NEWS FROM THE LEGISLATOR What changes can we expect from the new Government?

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1 NO. 16 DECEMBER 2006 EDITOR: JUR.KAND. JENNY WELANDER 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 NEWS FROM THE LEGISLATOR What changes can we expect from the new Government? On 6 December, the Swedish Parliament adopted the Swedish Government s Finance Bill for 2007, which reflects the labour market policy that the new Government intends to pursue. Even if the Government intends to maintain the Swedish model, some changes can be expected. Some of these changes will enter into force on 1 January 2007 while others are of a more long term nature. Permanent employment will still be the principal rule in the Swedish labour market. However, the Government intends to reverse some of the changes in the Employment Protection Act (LAS) adopted by the Parliament last spring, which have not yet entered into force (see our previous newsletters No 14 and 15). The Budget Bill includes the following changes: - It will be possible to have a free agreed fixed-term employment with the same employer for not more than 24 months during a five year period (instead of maximum 14 months during a five year period as decided last spring); - employment for a specific season will be reintroduced as a form of employment; - the qualification period for priority right to re-employment will be twelve months (instead of six months during a two year period as decided last spring): - the rules in LAS under which employees over 45 years of age are entitled to take credit for a double term of employment will be revoked: - a prohibition on age discrimination will be introduced, and a coordination of the current discrimination laws as well as a consolidation of the discrimination ombudsmen to one authority, as proposed by the Discrimination Committee, will be implemented; and - the report Increased right to full time employment (see our previous newsletter No 13) will not be implemented. New start jobs will be introduced on 1 January 2007, whereby employers in the private sector as well as employers in the public sector conducting business activities will be entitled to a special allowance corresponding to the employer s contribution when hiring any of the following categories: - Persons who have been unemployed, participated in labour market policy programmes, or received sickness benefits, disability benefits or social allowance for more than one year. The allowance will be paid out for the same period of time as the person has been unemployed; however, not more than five years, with the exception of persons over 55 years of age for whom the allowance may be received for a maximum period of ten years. - Young people aged who have been unemployed or participated in labour market policy programmes for at least six months. The allowance will be paid out for a maximum period of one year. - Asylum seekers who have been granted residence permits, quota refugees and the families of these groups during the first three years after the residence permits were granted. LAS will apply to the new start jobs. A job and development guarantee for the long-term unemployed and young people will be introduced as well as a reduction of the employer s contribution for young people aged A number of currently existing efforts, such as sabbatical years, bonus jobs and employment training in the regular education system will be abolished. Moreover, a number of authorities will be closed down or reformed. The Swedish Labour Market Administration will be page 1

2 reformed and transferred to a uniform organisation, which will result in the National Labour Market Board and the county employment boards being closed down. (Prop. 2006/07:1) Contact person: Jur.kand. Jenny Welander, jew@msa.se Employee participation in crossborder mergers The so-called participation committee proposes in its report that the regulations on employee information and participation in cross-border mergers of limited liability companies (European Parliament and the Council s directive 2005/56/EC, 26 October 2005) implemented in Sweden by a new act. will be In general, the regulations correspond to those set out in the Act on Employee Participation in European companies. It is proposed that a negotiating body representing the employees shall be established and negotiations about an agreement on employee participation in the overtaking company shall then be initiated. The agreement shall contain certain matters, e.g. the main contents of the employee participation, the procedures to be used and the term of the agreement. (SOU 2006:97) Contact person: Jur.kand. Anna Duvander, adu@msa.se ONGOING DISPUTES OF INTEREST Did Coop Sweden AB have the right to reduce the wages? The Commercial Employees Union ( the Union ) has initiated legal proceedings before the Labour Court against Coop Sverige AB ( the Company ) for violation of the applicable collective bargaining agreement. Currently, the case is at a preliminary stage and the proceedings are likely to commence in March or February next year. The case concerns the Company s entitlement to reduce the salaries for eleven white-collar employees in connection with a re-organisation of the Company s management structure. The starting point, in accordance with general principles of contract law, is that the employer in general is not entitled to unilaterally make amendments to an employee s terms and conditions of employment. Furthermore, alterations may not be made in violation of the applicable collective bargaining agreement either. In this case it is undisputed that the applicable collective bargaining agreement does not allow for any salary reductions. The collective bargaining agreement does state, however, that