LEGISLATION CHANGES. New rules in the Employment Protection Act regarding fixed-term employment. page 1

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NO. 18 JUNE 2007 EDITOR:

Advokat Maria Gill LEGALLY RESPONSIBLE: Advokat Magnus Wallander Stockholm

CONTACT PERSONS:

Advokat Magnus Wallander, Stockholm Advokat Henric Diefke, Göteborg Advokat Madeleine Rydberger, Malmö Dr. Christian Bloth, Rechtsanwalt, Frankfurt

In this issue of the newsletter we deal with some important, recently decided changes to the law, such as the extension of options to employ on a fixed term. We also report on the opinion of the Advocate General of the European Court of Justice in the “Laval” case, as well as some interesting case law from the Swedish Labour Court, including a decision regarding an em-ployer’s ability to terminate the employment of an employee who commits crimes on duty when the employee claims that his actions are due to illness (alcoholism). In the pen-sions area we discuss the new occupational pension scheme for blue-collar employees.

LEGISLATION CHANGES

New rules in the Employment

Protection Act regarding fixed-term

employment

As referred to in our Newsletter No. 17 (March 2007), the Government previously tabled a proposal to amend the Employment Protection Act (Sw: lagen om

anställnings-skydd) concerning fixed-term employment.

The Parliament has now decided on new rules, which can be summarised as follows:

• The starting point from a Swedish perspective is that an employment should be permanent. Under the new rules, a fixed-term employment will be permitted in four different situations: (i) so-called “general fixed-term employment” (Sw: allmän

viss-tidsanställning) for a maximum of two

years; (ii) substitute employment (for example when the ordinary employee is on parental leave); (iii) employment for per-sons over 67 years of age; and (iv) seasonal employment. Deviations from these rules may be made through collective bargaining agreements.

• The new form of employment - general fixed-term employment - will replace most of the current forms of fixed-term employ-ment. One substantial change is that an em-ployer will not be required to put forward any (permissible) reason for the fixed-term, as is the case today. A legal review may only be made if the choice to use a general fixed-term employment (instead of a perm-anent employment) has been made on a discriminatory basis.

• If an employee has been employed under either a general fixed-term employ-ment or a substitute employemploy-ment for a total of two years within a period of five years, the employment will automatically convert into a permanent employment. At present,

the conversion rule only applies to

substi-tute employees who have been employed for

a total of three years during a five year pe-riod. The upcoming changes will therefore strengthen the rights of the fixed-term employees. However, it is possible to com-bine the different forms of fixed-term employment within the five year period. For example, an employee can initially hold a substitute employment for up to two years and then a general fixed-term employment for additionally (up to) two years, without gaining the right of a permanent ployment, provided that the substitute em-ployment as such is “genuine”. Probationary employment, seasonal employment and em-ployment of persons over 67 years of age are not affected by the conversion rule.

The new rules will enter into force on 1 July 2007. However, the new conversion rule, with respect to substitute employment, will come into effect on 1 January 2008. Thus, for substitute employment the current rules (that is, conversion after three years) will be applicable for employment contracts entered into before 1 January 2008. If the substitute is employed on or after 1 January 2008, the new rules will apply (that is, con-version after two years). However, earlier periods of employment as a substitute will

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be counted for in the conversion time. For example:

One person is hired as a substitute for a period of 1.5 years, commencing 1 February 2008. This person has previously held sub-stitute employment with the company during the complete year of 2006, which is included in the conversion time. In this case the employment will automatically transfer into a permanent position when the present substitute employment has been ongoing for more than one year; i.e. on 1 February 2009 (in spite of the fact that the duration of this particular substitute employment was short-er than two years). The transitional rules can thus be said to have a certain retroactive ef-fect.

Contact person: Advokat Maria Gill, e-mail:

mgi@msa.se

Other changes in the Employment

Protection Act – priority right to

re-employment, abrogation of special

regulations for older employees etc.

The Parliament has further decided on the following changes to the law, which enter into force on 1 July 2007:

• Under the Employment Protection Act, an employee who is made redundant has (under certain circumstances) a priority right to re-employment at the company, should the company wish to recruit new personnel within a certain period of time following the termination of employment. The qualification period for this priority right to re-employment will remain the same, being a total of twelve months’ em-ployment during the past three years. (Last spring the Parliament decided that the quali-fication period should instead be nine

months, to have effect from 1 July 2007. The new decision in this regard can thus be regarded as a “restitution” to the present rules.) With respect to the aforementioned new employment form (that is, a general fixed-term employment) it should be noted that a priority right for re-employment will arise after 12 months’ service, i.e. there is no special exception for such employments (despite governmental lobbying by employers’ organisations). Hence, an em-ployer wishing to avoid a priority right to re-employment should limit the duration of general fixed-term employments to 12 months.

