Sources of regulation
The primary source of termination of employment law is the 1982 Employment Protection Act (EPA). Other legislation details the termination of specific employment relationships, or of specific types of employees. These include the Trade Union Representatives Act of 1974 (TURA), the Equal Opportunities Act, the Measures to Counter Ethnic Discrimination in Working Life Act, the Prohibition of Discrimination in Working Life of People with Disabilities Act, and the Sexual Orientation Discrimination (Employment) Act. The Employment (Co-determination in the Workplace) Act of 1976 regulates the extent to which employers must negotiate with local unions.
In 1983, Sweden ratified the ILO Termination of Employment Convention, 1982 (No. 158).
Scope of legislation
The EPA applies to almost all employment contracts in the private and public sectors. A number of groups fall outside of the jurisdiction of the Act. These are employees who are classified as managers, members of their employers’ family, employed in their employers’ household, and employed with a job creation subsidy (EPA, sec. 1).
Contracts of employment
Employment contracts are usually valid for an indefinite period. Under the EPA, fixed-term and probationary contracts are legal under certain circumstances. These include when (EPA, sec. 1):
- the work is only for a specific season or task, or a fixed-term contact is necessitated by the special nature of the job;
- the contract is for temporary substitute employment, a traineeship, or for employment during a vacation;
- the work is only for temporary periods of high workload (in this case, the contract may not exceed six months during any two-year period);
- the employee is currently receiving a pension, where the employee must retire upon his or her 67th birthday, or another agreed-upon age; or
- the contract is for the period pending the employee’s commencement of compulsory military service lasting for over three months.
A fixed-term employment may otherwise be legal in cases when the contract only applies for a total of twelve months over a period of three years, and no contract period is greater than one month. In these cases, any contracts that conclude after less than one month apply for one month (EPA, sec. 5a).
In addition to governing the legality of specific types of fixed-term contracts, the EPA regulates the use of fixed-term contracts by the employers. With regards to a business that has not previously had any employees, a fixed-term employment contract may only apply for a period of eighteen months over three years (EPA, sec. 5a). Additionally, an employer may not employ any more than five fixed-term employees at any one time. If an employee has been employed as a substitute for a total of three year during the past five years, than employee’s contract is transformed into an indefinite-term contract (EPA, sec.5a). Employers may also utilize contracts for probationary employment, where employees are employed for a limited time not to exceed six months.
Employers may terminate probationary employees at any time (EPA, sec. 6). Such termination, however, must be given two weeks notice. Additionally, the local union to which the employee belongs must be informed of the action. Both the employee and union are entitled to consultation with the employer regarding the termination (EPA, sec. 31).
An employer who decides that he or she does not wish to extend or renew a fixed-term contract must notify the employee of his or her decision at least one month before the expiration of a fixed-term contract. An employee, however, is only entitled to such notification if the employee has been employed for more than twelve months over the past three years. If the period of employment lasts for less than one month, end-of-contract notice is given at the commencement of employment. A seasonal employee whose contract will not be continued must be notified one month before the beginning of the new season (EPA, sec. 15). Such notification must be in writing (EPA, sec 16). At the same time that notice is given, the employer must notify the local union to which the employee belongs. This notification must state the procedure that the employee has to follow if he or she wishes to make the fixed-term contract apply for an indefinite term. The notification must also inform the employee whether or not he or she is entitled to priority benefits with regard to reemployment. Furthermore, the notice must explain that notification is required for the employee to exercise the above rights (EPA, sec. 16). The union and employee are then entitled to enter consultation with the employer regarding the notice (EPA, sec. 30a).
If either party does not wish to continue a probationary employment after the expiry of the probation period, notice must be given, at the latest, upon the expiry of the probation period. Failure to give such notice will result in the employment relationship lasting for an indefinite period.[1]
A fixed-term employee, upon receiving notice of termination, is entitled to a fully compensated leave of absence in order to explore further employment opportunities (EPA, sec.17).
Termination of employment
An employee may resign his or her employment, but the resignation is only valid if the employee gives one-month advance notice, if no other agreements apply. If the employee does not respect the notice period, the employer is entitled to damages for financial losses (Aldercrutz, p. 104). However, if the employer has severely failed to fulfil his or her obligations to the employee, the employee may resign immediately (EPA, sec. 4). This type of resignation is valid if the employer assaults or insults the employee.