wages shall be determined individually and differentiated for each individual with special attention to the employee s position. Thus, the decisive question in this case is whether the Labour Court will find that the eleven affected employees have been offered new positions within the Company or not. In terms of employment law, this case concerns what is generally described as renegotiation of the employment contract. The Union argues that the employment positions have not been subject to any major alterations and that amendments only have been made with regard to the employees titles. The Union claims, inter alia, that the new positions contents, official status, duties and requirements are equivalent to those existing prior to the re-organisation. The Company, on the other hand, argues that the eleven affected employees have been offered and also accepted new positions within the Company. The Company alleges that the re-organisation had caused that certain positions disappeared and were replaced by other positions with a lower degree of responsibility. It should be noted that, irrespective of whether the Labour Court finds that new positions have been created due to the reorganisation and that the pay cuts had been made in accordance with the applicable bargaining collective agreement, the Company also has to substantiate that the employees in fact have been offered and accepted the new positions. Further, it should be observed that if the employer wants to change the terms and conditions of employment and the employee opposes to such a change, the only option available for the employer, according to general principles of contract law, is to terminate the existing contract and offer a new employment contract. Termination of an employment contract can, if initiated by the employer, only be made on reasonable grounds. This means that a withdrawal of employment benefits against the employee s requires (i) reasonable grounds for termination of the existing employment contract, and (ii) that the employee accepts the amended employment contract. The latter point necessitates a notice of termination and the amended terms and conditions of employment be submitted to the affected employees. It should also be stressed that consultations with the affected trade unions need to take place with regard to the alteration of employment terms. The implementation of the amendments may under no circumstances be discriminatory. In this case it is undisputable that the Company has consulted with the affected page 2

3 trade union on the re-organisation. Reasonable grounds for termination of the existing employment contract may also exist. However, it is not clear whether a notice of termination had been submitted to the affected employees and whether new terms and conditions of employment had been offered to the employees. We will continue to follow this case and report in a forthcoming newsletter. (AD 2006 no 195) Contact person: Jur.kand. axe@msa.se Sabina Axelsson, Negative freedom of association put to the test by Gothenburg District Court and European Court of Human Rights Freedom of association is part of the fundamental rights and freedoms under the Swedish constitution and embodies the freedom to associate with others for public or private purposes. The Swedish constitution protects freedom of association merely vertically, i.e. against the state or municipalities, but not against private bodies like trade unions or employers associations. Freedom of association is usually divided into a positive and a negative side: the positive one protects in principle the right to form and join associations and the right of such associations to act. Negative freedom of association is defined as the right not to be forced to join or support an association or not to be discriminated against for choosing not to join an association. According to case law, the Swedish Co- Determination Act merely covers positive and not negative freedom of association. Since 1995, the European Convention on Human Rights and Fundamental Freedoms ( the Convention ) has, however, been incorporated into Swedish law. According to case law of the European Court of Human Rights, Article 11 of the Convention protects both positive and negative freedom of association. There are currently two law-suits pending concerning negative freedom of association. The Gothenburg District Court has held a preparatory meeting on 17 October 2006 in a case concerning five women who were not members of a trade union and who were made redundant. Their employer supported by the employers association Almega agreed with the Salaried Employees Union (HTF) and in accordance with the applicable collective agreement on a so-called priority agreement. Had the employer instead applied the Employment Protect Act s principle last in, first out, four of the five women would have stayed. In order to get HTF s approval to depart from the Employment Protection Act s priority rules, the employer paid 50 monthly salaries to be distributed by HTF among those made redundant. The priority agreement s outcome was that the five women were made redundant first while the additional 50 salaries were distributed predominantly amongst redundant trade union members. For example, one woman who had worked for nine years received a redundancy payment of one monthly salary, whereas a trade union member who had worked equally long got nine monthly salaries. The five women were denied the right to negotiate their own redundancy terms because under Swedish law, the priority agreement is also binding for unorganised employees. Represented by the Centre for Justice the women claim damages amounting to between 120,000 and 260,000 SEK both for the economic loss they have suffered and for the distress