Act on Actions against Discrimination in Working Life due to Ethnic Origin, Religion or Other Belief

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1 NO. 21 OCTOBER 2008 EDITOR: Jur kand Jenny Welander Wadström 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 Newsletter EMPLOYMENT LAW AND PENSIONS In this issue of the newsletter, we will be addressing the new Discrimination Act which will be entering into force on 1 January 2009 as well as a number of interesting decisions made by the Labour Court over the last few months. For example, in three separate decisions, the Labour Court has scrutinized the concept of transfer of business and questions relating to collective agreements that may arise in connection with a transfer. In addition, one of the Labour Court s decisions addresses the issue of whether the imposition of a stringent language requirement constituted discrimination. NEW LEGISLATION New Discrimination Act In Newsletter No. 19 of October 2007 we mentioned the Government s plans to formulate more consolidated discrimination legislation. The Riksdag has now adopted a new Discrimination Act, which will enter into force on 1 January The new Discrimination Act will replace the following discrimination acts. Equal Opportunities Act Prohibition against Discrimination Act Act on Actions against Discrimination in Working Life due to Ethnic Origin, Religion or Other Belief Prohibition against Discrimination in Working Life due to Functional Disorder Act Prohibition against Discrimination in Working Life due to Sexual Orientation Act In the future, the grounds for discrimination included in the current discrimination acts will be governed in the consolidated legislation. In addition, two new discrimination grounds have been added; cross-gender identity or expression and age. The discrimination ground of cross-gender identity or expression was explained in the preparatory works as: (i) a person s mental gender, i.e. how a person experiences their gender; and (ii) how a person expresses his/her social gender, for example with clothing, body language, make-up or hair style. The concept is characterised by a cross-gender element, which means that it also includes conditions beyond or outside what we normally mean by gender. The discrimination ground includes situations where somebody does not identify themselves as a woman or a man, and that somebody demonstrates that they belong to another gender than the one they consider their own through their clothing or otherwise. The discrimination ground has no sharp demarcations. The intention is that anyone identifying or expressing themselves as a transvestite or intersexual individual should be able to invoke the prohibition against discrimination. The prohibition against age discrimination complies with the Working Life Directive in EC law (2000/78/EC). Age refers to a person s achieved length of life and means a prohibition against discrimination due to high as well as low age. However, there are a few exceptions to the prohibition in question. For example, age as an actual requirement for a new employment could constitute an exception. Another exception is that it will still be permissible to apply age limits for right to pension benefits, survivor s benefits or disability benefits in individual agreements as well as in collective agreements. It will also be allowed to discriminate due to age if the decision has a legitimate purpose and the means used are appropriate and necessary to achieve the purpose. This last mentioned exception means that it is still permitted to use age criteria in collective agreements as regards minimum wages, extended vacation and notice periods, since the age requirement for page 1

2 such conditions has a legitimate purpose. On the other hand, an employer s desire to maintain a homogeneous age structure is not considered an acceptable reason to refuse somebody employment. As before, direct as well as indirect discrimination is prohibited. Employers contravening the discrimination legislation will be ordered to pay discrimination compensation to the person subjected to discrimination. The new Discrimination Act will also, to some extent, apply outside the labour law area. A newly merged public authority the Discrimination Ombudsman will supervise compliance with the law. This means that the current four public authorities dealing with discrimination will disappear. The new head of the Discrimination Ombudsman will be Katri Linna, who currently holds the office of the Ombudsman against Ethnic Discrimination. The Discrimination Ombudsman will be entitled to pursue a claim on behalf of a person who feels that they have been discriminated against. Certain interest groups will also be entitled take legal action. It should be mentioned in this context that the Swedish Labour Court (the Labour Court ) will have a different composition in discrimination cases under the Discrimination Act. The Labour Court will be competent with five members, of whom only two have been appointed by both sides of industry. If the parties so request, the case should be tried by seven members. (Prop. 2007/08:98 and prop. 2007/08:72) Contact person: Jur kand Ronak Moradi, e- mail rom@msa.se NEWS FROM THE LABOUR COURT Three court-decisions regarding transfer of business Transfer of business pursuant to section 6 b of the Swedish Employment Protection Act In the event of a transfer of business, all employees who relate to the transferred business are, under section 6 b of the Swedish Employment Protection Act (the LAS ), entitled to be transferred to the acquirer with unchanged terms and conditions. The provisions governing transfer of business in section 6 b of LAS are based on the so-called EC Acquired Rights Directive. The European Court of Justice (the ECJ ) has construed the concept of transfer in detail and held, among other things, that it is to be a question of the transfer of an organised economic entity which retains its identity during and after the transfer. The issue of whether a relevant transfer pursuant to section 6 b of the LAS exists is to be established by an overall assessment. The ECJ held in the Spijkers judgment that