Employment law and pensions

Transcription

1 a newsletter from mannheimer swartling no. 34 june 2013 Employment law and pensions editor: Jur kand Lena Schreiber 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. In this issue of the newsletter, we address a number of interesting decisions from the Labour Court concerning, inter alia, the exemption under the Employment Protection Act for employees in managerial positions, discrimination and unfair treatment of employees on parental leave, the question as to who has the burden of proof in relation to the so-called two-month rule, as well as interesting court cases concerning violations of the Act on the Protection of Trade Secrets and a noncompetition undertaking in an employment agreement. We also address a review initiated by the government of the rules regarding protection of whistleblowers. News from the courts question as to whether a terminated employee had a management position and thus was excluded from the employment protection act An employee in a small company had been terminated. The employer had not followed the provisions regarding termination in the Employment Protection Act (the Act ). The main issue was whether the employee, considering his position, duties and benefits, had a managerial or comparable position and thus was excluded from the application of the Act. There were special circumstances in the case. The company had been founded by the terminated employee and the CEO. After the company was created, the ownership structure changed. The company was, by the time of the employee s termination, owned by a parent company in which the employee held shares. The employee was not only a board member and the CEO of the parent company, but also the chairman of the board in the employing company.

2 The Labour Court emphasized that according to preparatory works to the Act and case law, the exception for management positions should be interpreted narrowly. When deciding whether the exception applies in a particular case, it is essential to understand how the management is organized and exercised in practice. To be excluded from employment protection, an employee must have not only managerial duties but also remuneration and other employment conditions normally applicable to management positions. The Labour Court stated that, generally, a small company can have only one employee with a management position. However, in this case, the court could not rule out the possibility that both the CEO and the terminated employee had such management positions. At the company s inception, the employee and the CEO agreed that they should own the company together, that they should have the same influence and that both should be working in the business. The change in the ownership structure had not affected any of these circumstances. Furthermore, after the structure change, the employee had continued to work independently without direction from the CEO, and his power to decide and influence the business had differed significantly from other employees. The Labour Court held that the employee had a management position and that the Act was not applicable to his terms of employment. Particularly in small companies, the case seems to slightly increase the categories of employees that are exempt from the Act. The Labour Court has already in a previous case excluded more than one employee with a management position in a small company (Labour Court judgment 1979, number 60). However, that company had around 35 employees which should be compared to only eight employees in this case. The judgment also seems to differ from another case (Labour Court judgment 1998, number 65) where the Labour Court stated that a law firm with around 40 employees constituted such a small company that it should not be possible to exclude more than one employee. question on where to place the burden of proof when applying the two-month rule in the employment protection act A personal assistant who worked at a home-help service company had been dismissed for sexual harassment in the workplace. The employee claimed that the dismissal was invalid because the employer had known about the incidents for more than two months and therefore, according to the Employment Protection Act s socalled two-month rule, was prohibited to dismiss on these grounds. The Labour Court emphasized that the question of burden of proof relating to the two-month rule had not been explicitly addressed in preparatory works or case law. In the judgment, the court mainly focused on which party had better access to the evidence. The Labour Court placed the burden of proof on the employee. If the burden of proof had been placed on the employer, the company would have had to prove that all its representatives, two months before the employee s dismissal, had no knowledge about the incidents. It is important to note that the Labour Court did not establish a general principle of burden of proof relating to the two-months rule but rather that it in this case is most appropriate to place the burden of proof on the employee. It is often very difficult to prove to not have knowledge of something. However, the court did not specify when the burden of proof might be placed on the employer, or how such assessment should be done. (Labour Court judgment 2013, number 12) jur kand daniel stålberg dast@msa.se (Labour Court judgment 2013, number 4) jur kand daniel stålberg dast@msa.se

