HR legal

The Labor Court: Short-term employees will transfer with seniority

29 March 2019

The Labor Court has recently ruled in favor of a harbor employee in a judgement, in which a port operator was found in breach of the so-called Last In First Out principle (“turordningsreglerna”) under the Swedish Employment Protection Act. The port operator was to pay 50 000 SEK in damages to the dock worker for wrongful dismissal due to redundancy.

In 2017 two dock workers were terminated by a port operator due to shortage of work. The selection of affected employees was based on the so-called Last In First Out (LIFO) principle, as required under Swedish law in redundancy situations.

Both workers had been employed in temporary positions (“behovsanställningar”) as so called Blixtar. Working as a Blixt is a special kind of employment in the ports of Gothenburg where the employee decides when he or she wants to perform work. The system is managed by a telephone system, where the employee manages his/her own interest of work a specific day. In order to work on the docs, the employee needs to apply for a registration certificate which allows the employee to work in the ports.

The two employees had during their time as “Blixtar” initially performed work for two different companies. Both companies were later transferred to a third company as part of a business transfer.

The dispute in the case was therefore whether the employees as part of the business transfer could include their seniority from their first employer as Blixtar before the business transfer, and thereby achieve a better position in the Last In First Out list, which the company used for selecting the affected employees.

The Labour Court’s ruling

According to the Labor Court, in the event of a transfer of activities from one business to another, the rights and obligations of employment relationships that existed at the time of the transfer will also be transferred. With respect to the seniority of short-term employees, this means that the seniority would transfer for those employees who were working at the time of transfer.

In the specific case, one of the employees had been working in the ports a few days before the transfer and soon thereafter. The Labor Court found that this circumstance was sufficient to create a time connection, which meant that the employee in fact had been employed at the time of the transfer. Therefore, the seniority for this employee should transfer as part of the business transfer, and due to this increased seniority, the so-called LIFO principle had been violated, and the termination was found to be unjustified.

The other employee had completed his fixed-term employment of 17 days, before the transfer and he did not perform work for the company again until 52 days after the business transfer. During the pause, he was furthermore not registered as a “Blixt” at the ports in Gothenburg. Therefore, the Labor Court found that the time connection between the work performed before and after the business transfer was not sufficient to establish an employment at the time of transfer. In other words, the Labor Court found that the decisive criteria were the “time-connection” between the work performed before and after the business transfer. The seniority of this employee should therefore not be included in the LIFO list, and therefore the termination was justified.

IUNO’s opinion

Although the decision is linked to a specific industry, with special types of employment, the Labour Court’s decision does serve as a valuable clarification for companies involved in a business transaction, and to what extent the companies involved need to include short-term employees and transfer these employees with their seniority, in the event of a later reduction in force.

IUNO recommends that companies involved in business transactions, consider the need to make reductions in force and other changes to the organization as part of the transaction. Often these transactions prove more difficult and costly than foreseen and should be taken into account already at the time of due diligence and negotiation. Companies who are considering post-transaction integrations and other kinds of reorganizations should carefully assess the protections and procedures in place, before starting the process.

IUNO recommends that companies who employ short-term employees carefully assesses the legal status for those employees and ensures that the employment complies with the rules for short-term employment and is sufficiently documented in writing.

In 2017 two dock workers were terminated by a port operator due to shortage of work. The selection of affected employees was based on the so-called Last In First Out (LIFO) principle, as required under Swedish law in redundancy situations.

Both workers had been employed in temporary positions (“behovsanställningar”) as so called Blixtar. Working as a Blixt is a special kind of employment in the ports of Gothenburg where the employee decides when he or she wants to perform work. The system is managed by a telephone system, where the employee manages his/her own interest of work a specific day. In order to work on the docs, the employee needs to apply for a registration certificate which allows the employee to work in the ports.

The two employees had during their time as “Blixtar” initially performed work for two different companies. Both companies were later transferred to a third company as part of a business transfer.

The dispute in the case was therefore whether the employees as part of the business transfer could include their seniority from their first employer as Blixtar before the business transfer, and thereby achieve a better position in the Last In First Out list, which the company used for selecting the affected employees.

The Labour Court’s ruling

According to the Labor Court, in the event of a transfer of activities from one business to another, the rights and obligations of employment relationships that existed at the time of the transfer will also be transferred. With respect to the seniority of short-term employees, this means that the seniority would transfer for those employees who were working at the time of transfer.

In the specific case, one of the employees had been working in the ports a few days before the transfer and soon thereafter. The Labor Court found that this circumstance was sufficient to create a time connection, which meant that the employee in fact had been employed at the time of the transfer. Therefore, the seniority for this employee should transfer as part of the business transfer, and due to this increased seniority, the so-called LIFO principle had been violated, and the termination was found to be unjustified.

The other employee had completed his fixed-term employment of 17 days, before the transfer and he did not perform work for the company again until 52 days after the business transfer. During the pause, he was furthermore not registered as a “Blixt” at the ports in Gothenburg. Therefore, the Labor Court found that the time connection between the work performed before and after the business transfer was not sufficient to establish an employment at the time of transfer. In other words, the Labor Court found that the decisive criteria were the “time-connection” between the work performed before and after the business transfer. The seniority of this employee should therefore not be included in the LIFO list, and therefore the termination was justified.

IUNO’s opinion

Although the decision is linked to a specific industry, with special types of employment, the Labour Court’s decision does serve as a valuable clarification for companies involved in a business transaction, and to what extent the companies involved need to include short-term employees and transfer these employees with their seniority, in the event of a later reduction in force.

IUNO recommends that companies involved in business transactions, consider the need to make reductions in force and other changes to the organization as part of the transaction. Often these transactions prove more difficult and costly than foreseen and should be taken into account already at the time of due diligence and negotiation. Companies who are considering post-transaction integrations and other kinds of reorganizations should carefully assess the protections and procedures in place, before starting the process.

IUNO recommends that companies who employ short-term employees carefully assesses the legal status for those employees and ensures that the employment complies with the rules for short-term employment and is sufficiently documented in writing.

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Anders

Etgen Reitz

Partner

Shirin

Sharifi

Associate

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