If the employee leaves his or her employment without offering any information regarding the reason for leave or intention to return to work, the Labour Court has ruled that the employer must wait two to three weeks before considering the employment to have ceased. If the employer can show that the employee has no intention of returning to work, the employment can be considered to have ended immediately (Adlercrutz, p. 104).
Dismissal
An employer who wishes to terminate a contract of employment may either dismiss with notice, or discharge without notice (summary dismissal) (Adlercrutz, p. 103). If the employer discharges with notice, he or she must have a valid and objective reason for the termination, and it must be related to the employment relationship. Section 7 of the EPA requires that dismissal be for “just cause.” The dismissal can be shown to be for just cause if it was for redundancy, which are those reasons relating to the enterprise, or for reasons that relate to the employee’s person (Adlercrutz, p. 107).
The employer may summarily dismiss his or her employee if the employee grossly neglects employment obligations. According to case law, the following are valid reasons for summary discharge (Adlercrutz, p. 110):
- serious incidents or threats of violence at the workplace;
- serious crimes against the employer’s property;
- sexual harassment of pupils, if at a school;
- activity disloyal to the employer; and
- participation in an illegal strike after orders to cease strike activity have been issues.
A summary dismissal may not be based solely on circumstances known to the employer more than two months before the dismissal, although this prohibition does not apply if the employee requests that the dismissal is delayed, or if there are extenuating circumstances (EPA, sec. 18). The employer may also summarily dismiss an employee if the employee has committed a serious breach of his or her contract.[2]
A number of legal restrictions apply if the employer dismisses an employee for redundancy. The employer is expected to consider whether a redundant employee may be assigned to other work. Additionally, the employer should consider other ways to undergo structural changes without creating employment redundancies. Ultimately, however, the need to reduce costs and the effect of the decision on the workforce should guide the employer’s final decision (European Commission, p. 84).
Despite having the power to determine that redundancy-based terminations are necessary, the employer is not allowed to decide who specifically will be made redundant. Employees affected by the redundancy are assigned to “seniority units” where, within each unit, the most recently hired employees are the first to be terminated. Furthermore, effective operation of the organization is only considered to the extent that the remaining employees must be sufficiently qualified to handle the necessary tasks, after a training period. If an employer has ten or fewer employees, he or she may exempt two employees from termination, who are particularly valuable to the firm’s operation (European Commission, p. 84).
If the redundancy affects five or more employees, or twenty or more employees over a period of 90 days, the 1974 Act on Various Employment Promotion Measures mandates that the employer notify the County Labour Board of the impending redundancy (European Commission, p. 91).
The following are considered valid reasons for termination of employment (Aldercrutz, pp. 108-109):
- reason related to the conduct of the employee (e.g. refusal to obey the employer’s orders[3] and lack of punctuality); however, these offences must be serious in order to constitute just cause;[4]
- if the employee does not cooperate with his or her colleagues;[5]
- incapacity of the employee; however, after the probation period the application of such claims are limited;[6]
- participation in illegal strikes, especially when the employees have refused to comply with a Labour Court order to return to work;
- criminal offences against the employer that show the employee’s general unfitness for the job. Generally, a violent act in the workplace is sufficient for dismissal, while case law has shown sexual harassment not to be, because the employer took no actions to encourage the employee to change his/her behaviour; and
- undisciplined behaviour, only when such behaviour shows the employee to be unfit for the job. Only in egregious cases have refusal to obey orders, late arrival, and absence from work without reason been sufficient grounds for dismissal.
If these circumstances do not apply, the dismissal can be declared invalid, and the employee is entitled to damages (European Commission, p. 45).
A dismissal may not be based on (European Commission, p. 54):
- the employee’s trade union affiliation or activities;
- the employee’s race, sex, ethnicity, religion or belief, disability, or sexual orientation;
- an employee’s pregnancy or parental leave;
- care for dependents;
- military or civil service; and
- leave for educational purposes.
A dismissal based on these circumstances may be declared void by a Labour Court, in which case the employee is eligible for damages. Additionally, a reason is not considered “objective” if it is reasonable to expect that the employer provide work for the employee. Alternatively, the Labour Court, at the request of the employer, may issue an injunction in support of the termination (European Commission, p. 54).
