Employment law and pensions

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1 a newsletter from mannheimer swartling no. 33 november 2012 Employment law and pensions editor Advokat Kerstin Kamp-Wigforss legally responsible Advokat Henric Diefke Göteborg/Stockholm / contact persons Advokat Henric Diefke Göteborg/Stockholm / Advokat Madeleine Rydberger Malmö Dr. Christian Bloth Rechtsanwalt, Frankfurt this newsletter is distributed solely for informational purposes and should not be regarded as legal advice. the newsletter may be quoted as long as the source is specified This issue of the newsletter addresses a number of legislative proposals such as the new Act on Agency Employees, as well as amendments regarding strengthened protection for fixed-term and substitute employees. We also report on the committee proposal on new rules for unfair dismissal disputes in the Employment Protection Act. In this edition, our case law coverage deals with a wide range of employment law questions: the employer s right to schedule vacation during the notice period when the employee is on garden leave, breach of the consultation obligation in section 38 Co- Determination at Work Act when contracting out work, re-organisation of part-time positions and thereby possible breach of the priority rules, as well the Court of Justice of the European Union s preliminary ruling regarding the 67 year-rule in the Employment Protection Act. Finally, we describe the assessment of the amendments in the Posting of Workers Act after the Laval-ruling by a parliament committee. Proposed new legislation proposed new act on agency employees and new rules in the posting of employees act In a Bill, the Swedish government is proposing a new law that shall regulate the employment conditions of employees in staffing agencies (the Act on Agency Employees). A central part of the Bill is the implementation of a principle of equal treatment. The principle of equal treatment shall, inter alia, entail an obligation for the staffing agencies to ensure agency employees at least the basic employment conditions which would have been applicable had the employee been employed directly by the hiring company. However,

2 the equal treatment principle is curtailed by several exemptions, for example as regards employees with so-called special employment support and employees in so-called protected employment or development employments. Furthermore, the requirement of equal treatment shall not apply to the salary of agency workers with indefinite employment that receive salary in between staffing assignments. It shall be possible to make further exemptions from the principle of equal treatment by collective agreements, entered or authorised by a national trade union, provided that the collective agreement is in cohesion with the general protection of agency employees in staffing agencies as set out in Council Directive 2008/104/EC on temporary agency work). Within the scope of the Bill, it is also proposed that new obligations be imposed on the hiring companies. Agency employees shall, inter alia, have a right to use common areas and facilities, such as the canteen, gym, etc. and to receive information on available permanent and probationary employments at the hiring company. Certain provisions in the new Act on Agency Employees shall also apply to foreign posted agency employees in Sweden. The Bill also contains proposed changes to the Posting of Workers Act. In short, extended possibilities for trade unions to take industrial actions are proposed in order to secure employment terms and conditions equal to those in a national collective agreement in the staffing agencies industry regarding foreign posted agency employees. The Bill is proposed to enter into force on the 1 January jur kand tobias normann proposal for strengthened protection of employees on general fixed-term or substitute employments The Ministry of Employment suggests amendments to the Employment Protection Act ( EPA ) in order to prevent different forms of abuse of fixed-term employments. The amendments are proposed in the light of the European Commission s criticism of the Swedish rules that, in breach of Council Directive 1999/70/EC concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP, lack provisions to limit the risk that different forms of fixed-term employments are combined in such a way as to circumvent the time-limits in the EPA. Under the current provisions in the EPA, an employment is considered to become an indefinite employment if the employee during a five year period has been employed with the employer on a general fixed-term employment for a total of more than two years or as a substitute for a total of more than two years. Given that the time of the fixed-term employments is counted within a five year period, the employer can combine different forms of employments under the current EPA to avoid the employment transforming into an indefinite employment. In order to limit abuse of the current rules, the Ministry of Employment suggests a complementary conversion rule. It is proposed that a general fixed-term or substitute employment becomes an indefinite employment if the employee has had successive probationary or fixed-term employments and the term of the general fixed-term employment or substitute employment exceeds two years. Therefore, the conversion rule operates so that the five year period does not apply if the employee has had successive fixed-term employments. Instead, the fixed-term employment becomes an indefinite employment once the employee has been substitute or has had a general fixed-term employment for more than two years. The amendment is of lesser importance for employers who are bound by collective agreements, since it shall be permitted to deviate from the complementary conversion rule by collective agreement. In connection with the above-mentioned amendments, the Ministry of Employment also proposes that employers shall be obliged to submit a written statement on the employee s total term of general employment or as substitute within three weeks of the employee s request. It is suggested that the legislative changes enter into force on 1 July advokat bita pourmotamed