of having been discriminated against because they chose to not join the trade union. The proceedings at the Gothenburg District Court will be held during (Gothenburg District Court case No T ) There is also a case concerning negative freedom of association currently pending before the European Court of Human Rights. The case concerns the question whether monitoring fees extracted from employees who are not members of a trade union constitute a violation of, inter alia, their negative freedom of association. The five applicants in the lawsuit were not members of a trade union while their former employer was organised in the employers association the Swedish Construction Federation. The employer concluded an agreement with the trade union s local branch Byggettan concerning the monitoring of salary conditions which resulted in the employer being obliged to deduct a monitoring fee from the employees salaries and pay the deductions to Byggettan six times a year. The five applicants requested to be exempt from the deductions because they were not members of the trade union. The Labour Court held that the deductions did not breach the individual applicant s rights under the Convention. Before the European Court of Human Rights, the five applicants and the Swedish Construction Federation complained that their negative freedom of association under the Convention was violated since the fee was tantamount to a forced membership of the trade union and contributed to the general union activities. Further, they claimed that they were required to support the trade union s political and ideological programme through the payment of the fees, and that they did not agree with that programme. The main hearing was held 20 June 2006 and the judgement is awaited around turn of page 3

4 the year. (European Court of Human Rights case no 75252/01 Evaldsson and others against Sweden) Contact person: Rechtsanwältin and EU-Advokat Kerstin Kamp-Wigforss, NEWS FROM THE SWEDISH LABOUR COURT Dismissal based on illness and the employer s obligation to rehabilitate his employees The Labour Court has in several cases considered the question of whether a reduced working capacity, caused by illness, constitutes just cause for dismissal. The starting point is that the sick employee enjoys extended protection against dismissal. An important exception is, however, if the reduction of working capacity is permanent and also of such a substantial nature that the employee is unable to perform work of any importance for the employer. A dismissal may in such a case be executed, provided that the employer has fulfilled his obligation to rehabilitate the employee in accordance with the provisions of the Work Environment Act and the National Insurance Act. This implies, inter alia, that the employer must consider whether it is possible to change the work organisation and thereby facilitate for the employee to remain at his place of work. Another solution could be to provide technical aid equipment. In a case where a welding operator in a small manufacturing company had been on sick leave for 2.5 years due to a repetitive strain injury in his shoulders, he was dismissed on personal grounds based on such illness. The employee challenged the dismissal before the Labour Court, claiming that there was no just cause at hand. The parties agreed that the employee at the time of notice was unable to perform his work as welding operator in the same way as before his sick leave. The employee s ability to perform work for the employer was regarded as permanently reduced. For the Labour Court it was, however, not sufficiently clear which working tasks, if any, the employee did in fact manage to perform. Accordingly, it was also unclear if it was possible to increase the employee s working ability by occupational training, adjustment of his working tasks or by technical aid equipment. Any such uncertainty is a risk which is borne by the employer. Therefore, the Labour Court held that there was no just cause for the dismissal. In this case, it should be noted that a number of rehabilitation measures had in fact been taken. The Labour Court did not express more precisely which additional measures were missing. However, the fact that the employee and his trade union had not been sufficiently involved in the ergonomic investigation seems to be one circumstance that was held against the employer. Further, the court also emphasized that the employer must clarify whether there are any possibilities for the employee to resume his work at the company before concentrating the rehabilitation measures on the possibilities for the employee to get a new job elsewhere. It was of no significance that the welding operator had chosen not to take part in the aforementioned measures as the employer had not finalised the investigation as to whether the employee could resume his service with the employer. Finally, it should be stressed that the employer s obligation to rehabilitation normally is limited to measures that aim at resuming the service with the employer. (AD 2006 no 90) Contact person: Maria Gill, advokat and Professional Development Lawyer, mgi@msa.se Important reasons to transfer an employee against her will? An employee was transferred from her permanent employment as teacher in a school in Knutby in spring 2004, first to a school in Almunge on a fixed-term basis and then to Vaksalaskolan in Uppsala from autumn A collective bargaining agreement including the General Terms AB 01 was applicable between the employer, the municipality of Uppsala, and the Teachers Union, of which the Employee was a member. This agreement included the following provision: When transferring an employee on a permanent basis it should be observed that important reasons must exist if the employee is transferred against his/her will. The Swedish Teachers Union argued that the transfer of the teacher, which took place after the much noted Knutby-murder and the following intense mass media attention, was caused by the teacher being a member of the Filadelfia congregation in Knutby, and that no such important reasons as required by the collective bargaining agreement existed. The Teachers Union thus brought an action before the Labour Court asking the court to oblige the municipality to pay damages to the teacher and the trade union. According to the municipality, the transfer was caused by important reasons referable to the activity of the school in Knutby. A decreasing number of pupils in the school year 2004/2005 and a re-organisation meant page 4