An individual who employs manual workers has the option of laying-off his or her workers. This means that the employer does not assign work to his or her employees, and the employees are not obligated to remain at the workplace, but the employment is considered to continue. There are no legislative restrictions regarding the totality of the lay-off. For example, the employer may reduce an employee’s working hours, or reduce the workweek. When the employer unilaterally decides to lay off his or her employees, the layoff must be for just cause, in that there must legitimately be a work shortage. An employer may not claim that he or she is laying off his or her employees if he or she is not able to re-hire the affected employees within a reasonable time. Similarly, the lay-off period may not be used in order to avoid paying full wages and benefits during a notice period. Case law dictates that lay-offs may not be used to deal with a lasting work shortage. If the workers affected by a lay-of cannot find other work, employers are obligated to pay full wages and offer full employment benefits (Adlercrutz, p. 112).
In cases of termination due to redundancy, an employer who anticipates terminating five or more employees has an obligation to notify the district labour market authority 2-6 months in advance, depending on the number of employees that the employer expects to terminate. When redundancy will likely result in a lay-off, the employer must observe a notice period of one month (Aldercrutz, p. 115).
If the employer compels his or her employee to resign in order to conceal a dismissal, the employee’s action must have been instigated by the employer. In such circumstances, the employer’s behaviour must have been contrary to good labour market practices (European Commission, p. 108).
Notice and prior procedural safeguards
Sec. 7 of the EPA recommends employee’s transfer to a more suitable job in order to avoid dismissals. However, the Co-Determination Act requires that the employer negotiate before deciding and acting on an employee transfer (CDA, sec. 11). A transfer because of an employee’s trade union activity may be in violation of the employee’s rights to freedom of association. A transfer because of neglect of duties may be considered punishment, and is only legal if such punishment has been agreed upon in the collective bargaining agreement (CDA, art. 62).
In case of redundancies, trade union representatives are given priority to continue their employment, if such continuation is especially important for the continuance of trade union activity in the workplace. Any dismissal that takes place contrary to this regulation is declared invalid (TURA, sec. 8).
Sec. 11 of the EPA specifies the minimum period of notice if the employer wishes to terminate the employment relationship:
- two months if the period of employment was between two and four years;
- three months if the period of employment was between four and six years;
- four months if the period of employment was between six and eight years;
- five months if the period of employment was between eight and ten years; and
- six months if the period of employment was greater than ten years.
The employer is obliged to notify the employee of his or her decision to terminate the employment relationship at least two weeks in advance of the notice period, or one week in advance of the notice period if the employee is dismissed summarily (EPA, sec. 30). Additionally, during the notice period, the employee is entitled to receive all employment benefits due during his or her regular period of employment, even the employer does not give him or her work, or offers a job that normally pays less (EPA, sec. 12). Under this provision, if the employee concerned belongs to a trade union, the employer is obliged to inform the local employees’ organization at the same time that he or she notifies the terminated employee.
Sec. 8 of the EPA establishes that notice of termination must be provided in writing and the employer must also inform the employee of the procedure to be followed if he or she wishes to assert that the notice is invalid.
Sec. 9 of the EPA requires that the employer must explain, if the employee requests, reasons explaining the termination. This explanation must be in writing.
The same procedure holds for dismissal with immediate effect. It is worth noting, however, that in Sweden this form of dismissal is unusual because the courts consider such dismissal appropriate only in the event that no other solution is possible.
Special circumstances apply if an employee reaches the age for compulsory old-age pension or, if no pension is available, the employee reaches 67. If the employer wants the employee to retire when he or she reaches such an age, the employer must give a one-month notice. An employee whose pension age is 65 or less is not entitled to more than one month’s notice of termination, nor is he or she eligible for seniority with regards to redundancy. An employer who wishes an employee to retire upon becoming eligible for full disability benefits under the National Insurance Act must give written notice as soon as the employer learns that the employee is eligible for such a pension (EPA, sec. 33).
Severance pay
Currently, there are no laws that govern severance payments upon termination. Collective agreements generally provide for severance payment in the case of termination for economic reasons (European Commission, p. 133).
Avenues for redress
Upon receiving notification that a represented employee will be terminated, the representative union and the employee are entitled to discuss the termination with the employer. Such consultation may only be requested within a week of notice of termination. When the employee or union requests consultation, the dismissal may not be carried out before such consultation is concluded. Similarly, if a dispute arises regarding the validity of the notice of termination, neither the employment terminates until the dispute is resolved, nor may the employee be suspended for the reasons that the notice was given (EPA, sec. 34).