3 report proposal on new rules in the employment protection act A committee had been assigned to review the rules regarding unfair dismissal disputes in the EPA. The committee s report presents three main proposals. Firstly, the report contains a proposal to change the current main rule that, in the case of an unfair dismissal dispute, the terminated employee shall remain employed during the course of the dispute. The committee proposes to amend this so that the employee remains employed for a maximum of one year from the termination date. Furthermore, it is suggested that it shall no longer be possible to declare a termination based on redundancy invalid solely on the basis that the employer has not completed his obligation to transfer the employee to a vacant position prior to making the employee redundant. If the employer violates this obligation, a liability to pay damages shall be the only remedy. Finally, the committee proposes that the statutory damages payable when an employer dissolves an employment contract against the employee s will and despite a court having declared the termination invalid, shall be reduced for smaller employers. The current amount of damages is between 6 32 monthly salaries depending on the employee s length of employment. Under the proposal, if the employer has fewer than 50 employees, the amount shall be reduced by one month s salary for every fifth employee below this number. The Bill is proposed to enter into force on the 1 January jur kand tobias normann News from the courts question as to whether the employer had a right to schedule vacation during the notice period when employees were released from work The pharmacy Apoteket Aktiebolag ( Apoteket ) had made two employees redundant. Prior to the terminations, consultations had been held between Apoteket and three trade unions. In the minutes of the consultation meetings, it was noted that the employees were released from work during the twelve months notice period. Apoteket had scheduled 20 of the employees vacation days to coincide with the notice period and the employees had received vacation supplements for those days. As for vacation days exceeding 20 days, i.e. days that the employees were allowed to save under the Vacation Act, the employees received payment in lieu of vacation together with their final salary payments. The dispute concerned whether or not Apoteket was allowed to schedule the vacation days to coincide with the notice period in the way described above. Apoteket asked the Labour Court to declare that they were not obliged to pay any further payments in lieu of vacation with respect to the 20 vacation days that had been scheduled to coincide with the notice period. One of the three trade unions opposed this and claimed that the Labour Court should hold Apoteket responsible for payment in lieu of vacation regarding the accrued 20 vacation days. The trade union argued mainly that the agreement in the minutes of the consultation meeting stating that the employees were released from work during the notice period entailed a commitment by Apoteket not to schedule vacation during that period. In this respect, the Labour Court noted that the employer had claimed that no actual agreement had been made regarding the possibility to schedule vacation to coincide with the notice period. This was not disputed by the trade union. Therefore, the Labour Court was unable to establish that it was the parties mutual intention to agree on a prohibition to schedule vacation during the notice period. Further, the parties had not explicitly stated in the minutes how the distribution of accrued vacation days should be handled. The Labour Court found that the statement in the minutes that the employees were released from work during the notice period did not as such entail a commitment from the employer to refrain from scheduling vacation days to that period. The Labour Court also investigated the applicability of section 26a of the Vacation Act (prohibition on scheduling vacation when an employee is on leave due to illness or leave of absence). Contrary to what was argued by the trade union, the Labour Court found that this provision applied only to situations where vacation could not be scheduled during the vacation year due to illness or other leave of absence and not in situations where the parties have mutually agreed that an employee is released from work. Furthermore, the Labour Court held that section 14 of the Vacation Act was not affected by the fact that an employee was released from work during the notice period. Section 14 states that annual leave shall not be scheduled to coincide with a notice period, unless the notice period exceeds six months. If the notice period exceeds six months, the parties must have agreed on such a prohibition

