a newsletter from mannheimer swartling no. 25 november 2009 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 5950 6298 henrik.diefke@msa.se contact persons: Advokat Henric Diefke Göteborg/Stockholm +46 31 355 1699/+46 8 5950 6298 henrik.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 www.mannheimerswartling.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 In this issue of the newsletter, we address a proposal concerning the simplification of the Vacation Act. We also report on a number of interesting decisions from the Labour Court, for example regarding breaches of non-competition restrictions and discrimination. Further, we give details about proposed legislation with reference to the Laval judgment. We would also like to announce that Henric Diefke, our employment law partner in Gothenburg, has been named chairman of the Employment and Pensions practice group and will divide his time between Gothenburg and Stockholm. Proposed new legislation In a bill (2009:10:4) the Swedish government is proposing factual, linguistic and editorial simplifications to the current Vacation Act. The new act, which is proposed to enter into force on 1 April 2010, shall, among other things, include the following: All employees, irrespective of type of employment or working time, shall be entitled to annual leave and vacation pay. However, with regard to employments lasting less than three months (short term employees), there will be a possibility to agree that no annual leave shall be taken during the period of employment. If such agreement is reached, compensation in lieu of annual leave, which according to
the new regulation shall no longer be presumed to be included in the salary for short term employees, shall be paid when the employment terminates. In this context, it should also be mentioned that it is recommended in the bill that employees, unlike previous legislation, shall be entitled to transfer vacation benefits from one employment to another with the same employer if it is clear that the new employment will commence in close connection to the previous. This change will primarily affect fixed-term employees who, through a combination of various types of employment, may be employed with the same employer during a longer period of time. Another proposed amendment provides that employees working at home, employees uncontrolled due to their line of work as well as employees who work part-time or have irregular working hours shall be entitled to the same amount of annual leave as full-time employees. The new act will further clarify how the number of vacation days with vacation pay shall be calculated. New rules will also be introduced both concerning the calculation of vacation pay which is paid in connection with the annual leave as well as the calculation of vacation pay for saved vacation days. Vacation days which have not been used or may not be saved, shall, in accordance with a new proposal, be compensated for with vacation pay within a month calculated from the end of the year. However, this only applies to vacation days exceeding 25 days. Other vacation days that could not be used shall accordingly be carried forward. It is recommended that absence from work because of illness or occupational injury should cease to qualify for vacation pay when the employee has been entirely or partly absent from work during the entire qualifying year, without longer interruptions of being absent than 14 days in a row. The corresponding rule today implies that absence caused by the above stated reasons shall not qualify for vacation pay if the employee has been absent during two qualifying years. Apart from that, it is recommended that all leave with temporary parental allowance for care of children, regardless of type, shall qualify for vacation pay for a maximum period of 120 days and 180 days with regard to single parents (no time-limit at present). contact person: jur kand bita pourmotamed e-post: bpo@msa.se News from the courts question as to whether former employees breached trade secrets act and a non-competition restriction when they started a competing business Three employees ( the Employees ) at an IT-company ( Company A ) terminated their employments and started directly thereafter a competitor company ( Company B ) within the same line of business, in which they, inter alia, developed a similar computer program similar to one which Company A supplies. Company A sued Company B in the District Court and claimed that Company B and the Employees were jointly and severally liable for damages to Company A because they had started a competing business by using trade secrets as well as by breaching the loyalty obligation and the post-contractual non-competition restriction contained in all employment contracts. Company B and the Employees disputed the plaintiff s case and the possible damages. The District Court found that there was no doubt that the information in form of customer lists, co-operation agreements and computer programs with hardware, which the Employees had access to at Company A, qualified as trade secrets. The District Court further held that, despite the fact that Company B had within a short period of time developed a computer program with close similarity to a computer program earlier produced by Company A, there could be other explanations for this than the usage of Company A s source codes or other information. Accordingly, the use or betrayal of trade secrets was not proven. The District Court did not find either that a breach of confidentiality had occurred. The non-competition restriction was according to the court unreasonable with respect to sec. 38 Contract Act as Company A was not required to pay the Employees any compensation during the non-competition period. Further, two of the Employees did not hold such positions in Company A that would normally justify a non-competition restriction. Consequently, a breach of a non-competition restriction had not occurred. The plaintiff s case was dismissed in its entirety. The judgment was appealed but the Labour Court upheld the District Court s judgment. (Labour Court judgment 2009, number 63) contact person: jur kand sofia karlsson e-mail: sok@msa.se question as to whether an employee is liable for damages due to preparing and starting a business that competes with his employer contrary to his employment agreement and the implied duty of loyalty During his employment an employee prepared and started a company along the same line of business as his employer (wholesale of TV sets). He also entered into an agreement with one of his employer s customers on behalf of his own company. Thereafter, the employee gave notice of termination. During the notice period he was summarily dismissed. The employee was charged with gross unlawful interference with the possession of another and breach of trust but finally acquitted in both aspects. The employer s damage claim was separated from the criminal case in order to be dealt with in the civil court. In the civil case, the employer argued that the employee was liable for damages to the employer due to preparing and starting a business that competes with his employer contrary to his employment agreement and the implied duty of loyalty. The District Court approved the employer s claim. The employee appealed and requested that the Labour Court reject the claim. The Labour Court established that (i) the employee had had a position of trust at the employer s company in respect of customer contacts, (ii) the employee had entered into an agreement with the customer during his employment and that this agreement was substantially in compliance with the existing agreement between the customer and employer, (iii) the customer s products were moved from the employer to the employee s new company, and (iv) the employee had probably played a role in that some hourly-paid employees had left the employer and started to work at the employee s new company.
