Employment law and pensions

a newsletter from mannheimer swartling no. 28 september 2010 Employment law and pensions editor: EU-Advokat Kerstin Kamp-Wigforss kka@msa.se legally responsible: Advokat Henric Diefke Göteborg/Stockholm +46 31 355 1699/+46 8 595 062 98 henric.diefke@msa.se contact persons: Advokat Henric Diefke Göteborg/Stockholm +46 31 355 16 99/+46 8 595 062 98 henric.diefke@msa.se Advokat Madeleine Rydberger Malmö +46 40 698 58 70 mry@msa.se Dr. Christian Bloth Rechtsanwalt, Frankfurt +49 69 974 012 20 cbl@msa.se 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 focuses on the latest case law and discusses an interesting judgment by the Court of Justice of the European Union on salary increments for pregnant employees as well as several decisions from the Labour Court. These deal with withdrawal of the employee s own notice of termination, duty of loyalty under a collective agreement, assessment of the so-called sauna-bathing principle as well as the reasonableness of a noncompete clause. Finally, we report on the Supreme Court s decision on the petition for a new trial and complaint of miscarriage of justice in the Laval-case. News from the courts question on salary protection for pregnant employees The case concerned a request for preliminary ruling from the Court of Justice of the European Union (the Court of Justice ) regarding salary protection for a stewardess who had been transferred to ground service because of pregnancy. The employee had been transferred to office work to avoid the exposure to physical agents such as ionizing and non-ionizing radiation (which may cause foetal damage) that occurred in her normal role. As a consequence of the temporary transfer the employee did not receive certain of the supplementary allowances that she had received in her previous position, resulting in a lower overall salary. The employee brought judicial proceedings against her employer, Finnair, at the Helsinki District Court on the ground that Finnair was not entitled to reduce her salary as a consequence of the temporary transfer and that the salary reduction constituted discrimination

pursuant to the Pregnant Workers Directive (Council Directive 92/85/EEC) and Finnish legislation. Finnair claimed that the action should be dismissed on the ground, inter alia, that the employee had not been guaranteed the additional allowances and that the additional amount she had received was dependent on how many and which flights she attended. The Finnish court turned to the Court of Justice and requested a preliminary ruling regarding the interpretation of the Pregnant Workers Directive. In its request, the Finnish Court asked whether the directive must be interpreted as meaning that a pregnant employee, who has been temporarily transferred to a post in which she performs tasks other than those which she performed prior to that transfer, is entitled to the same pay as she received on average before the transfer. The Finnish court also requested a ruling on whether the type of allowances received by that employee and the reasons for the payment of those allowances while performing her previous duties were relevant in that respect. The Court of Justice established that a pregnant employee who is granted leave from work or temporarily transferred to another position because of her pregnancy is entitled to the same remuneration to the extent it consists of basic monthly salary and the salary components and supplementary allowances relating to such factors as seniority, length of service and professional qualifications. However, the Court of Justice found that the employee was not entitled to keep the parts of her salary or supplementary allowances that were based on her performance of specific functions in particular circumstances and which were intended essentially to compensate for the less favourable working conditions involved. This implies that an employee who has temporarily been transferred to another position is not necessarily entitled to compensation which corresponds to her average compensation before the transfer. (Court of Justice of the European Union, C-471/08, Sanna Maria Parviainen against Finnair) contact person: jur kand lena wåglöf e-mail: lew@msa.se question on notice of termination by the employee An employer informed representatives of the local trade union branch of its intention to dismiss a specific employee. The reason for the dismissal was that the employee s husband had been sentenced to imprisonment for, inter alia, stealing from the employer s premises and making an unlawful threat against another employee. The employer believed that the employee had given her husband access to a security pass and code needed to enter the premises and had also contributed to the threat. Later the same day the trade union representatives had a meeting with the employee and informed her about the matter. However, the unlawful threat was not mentioned at that time. At the meeting the employee decided to terminate her employment. Two weeks later she contacted the employer through her legal counsel and asked for withdrawal of the termination, to which the employer would not agree. The employee brought an action against the employer, on the grounds, inter alia, that the employer had provoked her to terminate the employment in a manner that (under Swedish law) equated 2