seven criteria would constitute the basis of this assessment: 1. the type of company or business; 2. whether the company s tangible assets have been transferred or not; 3. the value of the intangible assets transferred at the time of the transfer; 4. to what extent employees have been acquired by the acquirer; 5. whether customers have been acquired or not; 6. the degree of similarity of the business operations before and after the transfer; and 7. whether and how long the business was dormant. The Labour Court has, in two separate cases, recently adjudicated whether the transfer of services from one subcontractor to another constitutes a relevant transfer. Was a switch of recruitment agency a relevant transfer? A company which provided fork lift services within the forestry industry (the Company ) had commissioned a subcontractor for the staffing of the fork lift operations. The subcontractor terminated the agreement with the Company and the employment contracts with twenty-three fork lift drivers due to redundancy. Thereafter, the Company entered into a new recruitment agreement with a recruitment agency for the hiring of fork lift drivers. The recruitment agency had employed ten of the twenty-three fork lift drivers who had been made redundant by the original subcontractor. Neither the Company nor the recruitment company had applied the rules governing transfer of business under section 6 b of LAS. The trade union which represented some of the fork lift drivers who were not employed by the recruitment agency brought an action against the Company and the subcontractor before the Labour Court in which the question of whether the rules governing transfer of business were applicable to the situation were adjudicated. page 2

3 The Labour Court considered the more detailed purport of the undertakings which the recruitment agency had with respect to the Company and reached the conclusion that the recruitment agency had not intended to assume a greater responsibility than to provide a number of fork lift drivers at the Company s disposal where the Company, among other things, was entitled to carry out the work management. Thus, it was purely a question of personnel hire. The Labour Court referred to ECJ case law and in particular to the Jouini case, and held that, for example, parts of the administration must also be transferred in order for a relevant transfer to be deemed to have occurred. This had not occurred. In the light of an overall assessment, no ongoing economic entity had been transferred to the recruitment agency and thus a relevant transfer pursuant to section 6 b of LAS had not occurred. (AD 2008 nr 51) Was a switch of cleaning contractor a relevant transfer? A hotel had entered into a service agreement with a cleaning company. The cleaning company terminated the agreement whereupon the hotel entered into a new agreement with a different cleaning company. The first cleaning company, due the termination of the contract with the hotel, made some employees redundant. Once the notice period had expired, two of the employees had once again started working at the hotel, but this time with the new cleaning company. The trade union with which the new cleaning company had a collective agreement brought an action against this cleaning company before the Labour Court on behalf of a member who had not received employment at the new company. According to the trade union, a business transfer pursuant to section 6 b of LAS had taken place when the latter cleaning company took over the cleaning contract, which entails that all employment relationships should have been transferred from the former cleaning company to the latter. The Labour Court noted that the majority of the employees had not been employed by the new cleaning company and thus had not been transferred. Neither had the supervision of the work nor any other part of the administration been taken over by the new cleaning company. The single fact that two employees had been able to continue working at the hotel did not entail that the transfer of such an organised group of employees as would constitute an economic entity had occurred. Thus, a business transfer pursuant to section 6 b of LAS had not occurred. (AD 2008 nr 64) Collective agreements in connection with business transfers section 28, Swedish Codetermination in the Workplace Act Section 28 of the Swedish Co-determination in the Workplace Act (the MBL ) contains provisions governing what effect a transfer of business pursuant to LAS entails for the collective agreements which the companies concerned may be bound by. Where both the transferor and the acquirer are bound by the same collective agreement, or where neither is bound by any collective agreement, no problems arise. If only the transferor, but not the acquirer, is bound by a collective agreement, the transfer of business entails that the transferor s collective agreement is transferred to the acquirer which thereby becomes bound by this collective agreement in applicable parts. If the transferor and the acquirer are bound by different collective agreements, the transferor s collective agreement is not transferred to the acquirer. However, in such a case the acquirer is obliged to apply the terms and conditions of employment pursuant to the transferor s collective agreement to the employees which are taken over from the transferor for an interim period of one year. Accordingly, the acquirer may thus be obliged to apply different collective agreements to its employees during this period. In a newly adjudicated case, the Labour Court has considered whether this is permissible even when the transferor s collective agreement is less advantageous than that of the acquirer. Should the collective agreement rules which are most advantageous to the employee be applied? A company had transferred a catering business to another company and the employees had been transferred with the business pursuant to the rules on transfer of business under section 6 b of LAS. For a period of one year, the acquirer had continued to apply the transferor s collective agreement to the employees that had been transferred together with the business. The transferor s collective agreement was less advantageously formulated than that which was applied by the acquirer which entailed that the employees who had been transferred from the transferor had terms and conditions of employment which were page 3

