Employment Protection issues
The Employment Protection Act
The Employment Protection Act of 1982 regulates a number of matters pertaining to the individual employee’s terms and conditions of employment. The act is mandatory to the benefit of the employee but may to a large extent be deviated from through collective bargaining agreements. Thus, the collective bargaining agreements that the Swedish Industrial and Chemical Employers Association is bound by all contain provisions that imply deviations from the provisions of the act.
The act is applicable to all employees, both in the public and private sector. However, a few groups of employees are excluded from its application. These groups are
(i) employees who, by virtue of their duties and conditions of employment, may be deemed to be in a managerial or comparable position,
(ii) employees who are members of the employer’s family,
(iii) employees who work in the employer’s household,
(iv) employees who are employed for work with special employment support or in sheltered employment and
(v) employees who are employed in upper secondary apprentice employment.
The Employment Protection Act contains fundamental rules applicable to the individual employment agreement. Thus, it contains provisions pertaining to the commencement of an employment, and the termination of an employment agreement. The principal rule of the act is that employees shall be employed for an indefinite period of time. Consequently, the act restricts the right for an employer to employ a person for a limited period of time.
The act contains extensive provisions for damages in the event of an employer contravening the act.
The rules Pertaining to Termination of Employment
According to the provisions of the act, an employer who wants to terminate the employment of an employee must be able to show objectively justifiable reasons for the termination. If an employer performs a termination without such reasons being at hand, the employer may have to face both claims for an annulment of the termination and claims for damages. The damages may in some situations amount to as much as approximately two to three years’ salary for the employee.
The objectively justifiable reasons that an employer must show are divided into two categories. The first category consist of terminations based on reasons related to the employer. Such terminations are called terminations due to redundancy. The other category consists of terminations where the reasons for the termination relate to the affected employee in person. Such terminations are called terminations due to personal reasons. The procedures for the two categories of terminations are similar in some respects, but there are also very important differences. Thus, they will be described further below under separate headings. Furthermore, the act also provides for a possibility for an employer to dismiss an employee without any notice period in case of a serious breach of the employment agreement by the employee. Summary dismissals are also described further under a separate heading below.
Terminations Due to redundancy
One of the fundamental principles under Swedish labour law is the employer’s freedom to organize and run the business any way that the employer deems fit, subject to the obligations to negotiate and inform the trade unions, as described under the above heading Co-determination at the Workplace. Thus, the employer is at any time free to re-organize its business, e.g. in case of poor profitability or due to a wish to rationalize etc. Such a re-organization may cause a need to reduce the headcount.
The first step in a re-organization procedure is to negotiate about the re-organization with the trade unions. The negotiation concerns the decision to re-organize. The employer may not take the decision before the negotiations, since this would deprive the union of its possibility to influence the decision. Once this negotiation has been concluded, the employer can take the decision to re-organize the business. If the re-organization entails a reduction of the headcount, the next step is to negotiate regarding which employees shall be laid off. Only after this negotiation has been concluded can the employer notify the affected employees of termination.
The fundamental principle applicable when deciding which employees shall be made redundant is the so-called last in-first out principle. According to this principle, the employee with the longest aggregate period of employment is entitled to remain employed the longest, provided that he/she has sufficient qualifications for any of the remaining positions. If two employees have the same period of employment, the oldest employee takes precedence. Thus, one of the first steps in a redundancy procedure is to create a list over the employees based on this principle.
The next step is to identify which positions will be made redundant. Since the above principle is decisive when determining which employees shall be made redundant, it is possible that it is not the employee who is holding the redundant position that will be given notice. Instead, the employer must investigate whether there are any vacant positions that the affected employee can reasonably be relocated to. A prerequisite for such a relocation is that the employee has sufficient qualifications for the alternative position. If there are no such positions, the employer must investigate whether there are any positions held by employees with a shorter period of employment that the employee can be relocated to. Again, the employee must have sufficient qualifications for the position in question. Only if it is not possible to re-locate the employee as described above does the employer have objectively justifiable reasons for a termination.