to a dismissal by the employer. In the alternative, it was argued that there were no reasons for the employer to reject the withdrawal of the termination. The employee demanded that the dismissal be nullified and that she receive general damages or, in the alternative, general and pecuniary damages and payment in lieu of vacation pay as well as the right to bring an action in a subsequent lawsuit for lost earnings relating to the period after the main proceedings. The District Court declared the termination null and void and obliged the employer to pay general damages and compensation for the employee s court costs. The employer subsequently appealed to the Labour Court. The Labour Court found it indisputable that it was the employer s decision to initiate dismissal proceedings that caused the employee to terminate her employment. To equate the employee s termination with an action by the employer requires, however, that the employer s measure is contrary to good practice in the labour market or is otherwise inappropriate. The Labour Court did not find that to be the case here. The Labour Court accepted the employer s statement that the purpose of the meeting with the trade union representatives was to initiate dismissal proceedings according to Section 30 Employment Protection Act (Sw. lagen (1982:80) om anställningsskydd), that the employer intended to inform the employee the day after and notify the local branch of the trade union and summon the employee to a deliberations meeting, as well as that the employer was prepared to reconsider the decision if the local branch of the trade union after discussion with the employee had information that demonstrated extenuating circumstances. According to the Labour Court, it would have been appropriate had the employer s representative made direct contact with the employee for a discussion but in any case it could not be considered inappropriate or contrary to labour market practice that the contact at that point in time was made by the trade union representatives instead. The Labour Court emphasized in particular that the trade union representatives were experienced and that it could be assumed that the employer had reason to trust that they would act in the best interest of the employee. As a general rule, an employee is bound by his/her own notice of termination and cannot withdraw it. Exceptions may be made if there are specific circumstances that prove that the notice was not seriously meant and that the opposite party had realised or should have realised this. An example from case law is that of an employee who gives notice of termination clearly in great haste following heated discussion and who then withdraws the notice shortly afterwards. The Labour Court noted, inter alia, that about two weeks passed in this particular case before the employee withdrew her notice and that the employee therefore should be considered bound by her notice of termination. Consequently, the Labour Court reversed the District Court s judgment by dismissing the employee s action. It was held that the employee should compensate the employer for the court costs in the District Court and the Labour Court. (Labour Court judgment 2010, number 41) contact person: jur kand ola axelsson e-mail: oax @msa.se question on employee s breach of loyalty according to applicable collective agreement An employee was employed as personal assistant and group manager in a company that provides services for personal assistance to disabled people. The company was a member of Almega, the Association of Private Care Providers (Sw. Föreningen Vårdföretagarna). The employee was a member of the Swedish Municipal Workers Union (Sw. Svenska Kommunalarbetareförbundet). Both organisations are bound by a collective agreement. During the employee s employment with the company she registered a partnership to provide the kind of services provided by the employer and, inter alia, entered into an agreement with one of the employer s customers to take over that customer s care. According to the agreement, the assignment would not commence until the employee had terminated her employment with the employer. The employer claimed that the employee had acted disloyally according to the collective agreement and referred to the following provisions. The confidence between employer and assistant is based on mutual loyalty and mutual confidence. The assistant shall during the term of employment and thereafter observe secrecy regarding the employer s business/the customer s affairs and observe secrecy concerning information on individuals that has come to the assistant s knowledge during her/his employment and whose disclosure may be detrimental to the individual or affiliated person. and The assistant is not permitted to carry out work or directly or indirectly pursue any financial business competing with that of the employer. The employer was of the opinion that the employee had violated the duty of loyalty by: i) having registered the partnership; ii) having pursued a competing business by undertaking and carrying out assignments for a municipality; iii) entering into the agreement to take-over the care of the employer s customer; iv) marketing the partnership s business without the employer s knowledge; v) failing to report to the employer that the company was about to lose a customer; and vi) using customer related information referable to the employment without the employer s consent. The Labour Court noted that the provisions in the collective agreement have the same contents as the general duty of loyalty in an employment relationship with the exception that the employee is also obliged under the collective agreement to observe a certain discretion subsequent to termination of the employment. The Labour Court found, unlike the District Court, that the employee