4 inferior to those of their new colleagues at the acquirer. The trade union, which the employees that had been transferred along with the business were members of, brought an action before the Labour Court and alleged that the company was in breach of the collective agreement because it had not applied the acquirer s collective agreement to the transferred employees. According to the trade union, the provision governing the application of the transferor s collective agreement for an interim period of one year was only applicable when the transferor s collective agreement was more advantageous than that which the acquirer applied. The Labour Court held that the trade union s claim lacked support in the wording of section 28 of MBL. The question was then whether there was support to be gained in other legal sources which, in certain situations, would entail the application of the provision in any other manner than that which is clear from the wording. According to the preparatory works, the purpose of the one year interim rule was to make the transfer from one employer to another as smooth as possible for the employee. However, the legislator appears to have based its reasoning on the presumption that, as a rule, the awaiting terms and conditions entailed a deterioration and that the rule appears to entail a protection against deteriorations. The fact that the rule in some cases could entail a hindrance to the improvement of the terms and conditions of employment does not appear to have been a subject of consideration during the legislative drafting process. The Swedish legislator had not left any room for the interpretation that the new employer, despite the wording of section 28 of MBL, should be obliged to apply any collective agreement other than that of the transferor as far as the transferred employees were concerned. Nor could it be considered that any support for obliging the employer to always apply the most advantageous terms and conditions of employment could be gained from EC law. The relevant EC law stated no more than that it should be avoided that those employees who are transferred in conjunction with a business transfer receive less advantageous terms and conditions. Thus, the company had followed the applicable rules and the trade union s case was dismissed. (AD 2008 nr 61) Contact person: Lucas Geisler, lkg@msa.se Ethnic discrimination during the recruitment process? A company offering pilot training sought a substitute for a receptionist. Two women applied for the position; the first woman was of Swedish origin and the second ( SL ) was Algerian. The company chose to employ the woman of Swedish origin. The Ombudsman against Ethnic Discrimination commenced proceedings in the Labour Court and claimed general damages primarily on the basis of direct discrimination and, in the alternative, on the basis of indirect discrimination. The Labour Court held that the Act on Actions against Discrimination in Working Life due to Ethnic Origin, Religion or Other Belief was applicable. According to this act, an employer may not treat a job applicant unfairly by treating him or her worse than the employer treats any other person in a comparable position insofar as the unfair treatment is directly connected to ethnic origin (direct discrimination). In addition, an employer may not treat a job applicant unfairly by applying a provision or a criterion which appears to be neutral but which, in practice, specifically treats unfairly any person of a particular ethnic origin (indirect discrimination). However, this does not apply where the unfair treatment can be justified on the basis of a legitimate purpose and the means are proportionate to the objective of the unfair treatment. The Labour Court first adjudicated whether direct discrimination had occurred, i.e. whether SL was in a comparable position with the successful applicant and whether there was a link between the fact that she was unsuccessful and her ethnic origin. It was common ground that SL and the successful applicant had equivalent formal qualifications. However, the employer alleged that SL, in contrast to the other applicant, did not possess the personal qualities which were required for the job and was thus not in a comparable position with the successful applicant. Among other things, good communication skills were deemed to be an important personal characteristic for a receptionist. The Labour Court held that the company s assessment of the suitability of the persons concerned had included an assessment of SL s deficiencies in the Swedish language. Accordingly, there was a link between the fact that SL had not been offered the job and the manner in which she spoke Swedish. However, according to the Labour Court, it had been apparent in the case that the successful applicant had been deemed to page 4

5 have an advantage in terms of personal suitability. Thus, the applicants were not in a comparable position and direct discrimination had not taken place. The Labour Court then went on to consider whether SL had been indirectly discriminated against through the company applying a criterion (to speak perfect Swedish) which, in practice, treated those persons for whom Swedish was not their mother tongue unfairly. It was common ground that a receptionist had to have good language skills although the issue was whether the company s requirement had been disproportionate to the duties required of a receptionist. The Labour Court took the view that the company had demonstrated that, in practice, it had applied a language requirement which appeared objectively justified and which was set at the correct level in order to perform the duties of a receptionist. It had also been proven that SL failed to achieve this standard. The language requirement was also considered to be appropriate and necessary in order to ensure that the duties were performed well. The company had thus been entitled