• With respect to employees on parental leave, the employer is obliged to inform em-ployees with fixed-term employment of vacant permanent and probationary employ-ment positions only if requested by the employee.

• In order to specifically prevent older employees from dismissal, the current law imposes different rules which give priority to older employees in relation to others. Based on the upcoming prohibition against age discrimination, such rules will now be revoked. This includes the present right to count one additional employment month for each month of employment after the age of 45. Such change will affect calculation of the period of employment with respect to: (i) order of seniority (i.e. the principle of “last in – first out”, applicable in redund-ancy situations); (ii) priority right to re-employment/employment with extended working hours; and (iii) damages under Section 39 of the Employment Protection Act (i.e. standardized damages payable when the employer refuses to comply with a judgement whereby a dismissal is declared void). For employees dismissed before 1 July 2007 the present rules will apply.

Another aspect of the current protection rules relating to older employees is that the actual level of damages under Section 39 of the Employment Protection Act is raised for employees over the age of 60 years. This rule will also be abolished, although the present rules will still apply for calculation of damages in a judgement pronounced be-fore 1 July 2007.

• Employees who are employed after 1 July 2007 and who receive so-called special employment support (Sw: särskilt

anställ-ningsstöd) will no longer be exempted from

application of the Employment Protection Act.

Contact person: Advokat Maria Gill, e-mail:

mgi@msa.se

Abolition of the employer’s

obligation to make rehabilitation

investigations

As referred to in our Newsletter No. 17 (March 2007), the Ministry of Social Affairs previously proposed the abolishment of the employer’s obligation to make reha-bilitation investigations. The Swedish parliament has now decided on the matter and the amended legislation will enter into force on 1 July 2007. This means that the current rule under the National Insurance Act (Sw: lag om allmän försäkring) which obliges the employer to make rehabilitation investigations: (i) if the employee has been on sick leave for more than four weeks in sequence; (ii) if the work often has been interrupted by shorter periods of sick leave; or (iii) when the employee so requests, will no longer be effective.

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Instead, an employer will now be obliged to provide the Social Insurance Office with sufficient information in order to ensure that the employee’s need of adequate rehabi-litation is clarified. It should also be noted that this amendment does not limit other aspects of the employer’s obligations in relation to rehabilitation.

The reasons stated for the changes are inter

alia that only a few of the rehabilitation

in-vestigations which should be carried out are actually completed, and that the employer in most cases does not have access to the medical information which is required for a proper assessment as to whether or not reha-bilitation measures need to come in place, and if so, when those measures should commence. However, these changes have been criticised. The critics argue that bad observance of the law is not a logical justi-fication for abolishing the rule. Further, it has been alleged that the changes may lead to the deterioration of rehabilitation work and also convey the message that rehabili-tation work is unnecessary. How the new system will work in practice remains to be seen.

Contact person: Jur kand Sabina Axelsson, e-mail: axe@msa.se

PENSIONS

New agreement on occupational

pensions for blue-collar employees

The Confederation of Swedish Enterprises and LO (the central workers’ union) have entered into a new general collective agree-ment relating to occupational pensions. Under the new collective agreement, workers in the private sector will be given the same benefits as are given to most

salaried employees in the private sector under the new ITP scheme. This means that from 2012, the employers concerned must make contributions for all employees above 25 years of age to a defined contribution plan. Such contributions amount to 4,5 per-cent of the person’s salary, up to approx-imately SEK 300,000 p.a. plus 30 percent of any salary exceeding SEK 300,000 p.a. The contribution rate under the old collective agreement was 3.5 percent flat. This rate will be increased gradually starting in 2008 in order to reach the final 4.5/30 percent level in 2012.