had during the term of employment with the employer violated the duty of loyalty in the collective agreement as regards items iv) and v) above by concluding an agreement with the employer s customer and by failing to report the matter to the employer. The Labour Court noted that it does not make a difference that the assignment started after the termination of the employment since the purpose of the agreement had been that the employee s partnership was going to take over the employer s customer. The making of the agreement was considered to have been done in order to cause the employer damage and was regarded as highly disloyal. Further, the employer had a special interest in being informed of the fact that the customer was considering leaving the employer before the employee s partnership took over the customer s care. The employee had also violated the duty of loyalty by failing to report the employer s risk of losing a customer or to take any action to inform the employer about the concluded agreement. Consequently, the employee was 3

found liable to pay damages to the company pursuant to Sections 54 and 55 of the Co-determination at Work Act (Sw. lagen (1976:580) om medbestämmande i arbetslivet). According to the Labour Court s final judgment, the reasonable amount of damages was set at SEK 40,000. (Labour Court judgment 2010 number 42) contact person: jur kand cecilia lönn e-mail: loc@msa.se question on whether a drastic transfer of a bodyguard had occured An employee had a fixed-term employment with the Swedish Security Service (Sw. Säkerhetspolisen, SÄPO) as bodyguard to the Swedish foreign minister. During a business trip the employee lost her temper when stopped at the security control at London Heathrow Airport and became embroiled in a dispute with the security staff. This caused a delay that resulted in the foreign minister having to travel to Stockholm without a bodyguard. After the incident the employee was transferred to another position. The Swedish Policemen s Union (the Union ) brought an action against the State. The case dealt principally with the following questions: i) Had the employee been subject to a drastic transfer for which there were no acceptable reasons (i.e. in contradiction with the principle imposed by the Labour Court in 1978 in the so-called sauna-bathing case (Sw. bastubadarmålet))? ii) Did the transfer constitute an unlawful disciplinary sanction pursuant to Section 32 of the Co-determination at Work Act (the Act )? iii) Had the State unlawfully caused the employee s sick leave and thereby incurred liability for economic loss? iv) Was the transfer resolved and executed before the consultations according to Section 11 of the Act were finalised? The Labour Court made the following assessment: i) The Labour Court found that the fact that the employee was transferred for personal reasons from a responsible and varied position as the foreign minister s bodyguard to unqualified office work under different employment conditions and with lower salary had such a major impact that the transfer could be tried legally. Further, it was established that the employee s behaviour at London Heathrow Airport was unprofessional and that she had forgotten her main task, i.e. to guard the foreign minister. In view of the above, the Labour Court was of the opinion that the employee was unsuitable for the work as a bodyguard. Accordingly, there were acceptable reasons for the transfer. ii) The Labour Court noted that there was no reason to believe that the transfer was caused by any other motive than the employee s inappropriate behaviour at London Heathrow Airport and that the transfer therefore did not constitute an unlawful disciplinary sanction for the purpose of punishment as claimed by the Union. iii) The Union alleged that the State by its negligent behaviour to transfer and to warn the employee as well as to hand over the employee s matter to the prosecutor had caused the employee s depression, anxiety and finally post-traumatic stress symptoms as well as sick leave as a consequence. The Labour Court stated that damages could only be paid if the measures taken by the State had been unlawful, which was not the case. iv) The Court noted that a permanent transfer within the scope of the work obligations qualifies as an important change for the employee which must be negotiated pursuant to Section 11 of the Act. Such negotiation may take place in an informal manner but it is a minimum requirement that the opposite party is aware that it is a negotiation. It was quite clear in this case that the transfer took place before the formal negotiation had been finalised, however the State claimed that there had been a co-operation process with the Union prior to the transfer. The Labour Court was of the opinion that the State had failed to make it clear to the Union that the co-operation process was to be considered as a negotiation and that there were no special reasons for deciding on the transfer before the negotiations were finalised. Therefore, the Labour Court held that the State should pay damages to the Union for violation of the obligation to negotiate. (Labour Court judgment 2010, number 52) contact person: jur kand sofia karlsson e-mail: sok@msa.se question on non-compete clause in employment agreement An employee left her employment and commenced employment at a company operating within the same field of business as the former employer. During her employment at the company the employee worked with three customers who had previously engaged her former employer. The employee was obliged