Unfair to summarily dismiss but fair to set off

A shop assistant in a grocery store was summarily dismissed. The reason for the summary dismissal was that she had been rude to customers, smoking in her uniform, and started closing the shop early. However, the company did not have sufficient documentation.

Therefore, the court found no grounds for the summary dismissal, and the company had to pay compensation to the employee. However, since the employee had started a new job after the summary dismissal, the question was if that income should be set off against the compensation the company had to pay.

No double salary

There are no rules on whether income should be set off or not from an employee’s salary claim in case of summary dismissal. Therefore, the case was based on the principle that only actual loss should be compensated, and the company had the right to set off.

It was decisive that the claim did not have the typical character of a salary. The court characterized salary as compensation for work performed or for being at the disposal of the company. As the employee was not at the disposal of the company, the compensation could not be treated as salary. Additionally, it would not be reasonable for the company to have to pay full salary for hours for which the employee has earned salary from another employment.

IUNO’s opinion

This case confirms that the right to set off applies when a summary dismissal is unlawful. Although this may only seem fair, the case brings clarity to the question of set off, since there are no rules or guiding examples. Also, the Labour Court again illustrated that companies have a heavy burden of proof if they summarily dismiss an employee.

IUNO recommends that companies are cautious when considering if summary dismissal is necessary. As the company has to prove cases of material breach, it is also important to ensure that all instances are properly documented. An unlawful dismissal can be expensive. Companies may benefit from keeping in mind that set off against new income is possible. This can be particularly important to keep in mind when negotiating a severance agreement.

[The Swedish Labour Court’s decision of 18 January 2023 in case A 2/23]