4 explicitly. The Labour Court found that the trade union had not shown that the parties had made such an agreement. In addition, the prohibition in section 14 did not apply since the notice period exceeded six months. Apoteket was therefore permitted to schedule vacation during the notice period. (Labour Court judgment 2012, number 65) jur kand lena schreiber qestion on damages under section 38 co-determination at work act The collective agreement regarding participation in TV productions carried out by SVT/UR applies between SVT (the Swedish public service television company), UR (the Swedish Educational Broadcasting Company) and the Swedish Musicians trade union. During 2009 and 2010, SVT had hired the production company Baluba for TV productions of the show Dansbandskampen. A dispute arose as to whether SVT had breached the obligation to consult the trade union under section 38 of the Co-Determination at Work Act ( MBL ) by deciding to engage Baluba. The decision to hire Baluba in 2009 had not been preceded by consultations with the trade union. The parties agreed that the decisions to engage Baluba for the TV productions of Dansbandskampen concerned such an engaging of labour as intended to be covered by section 38 MBL and that, as such, the collective agreement existing between the parties was applicable to the work. During the years in question, SVT had regularly employed fixed-term employees who were members of the trade union. According to the Labour Court, section 38 MBL does not require that the consultation issue in question specifically concerns a trade union member. It is also not necessary for a trade union member to have been employed at SVT at exactly the time when the consultation obligation arose. Therefore, SVT was under an obligation to consult the trade union according to section 38 MBL when the 2009 decision was taken. Regarding the decision in 2010 to let Baluba produce Dansbandskampen, SVT had on 16 June initiated consultations which were held on 20 and 23 June. On 30 June, SVT had received the trade union s request for consultations on central level and suggested 2 July as a date. On 1 July, SVT had made the formal decision to hire Baluba by entering into a written agreement. The consultations on central level were held on 2 July. Pursuant to the preparatory works, section 38 MBL is intended to give the trade unions the possibility to intervene when the anticipated contract can be expected to result in a breach of law or collective agreement or is otherwise contrary to what is generally acceptable in the sector concerned. The consultation obligation first arises when the employer is about to engage a specific contractor. The question whether a certain job shall be performed by a contractor at all is not covered by section 38 MBL (but possibly by the obligation to consult under section 11 MBL). The Labour Court held after evaluation of the evidence that the contract with Baluba in 2010 had already been negotiated and finalised (even though not yet signed) when SVT called for consultations with the trade union. The trade union s scope to influence the terms for the contracting out was therefore minimal. Therefore, SVT had already breached the consultation obligation in 2010 by calling for negotiations too late. According to the Labour Court, SVT also breached the consultation negotiation by not awaiting the negotiations on central level which took place the day after the signing of the contract with Baluba. The fact that the trade union would not have had any reason for a veto did not constitute exceptional reasons under section 38(3) MBL (according to which the employer, as an exception, can take and execute the decision prior to the consultations). The aim of the central consultations is that the parties on central level should try to solve the dispute in question. It is only the central trade union that has the veto right. The employer cannot simply ignore the upcoming central consultation and take the decision without awaiting the result of the consultations.

5 It was, however, the Labour Court s assessment that the trade union was not able to show that the requirements for a veto, i.e. disregarding law or collective agreement, had existed. Therefore, there was no reason to impose particularly high damages. SVT was ordered to pay to the trade union a total of SEK 150,000 plus interest as general damages and SEK 119,491 plus interest as compensation for legal costs. (Labour Court judgment 2012, number 57) advokat kerstin kamp wigforss question on redundancy and breach of priority rules An employer had carried out a re-organisation in one of his shops. The two employees had each received a transfer offer, according to which one sales assistant who had been employed longer was offered a reduction in working time of ten hours per week and the other shop assistant was offered five hours more per week. The shop assistant with the reduced working time did not accept the transfer offer and was given notice of termination of employment. The shop assistant claimed damages and argued that redundancy was not at hand, since this was not an actual reduction of the operations but rather a re-distribution of working hours. According to the shop assistant, the company had breached the priority rules because the downsizing should instead have affected the other shop assistant who had been employed for a shorter time. The Labour Court held that this was a case of redundancy and that the company had no reasons to apply the priority rules. The decision to re-organise was based on business economic reasons and was caused by a long period of unprofitability of the shop. With the changes, the staffing was better adjusted to the needs of the business and provided for more flexibility. Following the re-organisation, the previous two part-time positions disappeared and two new positions were created, whereupon the shop assistant who had been employed longer was offered the more extensive position with 25 working hours per week (instead of the previous 35 hours per week). Since she declined the offer, a redundancy situation arose and, consequently, just cause for termination of employment based on redundancy. No employees other than the shop assistant in question and her colleague who had already accepted her transfer offer of 15 hours per week (instead of the previous 10 hours per week) were included in the relevant priority group. Therefore, the company did not need to consider the priority rules. The shop assistant s argument that the offer of the same position but with fewer working hours did not qualify as a transfer offer, or at least not as a reasonable one, was rejected by the Labour Court. The court was of the opinion that the employer s transfer offer was reasonable since there was no shop assistant position with higher working time than 25 working hours per week after the re-organisation. (Labour Court judgment 2012 number 47) advokat sofia pedersen question as to whether the 67 yearrule had a legitimate aim that was both necessary and appropriate As reported in our Newsletter no 32, the District Court of Södertörn had referred two questions on the 67 year-rule in sections 32 a and 33 EPA for a preliminary ruling to the Court of Justice of the European Union. The case in the District Court concerns a former post office employee who was given notice the month he turned 67. The employee had based his claim for unlawful age discrimination, inter alia, on the fact that he, despite his request, did not receive more than a part-time position after he had turned 67 years, with the result that his retirement pension is so low that he cannot support himself.