All collective bargaining agreements that the Swedish Industrial and Chemical Employers Association are party to contain provisions that make is possible to deviate from the priority rules described above. However, any deviations require an agreement with the trade union in order to be enforceable. The provisions of the collective bargaining agreements make it possible to agree with the unions on a so-called “agreed priority list”. If such a list is agreed upon, it is possible to select the employees to be given notice using other criteria than period of employment and qualifications, criteria which are more relevant to the employer.
Once the employees to be given notice have been identified and the union negotiations have been concluded, the employer can go ahead and serve notice of termination. The notice period normally ranges between one and six months but may in some situations be as much as 12 months. The employee is entitled to all his/her benefits during the notice period. The employer can request that the employee works during the notice period but may also relieve the employee from his/her duty to work.
Employees who have been employed for at least twelve months during the last three years have a priority right to be re-employed by the employer, in case the employer needs to recruit new employees. This right is vested with the employee from the time when notice of termination is given until nine months have elapsed from the end of the employee’s employment.
Terminations Based on Personal Reasons
It is normally difficult to terminate an employment due to personal reasons. Furthermore, as in redundancy situations, the employer must try to relocate the employee to any vacant positions before the employment is terminated, provided that this is reasonable, and the employee has sufficient qualifications for the position.
Termination for personal reasons may be possible if the employee has committed a serious breach of his/her employment agreement, such as in cases of crimes committed against the employer or against colleagues, or in serious cases of disloyal behaviour. Extensive and unauthorized absenteeism may sometimes also constitute an objectively justifiable reason for a termination, as may grave cases of poor performance. On the other hand, an employee’s illness very seldom constitutes grounds for a termination.
Before an employer can terminate an employee due to personal reasons, the employer must normally have made the employee aware of the unacceptable behaviour that the employee is guilty of and tried to correct it. Furthermore, the employee must have been given a reasonable chance to correct his/her behaviour.
The first step in a termination process is that the employer informs the employee that the employer intends to terminate the employment. This information shall be given at least two weeks before the notice of termination is given. The employee’s union shall simultaneously be notified. The union and the employee are entitled to consultations with the employer regarding the pending termination. If such consultations are requested, the employer must postpone the termination until the consultations have been concluded. During these consultations, the parties normally discuss whether or not objectively justifiable reasons for a termination are at hand.
An employer may in some situations summary dismiss an employee. This is possible if the employee has committed a very serious breach of the employment agreement. Examples of such serious breaches that may constitute cause for a summary dismissal are crimes committed against the employer, such as theft or assault of a colleague.
The procedure for a summary dismissal is similar to the process for a termination due to personal reasons. However, there is no obligation for the employer to try to re-locate the employee. Furthermore, since a summary dismissal may only be carried out in case of very serious breaches of the employment agreement, the employer is not under any obligation to try to correct the employee’s behaviour and give a “second chance”.
As in case of a termination due to personal reasons, the first step in a termination process is that the employer informs the employee that the employer intends to terminate him/her and notifies the union. This information shall be given at least one week before the summary dismissal is executed. The right of the employee and union to have consultations and the obligation for the employer to postpone the execution of the summary dismissal are the same as in case of a termination due to personal reasons.
Remedies in Case of Unlawful Terminations
The remedies available to an employee who believes that the termination of his/her employment was not based on objectively justifiable reasons is to request that the termination shall be declared invalid and to demand damages. The damages available under the Employment Protection Act are divided into two different categories. First, the employee may demand damages for the offence that the employer has committed by the unlawful termination. Second, the employee may demand damages for economic loss. The damages for economic loss are capped and are maximized to 16 monthly salaries if the employee has been employed for less than five years, 24 monthly salaries if he/she has been employed for five years or more but less than ten years and 32 monthly salaries if the employee has been employed for more than 10 years.
If the employee requests that the termination shall be declared invalid, and this issue cannot be resolved through negotiations, the issue may be taken to court proceedings. Such proceedings may take up to a year or more. The employee normally remains employed during the entire proceedings and is entitled to all his/her employment benefits during the notice period.
If a termination is challenged solely as being made contrary to the priority rules described above, the employee cannot claim that the termination shall be declared invalid and will not remain employed during any court proceedings.
The remedies available in case an employee challenges a summary dismissal are the same as described above. However, in this situation, the employee will normally not remain employed during any court proceedings.