An employee may declare that a termination or dismissal was invalid. According to sec. 40 of the EPA, an employee who wishes to make such a declaration has to notify the employer of his or her intent within two weeks after receiving notice of termination or dismissal. If the employer has not informed the employee of his or her rights to challenge dismissal and to claim damages, the time limit is increased to one month. When such a case comes before the court, the employer has the burden of proof in showing that the dismissal was valid, and is obliged to show the importance for terminating the employee. This demonstration must include a valid reason for why the employee could not have been transferred to a more suitable job (Adlercrutz, p. 118).
When an employee has been summarily dismissed for reasons that would not be valid grounds for the issuance of a notice of termination, the summary dismissal is declared invalid upon application by the employee. A court that receives such an application may order that the employment continue, pending final adjudication of the dispute (EPA, sec. 35). When a court has issued such an order, the employee may not be suspended for the same reason as cited in the summary dismissal (EPA, sec. 37)
When an employee feels that his or her contract has ended illegally, in violation of sec. 4, paragraph 1 of the EPA, that employee has the right to initiate proceedings to declare the contract valid for an indefinite term. Should an employee choose to undertake such proceedings, he or she must inform his or her employer of his intention not later than one month after the end of his or her employment. Upon the employee’s application regarding this matter, the contract in question will be declared valid for an indefinite term (sec. 36, EPA). The court receiving an application for the above matter may order that the employment continue, pending final adjudication of the dispute. (sec. 36, EPA).
If the employer does not give objective notice for termination, the notice is declared invalid upon application of the employee. This provision does not apply if the basis for the challenge to the termination is solely on the grounds that the termination breaches rules regarding priority (EPA, sec. 34). In that case the employee may only receive damages.
Pending resolution of the termination dispute by the parties, a labour court may rule that the employment will terminate at the expiration of the period of notice, at a later time determined by the court, for that the current suspension be discontinued (EPA, sec. 34).
When a court has issued the final order that a notice of termination or summary dismissal is invalid, the employer may not suspend the employee as a consequence of the circumstances that caused the notice of termination or summary dismissal (EPA, sec. 37).
According to sec. 38 of the EPA, the employee is entitled to compensation for damages and pay or other employment benefits to which the employee is entitled. Damages may consist both of compensation for losses and for violation of the EPA, but the total amount of compensation may not exceed the amounts specified in sec. 39 of the EPA. Under sec. 39 of the same Act, if the employer fails to comply with a decision of the court to reinstate the employee the employment relationship is thereby terminated. In such circumstances, the employer has to pay damages to the employee based on the following:
- 16 months’ wages for less than five years’ employment;
- 24 months’ wages for at least five but less than ten years’ employment; and
- 32 months’ wages for ten or more years’ employment.
Where the employee has reached the age of 60 years, the amount is increased to correspond to 24, 36 and 48 months, respectively.
Damages may not be calculated on the basis of a greater number of months than have actually been commenced with the employer. Additionally, if the employee has been employed for less than six months, the amount shall correspond to six months’ wages (EPA, sec. 39).
Employees may claim the right of re-employment by giving notice. If employees are needed, an employee who claims this right have priority during rehiring, to be hired back into their original operational unit and occupation. This right can be used within nine months of dismissal, and is also available to individuals who have only been employed for a fixed time (Adlercrutz, 113).
Generally, an eligible employee must have been working for the employer for over 12 months during the last three years, or working 6 months seasonally over the last 2 years, and be sufficiently qualified for the new employment (Adlercrutz, 113).
Further information
[1] A. Adlercrutz: “Sweden”, in R. Blanpain (ed.): International encyclopaedia for labour law and industrial relations (The Hague, Kluwer Law International, 2002), p. 111.
[2] European Commission, 2006. Termination of Employment Relationships: the Legal Situation in the Member States of the European Union, p. 45.
[3] The refusal to obey has even been considered sufficient cause for summary dismissal (see the International encyclopaedia of labour law (The Hague, Kluwer Law International, 1999), p. 114).
[4] Alcoholism as a disease is not accepted as a valid reason for dismissal (see the judgement in the Social and Labour Bulletin, 1979, p. 182).
[5] This reason is valid only in small undertakings.
[6] International encyclopaedia of labour law, op. cit., p. 113.
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