Under the given circumstances, the Labour Court held that the employee had violated his employment agreement and the implied duty of loyalty by starting a business competing with his employer during the current employment, thereby deliberately acting in a way that was intended to cause the employer damage. Further, the Labour Court deemed that there was adequate causality between the employee s behaviour and the employer s damage. The District Court s judgment, by which the employee was held liable to pay SEK 4,000,000 to the employer, was therefore upheld. (Labour Court judgment 2009, number 38) contact person: jur kand kajsa nilsson e-post: knn@msa.se question as to whether the employer violated the parental leave act and breached the collective agreement by not granting a pay-rise to a vicar on parental leave On 1 October 2006, a community employed a person (the Employee ) as assistant vicar on a permanent, full-time employment. From 18 December 2006 until 1 January 2008 the Employee was on parental leave. The community was bound by a collective agreement with a trade union in which the Employee was a member and during February and March 2007 a local salary review was made in accordance with the collective agreement from which the Employee was excluded. The trade union sued the community before the Labour Court and claimed (i) pecuniary damages for loss of pay rise, (ii) general damages for violation of sec. 16 para. 1 no. 5 Parental Leave Act, and (iii) general damages for breach of the collective agreement. The community argued in response that the Employee was not discriminated against because the parties had agreed during the negotiations of the employment agreement that the salary was set at the 2007 salary level. Since the salary included the raise for 2007 the community had neither discriminated nor was in breach of the collective agreement. Another assistant vicar at the same workplace received the same salary as the Employee after the salary review 2007. The community argued that the decision in the salary review was based on salary criteria and the community s aim and action plan which dictated that the two assistant vicars should have the same salary. Accordingly, the Employee s salary would have been set at the same level if she had not been on parental leave. The Labour Court held that parties can agree that salary shall include a future pay-rise, but the employer bears the burden of proof for this since the collective agreement requires an annual salary adjustment for all employees. Given that the employment agreement did not expressly state this, the community had failed to prove that the salary included the future pay-rise. The question as to whether the Employee had been unfairly treated required a comparison with how the Employee would have been treated had she not been on parental leave. The community had budgeted pay-rises for assistant vicars as a group and the other assistant vicar had been granted a certain pay-rise. The community failed to prove that this was agreed upon with respect to the Employee and consequently, the Employee had been unfairly treated. The community argued that the Employee had been excluded because she had been employed for too short time (approximately
2.5 months) before going on parental leave in order to be able to be evaluated for a pay-rise. The Labour Court considered that this confirmed that the Employee was excluded based on her parental leave. Since the collective agreement states that employees on parental leave shall be included in the annual salary review, the community had also breached the collective agreement. The Labour Court found the community liable for general damages amounting to SEK 40,000 and SEK 1,200 in pecuniary damages to the Employee and SEK 35,000 in general damages to the trade union. (Labour Court judgment 2009, number 56) contact person: jur kand ulf von hofsten e-post: uvh@msa.se question as to whether a pregnant woman was subject to discrimination on grounds of sex or subject to less favourable treatment under the parental leave act when she was denied to attend a course taking place one week before the expected childbirth A pregnant employee applied for attending a course that was going to take place one week before the expected childbirth. The employer rejected her application and argued that the newly acquired knowledge would be difficult to firmly establish because the employee was going to be absent from work for quite a long time after the course. The Equal Opportunities Ombudsman (now Equality Ombudsman) brought a law-suit and claimed that the employer had firstly violated the prohibition of discrimination on grounds of sex in the Equal Opportunities Act (now Discrimination Act) and, secondly, the prohibition of less favourable treatment in the Parental Leave Act. The Equal Opportunities Ombudsman requested that the Labour Court hold the employer liable for damages to the employee. The employer was of the opinion that employees do not have an unconditional right to competence development. This was rather a question that would fall under the employer s right to lead and distribute work. Further, the employer argued that the decision to reject the employee s course application was based on the fact that the employee would be absent for a longer period of time and that this had nothing to do with her sex, her pregnancy or that she was going to be on parental leave. A man who intended to be absent from work for a longer period of time would have been treated in the same way. The Labour Court held that the employee had reasonable grounds to believe that she would be allowed to attend the course in question because she was encouraged to develop her competence in that field and look for a relevant course at a competence development meeting with her division manager a couple of months earlier. The Labour Court was thus of the opinion that the employee had been subject to less favourable treatment on grounds of her parental leave when she was denied to attend the course, even though a man s application would have been rejected in a similar situation as well. The employer had accordingly violated sec. 16 Parental Leave Act and was held liable to pay damages amounting to SEK 25,000 to the employee for the violation she was subject to. (Labour Court judgment 2009, number 45) contact person: advokat yvonne ivarsson e-post: yiv@msa.se
