Cirio Law Firm is a Swedish law firm based in Stockholm, providing legal advice in all areas of business law for national and international clients.
The firm was originally founded in 1918 but adopted the name Cirio in 2019 out of a desire to create a law firm of the new era. Cirio aims to be a long-term and sustainable strategic partner for both clients and employees. Based on modern values and methods, we strive to combine brilliance in legal advice with care for our clients and talents.
Cirio has a transactional focus but provides advice in all areas of business law relevant for its clients. We have a strong reputation and deep industry knowledge and technical understanding of conducting business in our sectors: Life Science, Digitization & Technology, Energy & Infrastructure Projects and Real Estate.
Cirio has approx. 130 employees and the capacity to take on any assignment for clients within the broader field of business law, including employment law.
SWEDISH LABOUR LAW IN A NUTSHELL
APPLICABLE LAWS AND Legal sources of Swedish labour law
In Sweden, the employment relationship is highly regulated and the parties in the labour market play an important role in forming employment conditions.
The main sources of employment regulation are statutory laws, collective bargaining agreements (CBAs), individual employment contracts and general legal principles.
The labour laws can be divided into individual employment laws and collective labour laws. Key laws include the Employment Protection Act, which provides robust employment protections for employees, with an exemption for senior managers, and the Co-Determination in the Workplace Act, which governs union relations and CBAs.
CBAs are traditionally centralized, industrywide agreements concluded between employers or employers’ associations and trade unions, at either the national or local level. CBAs allow the parties to the CBA to agree on deviations from statutory laws and normally regulate working hours, overtime compensation, minimum wages and other workplace issues. CBAs also govern mandatory pension and insurance schemes for employers bound by the CBA. It is voluntary for employers to sign up for a CBA, but trade unions have a right to take industrial actions against employers not bound by a CBA to establish one. Approximately 90 percent of the total workforce in Sweden is covered by a CBA.
Employment agreements and benefits
Employment agreements can be either oral or written. However, employers are obligated to provide written information on the main employment terms within seven days from the first day of employment and, therefore, it is customary that employment agreements are in writing.
Employment agreements apply for an indefinite period, unless otherwise explicitly agreed. The parties can also agree that the employment shall start with a probationary period of up to a maximum of six months. During the probationary period, both parties may end the employment subject to two weeks’ notice. No specific reason for the termination needs to be given.
There are three forms of permitted fixed-term employment: special fixed-term employment, substitute employment, and seasonal work employment. Special fixed-term employment may be used for a maximum of 12 months (in total) during a five-year period.
There are no statutory minimum wages under Swedish law, but many CBAs stipulate minimum wages. Thus, if the employer is not bound by a CBA, the employer and the employee are free to agree on the salary level. There is no obligation for employers to pay pension contributions in addition to those included in the social security contributions paid by the employer, unless the employer is bound by a CBA. It is, however, common that employers provide additional occupational pension benefits for their employees as part of the total remuneration package.
WORKING HOURS, rest periods AND OVERTIME
In Sweden, the maximum working time is 40 hours per week. Employees are entitled to 11 hours of rest within each 24-hour period, and 36 hours of rest within each seven-day period. Night work requires a CBA or special permission from the Swedish Work Environment Authority. Certain employees, e.g., senior executives, may be exempt from these working hours restrictions under certain conditions.
Overtime is allowed with a maximum of 50 hours per calendar month and a total of 200 hours per year. In exceptional circumstances, another 150 hours of overtime per year may be permissible. There is no statutory overtime pay, but many CBAs include such provisions. It is common practice that employers provide up to five additional vacation days per year in lieu of overtime compensation.
VACATION, SICK LEAVE AND PARENTAL LEAVE
Employees are entitled to a minimum of 25 paid vacation days per vacation year (plus public holidays). Employees are entitled to four consecutive weeks of vacation during June to August, unless otherwise agreed, and they may save up to five paid vacation days per year for five years. Vacation pay is accrued during the accrual year and is used in the subsequent vacation year.
During sick leave, employers must pay 80% of the employee’s salary for the first 14 days, with state benefits available thereafter.
Parents have generous rights to time off for taking care of their children. Parental pay is paid by the Swedish Social Insurance Agency (not by the employer) for a maximum of 480 days (in total) per child. 90 of these days are reserved for each parent.