Contact person: Advokat Carl Dahlborg, e-mail: cdb@msa.se

NEWS FROM THE COURTS

The Advocate General’s opinion in

the Vaxholm dispute (the Laval

case)

The Advocate General recently issued his opinion in the so-called Vaxholm dispute discussed in our Newsletter No. 17 (March 2007). In that matter, the Latvian building company Laval un Partneri Ltd (“Laval”) was engaged through its Swedish subsidiary L & P Baltic Bygg AB (“Baltic”) to con-struct a school in Vaxholm in 2004. Since Baltic and the Swedish Building And Public Works Trade Union (Sw: Svenska

Bygg-nadsarbetareförbundet) (”Byggnads”) were

not able to agree on a collective bargaining agreement, Laval signed two collective bargaining agreements with the building sector’s trade union in Latvia. In November 2004 Byggnads and its local trade union commenced a collective action in relation to Baltic, and the Swedish Electricians’ Trade Union (Sw: Svenska Elektrikerförbundet)

joined the action as an expression of soli-darity. After the work on the site had been interrupted for some time, Baltic became the subject of liquidation proceedings and the Latvian employees returned home. In December 2004, Laval commenced proceedings before the Swedish Labour Court seeking damages, a declaration as to the illegality of both of the collective action by Byggnads and of the solidarity action by Swedish Electricians’ Trade Union and an order for cessation of the action. The La-bour Court concluded that its examination of the legality of the collective action raised questions of interpretation of Community law and referred the following two que-stions to the EC Court of Justice for a preli-minary ruling:

1. Is it compatible with the rules of the EC Treaty on the freedom to provide services and the prohibition of any discrimination on the grounds of nationality and with the provisions of the Posting of Workers Dir-ective for trade unions to attempt to force, by means of industrial action, a foreign temporary provider of services to sign a collective bargaining agreement in the host country?

2. Do the above-mentioned rules constitute an obstacle to the application of the Swed-ish so-called Lex Britannia principle which means that it is permitted, by way of indu-strial action, to force a foreign company to sign a collective bargaining agreement even though the company is already party to an applicable collective bargaining agreement in its home country?

The Advocate General suggests in his opinion that the EC Court of Justice should find that (where a member state has no

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system for declaring that collective bar-gaining agreements have universal appli-cation) the abovementioned rules do not prevent trade unions from attempting, by means of collective and solidarity action, to compel a service provider from another member state to subscribe to the rate of pay determined in accordance with a collective bargaining agreement. This is, however, subject to the industrial action being moti-vated by public interest objectives (such as the protection of workers and the fight against social dumping) and not being car-ried out in a manner which is dispropor-tionate to the attainment of those objectives. When examining the proportionality of the collective action, the Labour Court should, according to the Advocate General’s opin-ion, verify whether the terms and conditions of employment laid down in the relevant collective bargaining agreement were in conformity with the Posting of Workers Directive, and further, whether other conditions involved a real advantage, signi-ficantly contributing to the social protection of the posted workers. That is, the protec-tion should not duplicate any identical or essentially comparable protection which is already available to the workers under the legislation and/or collective bargaining agreement in the home country.

It remains to be seen how the EC Court of Justice will decide these questions. The General Advocate’s opinion is not binding but very often followed by the EC Court of Justice. Byggnads has expressed their approval of the opinion. The Confederation of Swedish Enterprise (Sw: Svenskt

Näringsliv) welcomes the requirement of

proportionality with regard to industrial ac-tion and considers it remarkable that the Advocate General did not state clearly

whether Lex Britannia is consistent with the prohibition of discrimination in the EC Treaty.

Contact person: Rechtsanwältin and EU-Advokat Kerstin Kamp-Wigforss, e-mail

kka@msa.se

Infringement of the freedom of

association and prohibited lockout

action

For the purposes of a staffing a particular project, the company ITG Gruppen AB entered into fixed-term employments with a number of electricians who were members of the Swedish Electricians Union (Sw:

Elektrikerförbundet). At that time, the

company was party to a collective bargain-ing agreement with another trade union, IF Metall, whose Technology Agreement also applied to the electricians’ employment. After doubts had been raised as to which collective bargaining agreement should be applied to the electricians’ employment, and also which trade union should have the right to enter into collective bargaining agree-ments with the company, the company introduced an employment freeze (Sw:

an-ställningsstopp) on permanent employment

which was directed towards the electricians. Citing the employment freeze as well as the alleged incidents of company putting pres-sure on the employees to join IF Metall (which supposedly had been a precondition for permanent employment) the Swedish Electricians union filed a suit against the company for violations of their freedom of association. The Swedish Electricians Union also claimed that the employment freeze constituted a prohibited lockout action of sort (Sw: stridsåtgärd).

The company contested the allegation that it had made permanent employment condi-tional upon membership in IF Metall and denied that the employment freeze had been intended to infringe the freedom of asso-ciation. Instead, it argued that the sole basis for its actions was the fact that the costs in-curred as a result of applying the Instal-lation Agreement advocated by the Swedish Electricians Union would have rendered the project for which the electricians had been employed unprofitable. Pending a definite answer as to which trade union should have the right to enter into collective bargaining agreements with the company, the company consequently chose not to permanently em-ploy the electricians.