to impose the relevant language requirement and indirect discrimination had not taken place. (AD 2008 nr 47) Contact person: Jur kand Maria Henningson, hnm@msa.se Validity of transfer A systems administrator had been transferred to a position as janitor. The trade union claimed that under his employment contract the employee was not obliged to work as a janitor and that the employer was liable in damages as a result of the transfer. According to the trade union the transfer was such a far-reaching change of the employee s conditions of work and employment that he had been relieved of his position in a manner that was equal to a dismissal or termination. The Labour Court found that the consideration of the issue of whether a janitor s duties are covered by the employee s obligation to work or not must be made on the basis of his individual employment contract or the applicable collective agreement. A comparison between the terms of work and employment of a systems administrator and that of a janitor should thus be made. The Labour Court found that even if the duties were different in several respects, it was evident from the evidence presented that the duties were of a fairly routine nature in both positions. In the employer s salary descriptions the duties as systems administrator and janitor had also been valued quite similarly. In summary, the Labour Court found that the employee s duties had changed as a result of the transfer, but that the changed duties were not obviously less qualified than the previous duties. In addition, the new duties belonged to the same collective agreement as the previous duties and the employee s conditions of work and employment were unchanged in other respects. In light of this, the Labour Court held that under his employment contract the employee was also obliged to work as a janitor and thus he could not be deemed to have been dismissed from his employment as claimed by the trade union. Alternatively, the trade union claimed that the transfer had been made on personal grounds and had been so far-reaching that acceptable reasons were required and that no such reasons existed. According to the trade union, the transfer was thus in breach of the collective agreement existing between the parties. In this respect, the Labour Court referred to Labour Court judgment 1978 No. 89, where the Court stated that transfers brought about by causes which can be related to the individual employee personally and which result in particularly far-reaching effects in view of duties as well as employment benefits and employment conditions, could be tried legally in a similar manner to dismissals. Such a particularly far-reaching transfer was only possible, according to this judgment, if the employer had acceptable grounds for the action. In the current proceedings, the Labour Court stated that the consideration of to what extent a transfer results in farreaching effects to the employee must take place based on objective grounds, i.e. not primarily based on the individual s interests. In that context great significance should be attached to the question of whether the salary and other terms of employment had become less favourable. The Labour Court found that the employee s employment benefits had not changed, that the working hours and salary were the same, that he belonged to the same collective agreement and that the duties in both cases appeared to be of a fairly routine nature. Accordingly, the transfer could not be considered to have resulted in such far-reaching effects required for a transfer to be tried legally. (AD 2008 nr 63) Contact person: Jur kand Henrik Rosenqvist, hro@msa.se page 5

6 Damages due to breach of the Protection of Trade Secrets Act and violation of the duty of good faith Two employees at a company had been in contact with the company s customers, both during and after their employment, with a view to solicit these customers business to a newly established company. The company s customer register and customer file had been used to get into contact with the customers. The company claimed damages due to loss of profit. The cause of action was primarily that under the Protection of Trade Secrets Act the company would be entitled to damages since it had incurred damage as a result of the employees use and disclosure of trade secrets during, as well as after, their term of employment. Alternatively, the company stated that the employees had violated the underlying duty of good faith in their employment contracts, since they had taken measures to prepare competing business by, among other things, registering their own company and taking contact with the employer s customers during the period of employment. The Labour Court found that the customer register in question as well as the customer file should be regarded as trade secrets. However, as regards damages due to disclosure or use of trade secrets during employment, no damages could be awarded since it was not proven that the company s customers had been contacted with a view to solicit them. Nor could the company demonstrate any financial loss. Nor could damages be awarded according to the Labour Court due to the disclosure and use of trade secrets after the termination of employment, since there were no exceptional reasons, which is a requirement under the Protection of Trade Secrets Act. This conclusion was based on the fact that the employees had only contacted a very limited number of customers compared with the total number included in the customer register. In addition, the Labour Court held that it could not be excluded that the customers would still have engaged the newly established company due to their ties to the employees. Hence, since the company s competitiveness had not been negatively affected to an appreciable extent, there were no exceptional reasons to award damages against the employees. Finally, the Labour Court held that damages due to violation of the duty of good faith could not be awarded since the company had not been able to demonstrate any financial loss. (AD 2008 nr 59) Contact person: Jur kand Bita Pourmotamed, bpo@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 page 6