under her employment agreement with the former employer not to solicit the former employer s existing customers for a period of five years after the termination of the employment, and the employment agreement made provision for a fine against the employee on breach. The former employer was of the opinion that the contacts with the company s customers involved a breach of that non-compete clause and that as a consequence, a fine should be issued. In the employee s view, the clause in question was unreasonable, partly because it restricted the options open to her to earn her living and partly due to the difficulty of knowing who the former employer s customers are, as well as due to the long prohibition period and the size of the penalty. It follows from the Swedish Contract Act (Sw. lagen (1915:218) om avtal och andra rätsshandlingar på förmögenhetsrättens område) that a non-compete clause that refers to the period after the termination of an employment is valid and binding only in so far as it is reasonable. The assessment of what is reasonable shall, among other things, be based on the employer s motive behind restricting the competition, the length of the non-compete clause and whether or not the employee has obtained any compensation for his/her undertaking. When considering the question of whether the clause in this case should be deemed reasonable, the Labour Court initially established that the clause did in fact have a legitimate purpose since its intention was to protect the employer against a former employee who encourages the transfer of the employer s customers to a new employer. The Labour Court found, however, that the fact that customers within that field of business (sales of financial services) can engage 4

several different companies within the same business sector in parallel (or alternately), has an impact when evaluating what weight to attach to the employer s interest in the general assessment of the non-compete clause s validity. In the light of the fact that an application of the clause would significantly reduce the employee s employment opportunities within the same field of business (i.e., practically, it could be compared to a mere prohibition of competition), that the prohibition period was longer than what could be deemed normal practice and since the employee had not received reasonable compensation for the inconvenience caused by the clause, the Labour Court ruled that the clause was unreasonable and thus invalid. (Labour Court judgment 2010, number 53) contact person: jur kand bita pourmotamed e-mail: bpo@msa.se Other supreme court rejection of petition for new trial and complaint over miscarriage of justice in laval-case On 6 July 2010 the Swedish Supreme Court rejected the petition for a new trial and complaint over miscarriage of justice by the trade unions Swedish Building and Public Works Trade Union (Sw: Svenska Byggnadsarbetareförbundet) and its division 1 as well as the Swedish Electricians Trade Union (Sw: Svenska Elektrikerförbundet) regarding the Labour Court s judgment of 2 December 2009 (the socalled Laval-case, Labour Court judgment 2009 number 89). The Labour Court had held that these trade unions must pay to Laval un Partneri Ltd ( Laval ) damages amounting to SEK 550,000 for the unlawful industrial action and approximately SEK 2,000,000 in legal costs (see our Newsletter no. 26/2010). The trade unions invoked chapter 58, sec. 1, para. 1 no. 4 as well as chapter 59, sec. 1, para. 1 no. 4 Code of Judicial Procedure and claimed that the application of law forming the basis of the judgment was manifestly inconsistent with statute and that a grave procedural error occurred in the course of the proceedings that can be assumed to have affected the outcome of the case. The trade unions contended in particular that: there were no legal grounds for imposing damage liability on private legal entities on the basis of an infringement of article 49 EU-Treaty, there was no reason to compare private legal entities with the State with regard to damages and to impose retroactive damage liability on private legal entities, it was a gross error to classify the trade unions infringement of EU law as clear-cut, it was a gross error to apply Swedish law contrary to its wording and not to require negligence for imposing damage liability on the trade unions, in particular since they (when the industrial action took place) followed Swedish law. Further, the trade unions claimed that the Labour Court had relied on the wrong language version of the preliminary ruling of the Court of Justice, had misunderstood the preliminary ruling and had explained it in the wrong way. Finally, it was a gross error to fail to obtain a new preliminary ruling from the Court of Justice with regard to the question of the trade union s damage liability. The Supreme Court was of the opinion that there were no grounds to believe that the Labour Court s application of law was manifestly inconsistent with statutory provision, since the Labour Court s judgment in detail accounted for the rules and principles which had been applied in the case, including the Court of Justice s case law in that area. Neither did the Supreme Court find any reason to believe that the Labour Court s assessment otherwise contained an application of law which was manifestly inconsistent with statutory provision. Finally, the Supreme Court found that no miscarriage of justice had taken place. (Supreme Court no. Ö 2181-10) contact person: eu-advokat kerstin kamp-wigforss e-mail: kka@msa.se 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. 5