The Labour Court found that the Swedish Electricians Union had not substantiated its claim that the company had tried to force the electricians into changing trade union membership. As to whether or not the em-ployment freeze constituted a violation of the freedom of association, the Labour Court found no reason to question that, from the company’s perspective, there had been uncertainties regarding the question of the correct collective bargaining agreement counterparty which, in turn, could have af-fected the company’s decision to complete the project for which the electricians had been employed. In the light thereof, the La-bour Court found that the Swedish Electri-cians Union had not substantiated its claim that the employment freeze had been in-tended to violate the freedom of association. The claims of the Swedish Electricians Union were thus rejected insofar as they concerned infringements of the freedom of association.

The Labour Court then considered the question of whether the employment freeze

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in relation to permanent employment and resulting fixed-term employment should be considered to have constituted a form of prohibited lockout action. In its findings, the Labour Court stated that every action as an employer takes which may actually influ-ence a trade union’s course of action could, in principle, be regarded as a lockout action. However, for an action to constitute a lock-out action in the context of Swedish em-ployment law, it is the underlying purpose of the action which is relevant. Given that the Swedish Electricians Union had failed to show that the company’s motive for the employment freeze was something else than purely financial considerations, it was held that the employment freeze could not be regarded as a lockout action and the Swe-dish Electricians Union’s claim in this re-spect was therefore rejected.

Contact person: Jur kand Johan Fredriksson, e-mail: jfn@msa.se

Termination of employment of

employee dependent on alcohol and

narcotics

The case dealt with a service technician, “JW”, who on two separate occasions had been found to be under the influence of alcohol and narcotics while at work. In con-nection with the most recent such incident, JW had been charged with, and found guilty of, driving under the influence of alcohol. The company, which after the first incident had issued JW with a written reprimand, decided to give JW a notice of termination on the basis that he had again been found to be under the influence of alcohol at work within only one year of the initial warning, and in addition, had also committed a cri-minal offence when performing his duties.

JW’s trade union filed a motion of appeal to the Labour Court and called for the termi-nation to be annulled. The trade union’s main objection to the termination was that JW had suffered from pathologic alcohol-ism at the time of the termination and that the company had not fulfilled its obligation to provide JW with rehabilitation prior to terminating his employment. (The case also concerned itself with other questions which for reasons of brevity have not been covered in this summary).

The company claimed in its reply that at the time of the termination, it had not known about the pathological character of JW’s alcohol abuse. It also claimed that JW, in spite of a written reprimand and by way of repeated and criminal misconduct, no longer held the trust of the company or its custo-mers. In the company’s view, JW’s actions justified not only a notice of termination but even dismissal without notice.

The Labour Court initially stated that its position regarding driving under the influence of alcohol while at work has since long been very strict and that it is reason-able to demand that an employee does not use alcohol/narcotics while at work. The Labour Court further explained that a ser-vice technician who is given access to customers’ homes and facilities must have the employer’s trust. In consideration there-of, the Labour Court found that JW had act-ed in such a way that the company had been entitled to dismiss him without notice. In the view of the Labour Court, JW had also failed to show that the company knew about the pathological character of his alco-hol abuse. However, the Court found that even if the company had known, the Court would not have come to a different con-clusion. As opposed to the procedure of

establishing just cause for terminating an employment with notice, personal circum-stances which are in favour of an em-ployee’s continued employment shall norm-ally be disregarded when determining whet-her twhet-here exists a just cause for dismissal

without notice. Although the company had

chosen to terminate JW’s employment with notice, it had been entitled to dismiss him without notice and was thus under no obli-gation to consider his pathological alcohol abuse. Consequently, there had been just cause for the termination (AD 33/2007). Contact person: Jur kand Johan Fredriksson, e-mail: jfn@msa.se

Ethnical discrimination of an

applicant

A man of Iranian origin applied by e-mail for employment as a reporter at a produc-tion company (among other posiproduc-tions). Four days later he received a reply, also by e-mail, stating that the company was looking for employees who had good knowledge of Swedish and that his application contained too many misspellings. The e-mail, stating the company name, was signed by an employee of the company.

The Ombudsman against Ethnic Discrimi-nation (Sw: Ombudsmannen mot etnisk

di-skriminering) summoned the company

before the Swedish Labour Court (Sw:

Arbetsdomstolen) alleging ethnic

discrimi-nation and claimed general damages to the employment applicant.