question as to whether, inter alia, a company is required to offer other available jobs in order of priority as well as whether the offers of other available jobs were reasonable A company in the ventilation and sanitation engineering business operating in several different places all over the country downsized an operation which resulted in a redundancy of approximately half of the employees. However, the company was able to offer these employees other available jobs in places nearby. Two employees, both with a longer period of employment than many other employees, rejected the offer to transfer and were subsequently dismissed due to redundancy. The trade union brought a claim against the company before the Labour Court and claimed damages for violation of the last in-first out priority rules. According to the trade union, the company should have carried out the transfers in line with the priority rules which would have entailed that the two dismissed employees with a longer period of employment in the company would have been entitled to stay. The trade union asserted that the company first should have determined the order of priority and thereafter should have transferred employees with a shorter period of employment to jobs in another place. The trade union further argued that the offers to transfer had been unreasonable. The company on the other hand was of the opinion that it was not required to transfer to available jobs in accordance with the order of priority. The company argued that the offers to transfer were reasonable and that the employees had rejected them without acceptable reasons. The dismissals could have been avoided if the employees had accepted the company s offer to transfer. The Labour Court established that the employer first is required to carry out a transfer to other available jobs at the company under sec. 7 Employment Protection Act before he must consider the order of priority among the employees pursuant to sec. 22 Employment Protection Act. Consequently, there is no obligation for the employer to distribute available jobs among the employees by order of priority in the event of a transfer under sec. 7 para. 2 Employment Protection Act. The Labour Court found that as there was no reason for the company to apply the priority rules, they were not violated. The company s offers to transfer were reasonable due to commuting distance and there were no acceptable reasons for the employees to reject such offers. Accordingly, the Labour Court dismissed the trade union s action. (Labour Court judgment 2009, number 50) kontaktperson: jur kand kajsa nilsson e-post: knn@msa.se Other proposed new legislation with reference to the laval judgment On 5 November 2009 the Swedish government made the decision on a legislation proposal (2009/10:48) concerning measures in response to the European Court of Justice ( ECJ ) judgment in the Laval case (see our Newsletter no 20/2008). In the Laval case the ECJ responded to two questions on the interpretation of EU law which the Swedish Labour Court had referred to the ECJ (see also Newsletters no. 17/2008 and 18/2007). The ECJ established that the EU Treaty and the so-called posting of workers directive preclude (i) that trade unions in a Member State in which the posting of workers directive has been implemented are entitled to means of industrial action as taken against Laval, and (ii) an application of sec. 42 para. 3 Co-Determination at Work Act (Lex Brittania). According to the legislation proposal, the following conditions must be met before trade unions may take industrial action to bring about a collective agreement with a foreign company that posts workers to Sweden: 1 that the terms of the collective agreement over which the trade union takes industrial action: (a) correspond to terms in a central industry-wide agreement in Sweden which is applied to equivalent employers; (b) do not regulate other areas than minimum pay and other minimum conditions in certain areas; and (c) are more beneficial for employees than statutory terms. 2 that the employer cannot show that the employees already have terms which are equally beneficial as the minimum terms in the relevant central industry-wide agreement. Industrial action that is taken without meeting these conditions is regarded as unlawful under the Co-Determination at Work Act. The Swedish Work Environment Authority is proposed to assist in providing information on terms of the collective agreements that may be applicable when posting workers to Sweden. The trade unions shall submit the terms of the collective agreement over which the trade union intends to take industrial action. Further, an employer posting employees to Sweden shall not be required to comply with the provision in the Working Time Act that stipulates that employees must be notified of the working time schedule at least two weeks in advance. It is proposed that the amendments to the legislation enter into force on 1 April 2010. The Labour Court s decision in the Laval case (A 268/04) will be passed on Wednesday, 2 December 2009. contact person: eu-advokat kerstin kamp-wigforss e-post: 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. Mannheimer Swartling has offices in Stockholm, Gothenburg, Malmö, Helsingborg, Frankfurt, Berlin, Moscow, St. Petersburg, Shanghai, Hong Kong, Brussels and New York.