Termination of employment due to shortage of work

As the employer, you are responsible for determining whether there is a shortage of work. You do not need to prove it. A shortage of work may be caused by a lack of incoming projects or by the company not having enough money to cover operations and payroll. A reorganisation may also have resulted in redundancy. The important thing is that the reason for termination of employment has nothing to do with the employee personally.

Relocation obligation before you terminate an employment

Before you can terminate someone’s employment due to a shortage of work, you need to investigate the possibility of relocating them. The relocation must be to a company vacancy that needs filling. The employee must possess the qualifications required to be able to work in the new role. As an employer, you need to accept a certain training period, but you are not obligated to create new tasks or a new position.

Made-up shortage of work is not permitted

According to the Swedish Employment Protection Act (LAS) termination of employment is always due to either a shortage of work or to personal reasons. However, you cannot claim a shortage of work if the reason you wish to terminate someone’s employment is in fact personal. If the termination is questioned and reviewed by the National Labour Court (Arbetsdomstolen), you need to be able to prove that the employment was terminated due to economic or operational reasons.

Priority rules

Priority rules apply in connection with termination of employment due to shortage of work. You decide who should leave first. You must create a priority list. The employees’ seniority determines their ranking in the priority list.

Last in – first out

The main rule of the Swedish Employment Protection Act (LAS) is simple: last in, first out. If there are employees who have been employed for the same amount of time, their age shall be the deciding factor. Older people enjoy more robust protection than younger people. Sufficient qualifications may also be a deciding factor. The collective agreements’ rules may differ. Most central collective agreements give the employer the opportunity to negotiate the order of priority with the local trade union organisation.

The right to exempt three peoples from priority rules

As an employer, you have the right to exclude three employees who are of particular importance to the continued operation from the priority rules. You do not have to explain your choice and the choice cannot be tried within the framework of LAS. On the other hand, exceptions from the priority rules can be tested according to the Discrimination Act.

In order to prevent abuse of the exemption, there is a three-month block. This means that if you dismiss staff with exceptions to the priority rules, at least three months must pass before you can make new exceptions to the rules. The exceptions from priority rules are dispositive. This means that collective agreements can contain rules that deviate from the law.

Risk of having to pay damages

Terminations of employment that breach the rules relating to order of priority may be declared invalid. The person whose employment was terminated due to an incorrect order of priority may also be warranted damages.

Obligation to negotiate

Termination of employment due to a shortage of work represents an important change for the business. The employer must therefore negotiate with the trade union in accordance with the Swedish Act on Employee Participation in Decision-Making (MBL). The negotiations must have been concluded before the termination can take place. If you and the trade union cannot reach an agreement, you make the final decision.

Who should you negotiate with?

• If the company is bound by collective agreement, you should negotiate with the trade union.
• If you are not bound by collective agreement, you need to negotiate with all trade union organisations that have members who are affected by the shortage of work.
• If no employee is a trade union member, negotiation is not necessary.

The trade union should be informed of

• the reason for the termination
• the number of employees affected
• to which categories these employees belong
• how many people the business normally employs and what categories they belong to
• when you intend to execute the terminations
• method for calculating any compensation beyond what is stipulated by law or collective agreement in connection with terminations
• Risk of having to pay high damages
• Employers who initiate negotiation too late or fail to negotiate with the trade union altogether may be liable to pay damages. The National Labour Court takes a serious view of breaches of the negotiation rules and may order substantial damages to be paid in connection with obvious infringements.

Risk of having to pay high damages

Employers who initiate negotiation too late or fail to negotiate with the trade union altogether may be liable to pay damages. The National Labour Court takes a serious view of breaches of the negotiation rules and may order substantial damages to be paid in connection with obvious infringements.

Report intention to give notice

Report your intention to give notice to the Swedish Public Employment Service (Arbetsförmedlingen) if you need, within one county, to terminate at least five employees. You also need to report if you believe that at least 20 employees will need to be terminated over the course of a 90-day period. How far in advance you need to report your intention to give notice depends on the number of people affected by the personnel change, but you should always do so well ahead of time.

5–25 people

Give notice at least two months before the final working day of the first affected person.

More than 25 people

Other rules apply if you need to give notice to more than 25 people.

Report notice to the Swedish Public Employment Service (in Swedish)

Right to re-employment

If you have terminated employees due to a shortage of work, you are obligated to offer them re-employment if the company needs to employ again at a later stage. This is called re-employment right, or priority right, and applies during the notice period and for an additional nine months.

Note that the priority right applies only to vacancies. In other words, your company must have a real need for re-employment.

Re-employment rules

• The person has been employed for more than 12 months in total in the last three years (for seasonal employees, for at least six months in the last two years). This does not apply to probationary employees.
• The employee must have registered interest in re-employment.
• The employee must have the right qualifications.
• The employee will lose their priority right if they decline a reasonable offer.
• The vacancy must be in the operational unit where the employee worked most recently.
• The priority right to employment applies in the agreement area where the employee was employed when the previous employment ended.

You have a duty to inform employees of the re-employment right

You must inform employees about the priority right in the termination notice or no less than one month prior to the employment being terminated. The rules do not apply in situations where you temporarily employ personnel some other way, for example by using a staffing company. However, you cannot hire in staff simply in order to circumvent the rules relating to re-employment right.

Seniority and age may be deciding factors

If more than one person were to have priority, their order of priority in relation to each other will be determined based on seniority. If the seniority is equal, age shall be the deciding factor. Older persons are prioritised ahead of younger people.

Even if the business changes owners during the period to which the priority right relates, the terminated employee shall be given priority by the new employer.

Collective agreements may impose special rules relating to priority.