5 that there would no longer exist mixed age groups and that a strict competence requirement for class teachers would apply. The Labour Court held that it was the nature of the provision that in the event of a dispute on its application it was up to the employer to show the circumstances that constituted the important reasons for the transfer. Further, the burden of proving the actual circumstances that were of importance for the decision should lie upon the employer. Since the municipality did not dispute the trade union s argument that this was a permanent transfer which was decided against the teacher s will, the Labour Court only tried the issue of whether the transfer was based on important reasons. The Labour Court held that there would only be a minor reduction in the number of pupils according to a forecast made for 2004/2005; that the number of teachers employed on an annual basis during the school year was nearly the same as last year, and; that the current teacher was replaced by another teacher. With reference to the municipality s statement that the teacher was unauthorized the Labour Court held that the transfer resulted in that she, still an unauthorized teacher, carried out her work at another school in the same municipality. In the light of the above, The Labour Court found that important reasons to transfer the teacher did not exist. The Labour Court held instead that the replacement occurred was due to the teacher being a member of the Filadelfia congregation and the conclusions reached following the Knutby-murder in respect of the values embraced by the teachers of the school. During the trade union negotiation preceding the decision on the transfer to Vaksalaskolan the municipality stated, according to the minutes, that the headmaster has lost confidence in the teacher after the events reported by the employer. According to the Labour Court, it could hardly be doubted that these events referred to the murder and the attempted murder in Knutby. The Labour Court also referred to the fact that the headmaster, in a written statement to the pupils parents dated 16 January 2004 stated, inter alia, that staff might be transferred in order to secure the means of control, the course of study and the observance of the Education Act and that the municipality informed the parents in writing on 28 April 2004 that an independent supervisory committee had examined the school, focusing on value issues and that the municipality, based on these reports, had decided to transfer three persons in this personnel category to other work places. The fact that the actual reason for the municipality s decision could be referred to the teacher s membership in the Filadelfia congregation made the breach of the collective agreement even more serious according to the Labour Court. The teacher was awarded damages amounting to SEK 80,000 while the trade union was granted damages amounting to SEK 50,000. (AD 2006 no 104) Contact person: Jur.kand. Ola Axelsson, oax@msa.se with criticism constituted grounds for dismissal This case concerned the question of whether a sport association had grounds to summarily dismiss an employee who had sent two s criticising members of the association s board. When a case of embezzlement in the association was exposed, differences arose between the employees and the management on how the association should handle this information. The employee sent two s in which he showed his discontent. The first was sent from his own computer to all hockeyclubs that were members in the association with copy to the chairman of the association. This led to his computer being shut down. He then sent another from a colleague s computer. This was addressed to a large group of associations within the Swedish sporting world. On the same day he was suspended from work and two days later he was summarily dismissed. The employee claimed before the Labour Court that the dismissal should be annulled. Under the employment agreement an employee is obliged to be loyal to his employer. Nevertheless, in spite of the loyalty obligation, an employee is entitled to criticize his employer to a certain extent. There are, however, limitations to the right to criticize depending on the employee s position and the criticism may never lead to threats towards the employer. The more senior the position, the higher demands on loyalty may be required from the employer. The Labour Court held that the employee did not in fact have a senior position but his job involved a position of trust at the association. Further, the Labour Court found that the first had an aggressive, offensive and inappropriate tone. The second contained accusations and wording that could be perceived as threatening towards another employee. The employee did not act on impulse and it was particularly aggravating that he had sent the from a colleague s computer. Based page 5

