What does the “new EPA” entail?

On 8 June, Sweden’s parliament decided on the new rules for Sweden’s Employment Protection Act (EPA). The “new EPA” thus comes into force on 30 June 2022 and will start to apply on 1 October 2022. What do the new rules mean? Our guest blogger Ingrid Clementson, a lawyer specialising in employment law, explains the new regulations.

There have been many discussions over the years about how the EPA could be changed in terms of security, employment transition and employment protection. In January 2019, a political agreement was struck, the so-called January agreement, whereby the parties agreed that employment law should be modernised and subsequent to which a number of investigations have been conducted.

The January agreement stated, however, that if the union and employers’ organisations reached an agreement, this would form the basis of the parties’ proposals. In December 2019, the Confederation of Swedish Enterprise, the Swedish Trade Union Confederation and the PTK (the council for negotiation and cooperation) signed a declaration of intent to reform the employment law and since then an agreement in principle has been proposed, which is the basis of the new EPA.

The union and employers’ organisations will soon adopt the so-called framework agreement, which contains deviations from the EPA. Note that the change itself is a comprehensive package that includes the introduction of basic public support for employment transition and skills. The employment law reform will achieve the aim of protecting employment by introducing rules on employment protection together with a system for skills development and employment transition, i.e. increased employability. This article, however, looks at the changes in the EPA only.

Summary of the changes:

• Objective grounds replaced by objective reasons. Termination of employment due to objective reasons refers to termination due to a shortage of work or personal reasons. The new law does not involve any changes in what is deemed a shortage of work in this context. However, there will be changes regarding personal reasons, in the context of termination for objective reasons. One change is that in future it will be sufficient that the employer has previously submitted one redeployment offer (at present several offers are often required).

• Changes in the rules on order of priority for terminating employment: at present the principle of last-in, first-out applies to all companies except for small businesses. Small businesses with up to 10 employees can currently exempt two employees from the order of priority. Small businesses have been able to choose to a greater extent who will stay when making redundancies due to a shortage of work. The new rules mean that all companies will now be able to exempt three employees from the order of priority.

• General fixed-term employment is being replaced by special fixed-term employment and the rule for converting fixed-term employment into permanent employment is changing. For employers, this means a fixed-term employee becomes a permanent employee faster (in 12 months) and people with fixed-term employment can qualify for preferential rights to employment faster.

• Full-time employment contracts shall be standard. As an employer, you need to provide an explanation in writing for why the employment is part time, if requested by the employee.

• A reorganisation may result in reduced working hours for employees, and special rules on order of priority are being introduced regarding the order in which employees’ hours are reduced. Rules are also being introduced to bring in a transition period during which working hours are reduced (tapering).

• Employment will no longer continue in the event of a dispute over the invalidity of termination of employment (except for union representatives in certain cases).

• Agency workers will have more opportunities to gain permanent employment at customer companies. If a worker is hired out to the same operating entity of a customer company for a total of 24 months within a 36-month period, the customer company must offer the worker permanent employment or pay them two months’ pay as compensation.

As previously mentioned, the union and employers’ organisations have reached an agreement in principle to enter into the so-called framework agreement. The framework agreement is expected to be signed shortly by the Confederation of Swedish Enterprise and PTK/Swedish Trade Union Confederation. The framework agreement deviates from the EPA. For the framework agreement to apply, the employers’ organisation (a member of the Confederation of Swedish Enterprise) and the union organisation (a member of either the PTK or the Swedish Trade Union Confederation) must join the framework agreement; the agreement is binding when the central union organisation adopts the framework agreement. If an organisation joins the framework agreement, it has adopted the agreement in its entirety. Not all of the union organisations within the PTK and the Swedish Trade Union Confederation will adopt the framework agreement. As a result, the framework agreement will apply only to certain companies that are bound by collective agreements.

The framework agreement deviates from the EPA; for example, it has more generous rules on order of priority, different rules on what constitutes an objective reason, different rules on remuneration via employment agencies etc.

Here are some concrete examples:

If you are a member of an employers’ organisation, your union for white-collar employees may have adopted the framework agreement while your union for blue-collar employees may not (a common scenario): this means that the objective reason assessment is different for the two different types of employees. In addition, the rules on order of priority and compensation for agency workers etc. differ for blue-collar and white-collar employees.

As a business and a member of an employers’ organisation, it is important that you contact your employers’ organisation to find out what applies in your case.

If your business has a local collective agreement (i.e. you have entered into an agreement with the union to follow a particular collective agreement), you must contact the union to find out whether the collective agreement itself will change.

If you are a business that is not bound by a collective agreement, then the EPA applies as of 1 October 2022, which will be important when you hire staff, reorganise the company or terminate employment etc.

In conclusion, it will take time before collective agreements are potentially adapted and new practices are established around the new law. If you are unsure what applies in your situation, please don’t hesitate to contact Azets for further help and support.