3 question as to whether an employer s nonfulfillment of an agreement was to be considered discrimination as well as unfair treatment under the parental leave act A woman had been hired as a legal advisor at a debt-collecting company for a probationary period. Soon thereafter the woman told her employer that she was pregnant. The probationary employment turned into a permanent position. According to the woman, she and the CEO of the company had agreed on a salary increase that would take effect when she received the permanent position. After it was known that she was pregnant and that she would take parental leave, she was told by the company s group manager that she would not receive a salary increase. The Equality Ombudsman (Sw. Diskrimineringsombudsmannen) sued the company on behalf of the woman, claiming economic damages and compensation for discrimination/general damages. The company disputed that the parties had entered into an agreement on a salary increase and that the woman had been discriminated against. The company argued that, because of the company s poor financial condition, none of the other employees in the company had received a salary increase. The Labour Court held that a binding agreement had been reached; the company, by breaching this agreement, had disfavored the woman. The court found that a prerequisite for direct discrimination under the Discrimination Act is a connection between the discrimination and the gender; unfair treatment under the Parental Leave Act, requires a connection between the unfair treatment and the parental leave. Both the Discrimination Act and the Parental Leave Act contain special provisions on burden of proof, where those who allege discrimination must show facts that give reason to infer that discrimination has occurred, whereupon the burden of proof shifts to the party who has allegedly discriminated. The Labour Court held that the woman, by showing that the group manager had expressed dissatisfaction over her pregnancy, had demonstrated a probable connection between the notification that she would not receive a salary increase and her pregnancy and expected parental leave. According to the government bills of the applicable laws, it is sufficient that either gender or parental leave is one of a number of reasons for the employer s actions; it does not need to be the only reason, or the decisive reason, for the employer s decision. The company failed to establish that it was only due to the company s poor financial situation that the woman did not receive a salary increase. Rather, the presented evidence, an communication between the woman and the CEO, was an indication to the contrary. The company was ordered to pay economic damages and compensation for discrimination/general damages of 50,000 SEK to the woman. (Labour Court judgment 2013, number 18) advokat sofia pedersen sok@msa.se question as to whether alcohol testing was in violation of law and good practice on the labour market An employer (a transport company) had ordered its employees to comply with the alcohol policy of a customer company. The policy required randomly selected drivers who entered the customer company s factory area, to be tested for alcohol. The Swedish Transport Workers Union took action against the employer, claiming damages for among other things, violation of the applicable collective agreement. The union claimed that by ordering its employees to comply with the customer company s policy, the employer had, in violation of the collective agreement, given instructions which were in violation of law and good practice on the labour market. To determine whether the employer s actions violated law and good practice on the labour market, the Swedish Labour Court weighed the conflicting interests (the intrusion upon the employees personal integrity and the safety interest the employer aimed to satisfy) against each other. As regards the intrusion upon the employees personal integrity, the Labour Court concluded, based on, among

4 other things how the alcohol testing was set up, that the tests did not constitute noticeable infringement. Regarding the employer s interest in complying with the customer company s policy, the Labour Court began its reasoning by noting that, although the customer company had a significant and justified interest in conducting the alcohol tests, this interest could not be attributed to the employer. However, the Labour Court continued by stating that, in view of the nature of the employer s business (transport of goods), the employer could in this case not solely consider its own interest but could also take the interests of customer companies into consideration. As the customer company was an important customer of the employer, with a legitimate safety interest, the Labour Court determined the employer s interest in complying with the customer company s policy to outweigh the employees personal integrity interest. Thus, the Labour Court concluded, the alcohol testing did not violate law and good practice on the labour market, and the Swedish Transport Workers Union s action was dismissed. Currently, there is no legislation in Sweden that addresses the issue of an employer s right to test employees for drugs and alcohol. Therefore, the Labour Court s reasoning, centred around what is admissible in relation to law and good practice on the labour market, may have relevance even when claims are not based on a collective agreement. (Labour Court judgment 2013, number 19) jur kand tobias normann tono@msa.se question regarding damages due to unfair dismissal An employee who had been on maternity leave had after her leave been offered a new position with different working hours. The employee brought an action against her employer, claiming that she had been dismissed because she did not get back her previous duties and working hours or other equivalent and reasonable working conditions. The employer denied that the employee had been dismissed, arguing, among other things, that the employee had terminated her employment herself, by turning down the employer s offer of an equivalent position. The Parental Leave Act prohibits discrimination against employees on parental leave. According to EC legislation, employees on parental leave are entitled to return to their previous work, or work of equal value, at the end of the leave, on terms no less favorable to the employee. The parties agreed that the new position entailed changed tasks and working hours: from daytime on weekdays to evenings on weekends. The Labour Court found that the new position entailed a reduction in working hours, which normally requires agreement between the parties. To change employment conditions if no such agreement is reached, the employer needs to terminate the existing employment contract and offer employment on new terms, which requires just cause for dismissal. In this case, the employer had not claimed that there was just cause for dismissal. The Labour Court stated that the new offer was clearly on less favorable terms compared to the work the employee had prior to maternity leave and that the offer meant that the normal working hours where reduced. This entailed that the new position was not equivalent with the previous position. Therefore, the employee had been entitled to reject the offer without jeopardizing her employment. Furthermore, the position had not ceased when the employee declined the offer, as claimed by the employer. The Labour Court noted that when the employee was offered the new position the employer stated that the employee either could come back to the offered position or not at all. The employer treated the employee s counteroffer as a resignation. According to the Labour Court, the employer s actions constituted a dismissal of the employee by the employer. Because there was no cause for the dismissal, the employer was required to pay general damages of SEK 120,000 and economic damages of approximately SEK 80,000. (Labour Court judgment 2013, number 22) jur kand lena schreiber lew@msa.se