6 on the fact that the information was widely circulated and the effects the s had on the association in creating concern and rumour amongst members and sponsors, the Labour Court found that the employee had seriously neglected his duties towards the association and that he had disregarded his loyalty towards the employer to such an extent that there were grounds for dismissal. (AD 2006 no 103) Contact person: Jur.kand. Anna Duvander, Vagueness with regard to grounds for dismissal and suspension a violation of the duty of negotiation In February 2005 an assistant nurse was dismissed from his employment at a publicly administered elderly care service in Gothenburg. The Employee s trade union filed a claim before the Labour Court to have the dismissal be declared void. The court granted the declaration. However, the City of Gothenburg chose to terminate the employment with reference to section 39 of the Employment Protection Act and paid damages to the employee which led to the dissolution of the employment relationship. Further, the employee was suspended from his employment as of the date of the notice until the date of the Labour Courts judgement. During this time, several negotiations with the trade union had been held, one regarding the notice and two regarding the suspension. The case concerned the question of whether the employer had violated the duty of negotiation by not providing substantial arguments in favour of his case at the various negotiations. The Labour Court held that the employer had violated his duty of negotiation by not providing a sufficient description of the reasons for the termination and the suspension at any of the previous negotiations held between the parties. The court declared that in order to have a meaningful negotiation, both parties must clearly express and motivate their positions in the particular question. The Court found that the party must provide further information for the purpose of elucidating the reasons for the position of the party, e.g. by describing the course of events or identifying the persons affected. The Labour Court held further that the City of Gothenburg was liable for damages to the employee. (AD 2006 no 100) Contact person: Jur.kand. Maria Tholin, mtn@msa.se Discrimination of allergic minister A minister within the Swedish Church applied for a missionary assignment in Brazil. The church considered him not suitable for the position because of his allergy to root vegetables. According to the church, the assignment would expose the minister to a high health risk. The question in this case was basically whether the Church had violated the Prohibition of Discrimination in the Working Life of People with Disabilities Act. It became apparent during the proceedings that the minister had not had any allergic reactions since 2001 and that his allergic reaction when consuming root vegetables consisted of itching and dizziness caused by a fall in blood pressure. It was further found that these reactions could be stopped instantly by the intake of medication. The man s allergy was therefore not life threatening. The missionary assignment in Brazil would not have exposed him to such health risks that an employer has to consider. Consequently, the minister should have been deemed suitable for the work and was in the same or comparable situation as other applicants. The Church had not carried out an objective and individual assessment of the minister s ability to take on the job in question but had instead only undertaken a general judgement with regard to his allergy. The Labour Court held that the Church was guilty of direct discrimination by denying the minister the assignment. (AD 2006 no 97) Contact person: Jur.kand. Sofia Karlsson, sok@msa.se Just cause due to redundancy in kindergarten Due to various deficiencies in the safety arrangements at a private nursery school, several parents decided to withdraw their children from the school. The company that managed the nursery school feared that they would be forced to close down the school and made therefore its only employee redundant. In other respects, however, the company acted in a manner as if it intended to continue the business. They had, amongst other things, applied for individual child care money for the continued operation of the nursery school. The case raised the question of whether a redundancy situation actually existed. The Labour Court held that it normally does not question the employer s need to terminate personnel due to a planned downsizing of the business. Ultimately, it is the employer s own judgment of the need to downsize the business that decides whether there will be redundancies. However, the Labour Court held that when an employer assesses the various circumstances indicating a decreased or an increased need for personnel, he may only page 6

7 take such circumstances into consideration that are absolutely certain. Circumstances that are not certain, cannot be allowed to qualify as sufficient grounds for terminating employment, since this might lead to a situation where employees are made redundant just to be on the safe side. During the course of the proceedings, it had only been shown that the company feared that it might have to close down the nursery school. However, the company had not made any decision or taken any action to that effect. Hence, the Labour Court held that there was no redundancy situation when the employee was terminated. The employee was awarded damages due to unfair dismissal amounting to SEK 60,000. (AD 2006 no 92) Contact person: Jur.kand. Johan Fredriksson, jfn@msa.se Contact Details: STOCKHOLM Magnus Wallander Phone mw@msa.se GÖTEBORG Henric Diefke Phone die@msa.se MALMÖ Madeleine Rydberger Phone mry@msa.se FRANKFURT Christian Bloth Phone cbl@msa.se THE EMPLOYMENT PRACTICE GROUP OF MANNHEIMER SWARTLING WISH YOU A MERRY CHRISTMAS AND A HAPPY NEW YEAR page 7