The company denied responsibility on the basis that the e-mail message to the em-ployment applicant was transmitted without the knowledge of the company represent-atives and completely in violation of the

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in-structions to the employee. The task of the employee was only to receive applications and notifications of interest and to print out and sort these after occupational category. Thereafter, the material was to be presented to the partners of the company.

In Section 8 of the Act (1999:130) on ac-tions against discrimination in working life due to ethnic origin, religion or other belief (Act of 1999) there is a prohibition against direct discrimination pursuant to which an employer shall not treat an employment applicant or an employee unfairly if such unfairness is related to ethnic origin, religion or other belief. In Section 9 of the Act of 1999 there is also a prohibition against indirect discrimination pursuant to which the employer shall not treat an employment applicant or an employee unfairly by the application of a provision, a criterion or a procedure which appears neutral but in practice is unfavourable to people of a specific ethnic origin, religion or other belief. However, this does not apply if the provision, criterion or procedure can be justified by a legitimate aim and the instruments to obtain such an aim are considered to be appropriate and necessary. The Act of 1999 contains, however, no detailed definition of the “employer” or a statement as to for whom the employer is responsible. The Labour Court found that, as in another recent case (AD 2007 no 16), there is probably no scope for a more ex-tensive application of the concept “em-ployer” under the Act of 1999. The Labour Court noted in particular the absence of a provision relating to vicarious responsibility similar to that prescribed in Section 16 of the Act (2003:307) on prohibition against discrimination (the Act of 2003). According to the preparatory work to the Act of 2003,

an employer cannot escape liability for da-mages pursuant to the Act of 2003 to some-body who has been the subject of discrimi-nation by an employee, even if that em-ployee has acted in violation of the instruc-tions of the employer. There is, however, no corresponding provision in the Act of 1999. In the present case, The Labour Court found that the employee had acted completely out-side the instructions of company representa-tives and without their consent. For this rea-son, the company was considered not to have discriminated against the employment applicant and the action of the Ombudsman against Ethnic Discrimination was therefore dismissed.

Finally, it is worth noting that in a similar case (the abovementioned AD 2007 no 16), a municipality was found not to be legally responsible for a violation of the Act of 1999 for alleged harassment by trade union representatives in connection with the que-stioning of an employee in an employment interview. However, the preparatory work of the Act of 1999 expressly states that pro-cedures for discrimination of an employ-ment applicant where an employer hires so-called head hunters or special recruitment companies should be comprised by the di-scrimination prohibitions pursuant to the Act of 1999 (and, accordingly, prohibited.) (AD 2007 no 45).

Contact person: Jur kand Ola Axelsson, e-mail: oax@msa.se

SHORT NEWS

Labour Court judgement regarding termination of employment due to full sick-ness benefit – Under Section 33 paragraph 2

of the Employment Protection Act an

em-ployer may terminate the employment of an employee who receives a full permanent sickness benefit (Sw: hel sjukersättning som

inte är tidsbegränsad) by way of a written

notification to the employee. Under the re-gulation, such notification may be given as soon as the employer gets “knowledge” of the decision on full permanent sickness benefit. The Labour Court has now stipu-lated that the employer may only terminate employment in this way when the decision on full permanent sickness benefit has

gain-ed legal force (AD 40/2007).

Proposal relating to the employer’s right to demand a so called ”first day certi-ficate” in case of illness – According to

Section 8 of the Sick Pay Act (Sw:

sjuklöne-lagen), an employee is obliged to present a

doctor's certificate from the seventh day of sick leave. The proposal suggests that the employer should be entitled to demand a doctors’ certificate from the first sick day, provided that “special reasons” are at hand. In accordance with the new rules the em-ployer will have the right to, provided that special reasons are at hand: (i) demand a doctor’s certificate before the seventh day in an ongoing period of illness; and (ii) de-mand a ”first day certificate” for every occasion of illness during a one year period. The new rules are proposed to come into force on 1 January 2008, although it is worth noting that many employers already enjoy the right to claim a first day certificate through applicable collective bargaining agreements.

Contact person: Advokat Maria Gill, e-mail:

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Contact Details:

STOCKHOLM Magnus Wallander Phone +46-8-505 764 83 E-mail mw@msa.se GÖTEBORG Henric Diefke Phone +46-31-355 16 99 E-mail die@msa.se MALMÖ Madeleine Rydberger Phone +46-40-698 58 70 E-mail mry@msa.se FRANKFURT Christian Bloth Phone +49-69 974 012 20 E-mail cbl@msa.se

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