TERMINATION OF EMPLOYMENT
An employer who wants to terminate an employment needs to have “just reason” for the termination. Just reasons can be either (i) personal reasons (such as poor performance, misconduct, etc.) or (ii) redundancy.
Termination due to personal reasons is generally difficult and must, in most cases, be preceded by supportive or corrective measures and clear warnings. The employer also needs to investigate if there are relocation possibilities before termination may be justified.
Termination due to redundancy covers all reasons not relating to the specific employee, such as economic, technical, organizational or other business-related reasons. Generally, the employer’s reasons for a reorganisation cannot be challenged in court. When selecting employees for termination, the employer must follow a seniority principle, which means that employees with longer terms of employment have priority to remain employed over employees with shorter terms of employment. When terminating employment due to redundancy, a certain process must be followed, including union consultations, and the employee will normally have a preferential right to re-employment if there are open positions within nine months from the end of the employment.
Minimum statutory notice periods range from one month to six months, depending on the length of the employment. These notice periods can be extended by individual contracts or CBAs. During the notice period, the employee is entitled to salary and all other benefits, even if placed on garden leave. Payment in lieu of notice is not permitted. There is no statutory severance pay in Sweden.
If an employee commits a material breach of his or her obligations under the employment agreement, e.g., engaging in competitive business, theft, maltreatment, or disclosing business secrets, termination without notice may be justified. However, this possibility is only available in exceptional cases. The employer also needs to follow a certain procedure before finalizing such termination. Unlawful terminations can result in obligations for the employer to pay high damages to the employee and his/her trade union. It is, therefore, highly recommended to seek legal advice before terminating an employee to avoid unnecessary financial exposure.
Non-Discrimination
Sweden has non-discrimination laws that are applicable in the realm of Swedish labour law. These laws aim to prevent discrimination in employment on various grounds, e.g., race, ethnicity, gender, age, disability, religion and sexual orientation.
Employers are legally obligated to ensure that their hiring, promotion, and employment practices do not discriminate against employees or job applicants based on these protected characteristics. Additionally, there are laws in place to promote equal pay for equal work, regardless of an individual’s gender. Swedish labour laws also include provisions to protect employees from harassment, sexual harassment and victimization and ensure reasonable accommodations for individuals with disabilities in the workplace. Violations of these laws can result in obligations for the employer to pay damages to the employee.
Restrictive covenants
Restrictive covenants are not prohibited under Swedish law, however, they may be modified or set aside by Swedish courts if deemed unreasonable. There are certain factors that the court takes into account in its assessments, such as the scope of the restrictive covenant, the length of the restricted period and whether the employee receives compensation or not. There is also a CBA regulating the use of non-competition clauses in employment agreements, which has a normative effect on the Swedish labour market and should, thus, be regarded when drafting or assessing enforceability of non-competition clauses.
Transfer of undertakings
In Sweden, when there is a transfer of undertaking or part of an undertaking, specific rules, outlined in the Swedish Employment Protection Act and the Co-Determination in the Workplace Act, apply.
A transfer of undertaking occurs when a company, or part of a company, changes ownership, typically through mergers, acquisitions, or outsourcing. Under these rules, employees’ employment contracts and conditions are automatically transferred to the new employer on unchanged employment terms, unless the employee opposes having his or her employment transferred to the new employer. This means that the new employer must honour the terms and conditions, such as salary and other benefits, that were previously agreed upon with the original employer. Also, any CBA with the original employer will transfer to the new employer, unless terminated prior to the transfer.
Both the transferor and the transferee are obligated to conclude union consultations before the transfer may take place. This applies regardless of whether they are bound by CBAs or not.
The Swedish Union System and Union Negotiations
Sweden has a highly-organized and well-structured system for trade unions and CBAs. CBAs may be agreed upon at national or local (company) levels. Trade unions play a crucial role in shaping working conditions, wages, and benefits across different industries. Employees have a legal right to freely join unions without fear of discrimination or retaliation, and employers can join employers’ associations.
The CBA system requires employers to engage in consultations with trade unions on major decisions that impact employees, especially when significant changes, such as restructuring, layoffs, or outsourcing, are involved. The obligation to consult ensures unions have a say before decisions are made, but the unions normally have no veto right. Employers without CBAs also have certain consultation obligations, e.g., before taking a decision on termination due to redundancy or transfer of undertaking.
