the more interesting proposals below.

Changes in the rules on the order of selection for redundancy

Today, employers with ten employees or less have the right to exempt a maximum of two employees from the order of selection, the so-called Last In First Out principle, or LIFO list. The new rules would instead mean that all employers, irrespective of size, are given the possibility of making five exemptions. Seniority will still decide the priority in the order of selection. If two or more employees have the same seniority, the oldest currently gets priority. In these cases, it is proposed that the employer instead gets to decide who will get priority.

Currently, an employer may have to accept that a more senior employee, who needs a certain period of training for the new position, is transferred to a position held by an already qualified employee. The proposed changes would mean that an employee would only be entitled to continued employment by transfer if he or she qualifies for the future work at the time of transfer, i.e. without any training.

Lower and more predictable costs for terminations

Today, employees who take legal action to have their termination with notice invalidated are, as a main rule, entitled to retain their employment, with salary and other benefits, during the period of the dispute. It is proposed that this right will only apply if the employee shows probable cause that there was no just cause for the termination with notice, at an interim examination by a court.

If the employer has no more than fifteen employees, it will not be possible to invalidate a termination with notice that violates the Employment Protection Act. This means that if a termination with notice is made in violation of the Employment Protection Act, such employer will only be obliged to pay damages to the dismissed employee. However, terminations with notice which, for example, violate the Discrimination Act, can still be invalidated.

IUNO’s opinion

The proposal provides greater flexibility for employers regarding which employees that can remain in the organization in the case of redundancy. Furthermore, the proposal may entail reduced costs in the event of termination, especially for smaller employers. At the same time, the proposal provides a stronger employment protection for general fixed-term employees, who have become more common on the labour market. In addition, the proposal might set higher demands on employers to establish routines and budget for skills development.

If the committee’s proposal is adopted without changes, employers will need to adjust their contracts of employment, policies, and processes to be fully aligned with the new rules.

The proposal has raised political debate and different parties disagree on how the Swedish labour law should be regulated. It is, therefore, uncertain whether, and to what extent, the proposal will enter into force. IUNO, therefore, recommends that employers remain updated on how the proposal develops.

[En moderniserad arbetsrätt, SOU 2020:30]