6 The Court of Justice of the European Union delivered its preliminary ruling on 5 July 2012 and established that Article 6 (1) of Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation must be interpreted as not precluding a national measure which allows an employer to terminate an employee s employment contract on the sole ground that the employee has reached the age of 67 and which does not take account of the level of the retirement pension which the person concerned will receive, as that measure is objectively and reasonably justified by a legitimate aim relating to employment policy and labour-market policy. The 67 year-rule also constitutes an appropriate and necessary means by which to achieve that aim. The fact that the EPA does not mention which aim shall be achieved by the 67 year-rule is consequently not of significant importance. A date for the main hearing in the District Court of Södertörm has not yet been set. (Judgment of the Court of Justice of the European Union C-141/11 Torsten Hörnfeldt v Posten Meddelande AB) advokat sofia pedersen Other posting of foreign employees to the swedish labour market A parliamentary committee appointed by the government shall evaluate the changes made to the Posting of Workers Act in view of the European Court of Justice s ruling in the Laval case. The so-called Lex Laval changes entered into force in April According to Lex Laval, a trade union may use industrial action against an employer only in order to secure terms and conditions of employment which (i) correlate to the minimum requirements of a national collective agreement applied all over Sweden to similar employees in the relevant industry (industry agreements), (ii) only concern salary, vacation, working hours and certain other basic employment terms and conditions and (iii) are more beneficial for the employees than the statutory minimum. Industrial actions may not be taken if the employer can show that the employees already have terms and conditions which are, in essence, as beneficial as the minimum conditions in an industry agreement. The committee shall firstly identify, inter alia, the annual number of foreign employees posted to Sweden, what countries the employees are posted from and in what industries posting normally occurs. Thereafter, the committee shall (i) evaluate if the application of Lex Laval secures the protection of foreign posted employees basic employment terms and conditions, (ii) evaluate and assess the current approach where trade unions are obliged to submit collective agreement terms and conditions to the Work Environment Authority that, in its turn, submits such information to the employers and (iii) consider possible amendments of the law. The report shall be presented at the latest by 31 December As is discussed above in Proposed New Act on Agency Employees and New Rules in the Posting of Employees Act, the government has also recently presented changes to Lex Laval, as regards posted foreign agency employees. jur kand ola axelsson Mannheimer Swartling is the leading Nordic commercial law firm. Our clients range from many of Sweden s and the world s leading companies to medium-sized businesses and organizations. Common to all our clients is that the law plays an integral role in their commercial success. This drives us to continuously maintain our position at the forefront of our industry and attuned to the needs of our clients. We are a full-service firm with approximately 400 lawyers who are specialized in different practice areas of commercial law. Our teams are also organized by industry groups to ensure that we are fully knowledgeable about industry-specific needs and challenges. By combining the highest quality legal skills with industry knowledge, we offer our clients commercial legal advice with added value. Mannheimer Swartling has offices in Stockholm, Gothenburg, Malmö, Helsingborg, Frankfurt, Berlin, Moscow, St. Petersburg, Shanghai, Hong Kong, Brussels and New York.

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