5 question on former employee s breach of the act on the protection of trade secrets and a non-competition undertaking A manager at a factoring company (the Factoring Company ) terminated his employment to commence employment at a competitor. His former employment contract included a non-competition undertaking for one year after the termination of the employment. After the former employee had started his employment with the new employer, the Factoring Company filed a lawsuit against him for among other things breach of the Act on the Protection of Trade Secrets (the TSA ) and breach of the non-competition undertaking. The Factoring Company also filed a lawsuit against the new employer and claimed damages for breach of the TSA. Breach of the Act on the Protection of Trade Secrets and the duty of loyalty The Factoring Company was of the opinion that the former employee had breached the TSA by, among other things using and/or revealing the Factoring Company s customer register and other customer information after the termination of his employment. At trial, it emerged that at least 73 of the Factoring Company s customers had been contacted on behalf of the new employer. The Labour Court found that the customers had been contacted in alphabetical order, suggesting that the former employee had access to the customer list, a trade secret of the Factoring Company. The Labour Court therefore held that the former employee had deliberately and systematically used information regarding the customers of the Factoring Company and that he consequently was liable for damages under the TSA. As for the new employer s liability, the Labour Court held that a condition for employer s liability under the TSA is that the employer understands, or ought to understand, that a trade secret has been subject to an action under the TSA. The Factoring Company could not show that anyone other than the former employee had understood or ought to have understood that trade secrets were being used in violation of the TSA. The Labour Court held, however, after a reasoning regarding employer s vicarious liability for damages caused by employees in the performance of their duties, that an employer may be held liable if the employee in his or her employment uses or reveals trade secrets in violation of the TSA. According to the Labour Court, vicarious liability should apply at least when the usage or revelation, takes place in order to gain the employer s interest. Given that the former employee had been granted considerable freedom to develop methods for recruiting new customers and had then used the Factoring Company s trade secrets to do so, the Labour Court held that the new employer was also liable for damages under the TSA. The Labour Court thus held the employer liable by referring to provisions in tort law regarding vicarious liability, which may be regarded as an extension of third-party liability. The former employee and the new employer were ordered to pay SEK 3,200,000 in economic damages and SEK 300,000 in general damages to the Factoring Company. Question of breach of the non-competition undertaking The employee had a non-competition undertaking in his former employment contract which prohibited him from taking employment with a competitor for one year after the termination of employment. It was undisputed that the former employee had breached the non-competition undertaking as written. The question was whether the non-competition clause was unreasonable under section 38 of the Contracts Act. The Labour Court found that the wording of the non-competition undertaking prohibited the former employee, for a relatively long period, from working in a line of business where he had been working the last six years. The employment contract did not include compensation for the employee during the restricted period. Although the Factoring Company had an interest in protecting their existing customer relationships, the scope of the non-competition undertaking was broad and was seemingly designed to impede market competition. The Labour Court held that the undertaking was unreasonable under section 38 of the Contracts Act. One interesting aspect of the ruling was that the Factoring Company tried in its claim to limit the scope of the non-competition undertaking, arguing that the undertaking should be read to restrict the former employee from contacting or allowing contact, with known customers of the Factoring Company for one year. The Factoring Company argued, that the undertaking, if subjected to such limitations, would be reasonable. The Labour Court found that a noncompetition undertaking should be judged by its wording and meaning at the termination of employment. In an earlier judgment (AD 2010 number 27), the Labour Court had allowed a former employer to, after the termination of employment, limit a non-competition undertaking in a similar manner as the Factoring Company tried to do. In this case, the Labour Court raised serious doubts about assessing the reasonableness of the current undertaking after the restrictions that the Factoring Company had done after the termination of the employment. Unlike the previous Labour Court judgment 2010 number 27, the Labour Court held in this case that it is not possible to change the scope of a non-competition undertaking after employment has been terminated. The Labour Court consequently found that the non-competition undertaking was unreasonable and therefore invalid. (Labour Court judgment 2013, number 24) advokat sam seddigh sms@msa.se

6 Other investigation of stronger protection for whistleblowers An investigator was appointed by the government on 14 February 2013 (Dir. 2013:16) to review protections for employees that report various forms of misconduct, irregularities or criminal acts, socalled whistleblowers. The investor s mandate includes reviewing the current legal regime, analysing how the protections for whistleblowers should be strenghtened and suggesting measures to increase those protections. In that connection the investigator also needs to consider interests of the companies, such as protection of reputation and protection of commercial interests. Today, Swedish law does not contain any rules specifically aimed at protecting whistleblowers. However, there are a number of legal provisions that nonetheless provide protection for individuals reporting misconduct or irregularities. Employees are principally protected through the requirement for just cause for dismissal set forth in section 7 of the Employment Protection Act, the general legal principle of good labour practice requiring management to be exercised reasonably and in accordance with good practice and through the general legal principle bastubadarprincipen which gives an employee the right to have certain far-reaching transfers made by the employer tested in court. Justice of the Supreme Court Per Virdesten is appointed investigator and a final report shall be presented by 22 May advokat ola axelsson oax@msa.se Mannheimer Swartling is the leading business law firm in Sweden. By combining the highest legal competence with industry knowhow, the firm offers professional legal advice with added value. We are a full service firm with an extensive international practice and assignments all over the world. The firm have a turnover of SEK 1,2 billion, and approximately 600 employees.