The Elmzell Newsflash – first edition!

29 Jun 2016

By popular demand from our loyal and valued clients we hereby present and welcome you to our first edition of the Elmzell Newflash. Through the Newsflash we will provide you with ad hoc information regarding new regulatory and case law developments in Sweden. Please do not hesitate to contact Elmzell law firm should you require additional information about the content of the Newsflash.

New provisions regarding organizational and social work environment

The Swedish Work Environment Authority (Swe: Arbetsmiljöverket) has issued new provisions governing the organizational and social work environment. The provisions apply to all activities where employees perform work on behalf of an employer.

The purpose of the provisions is to promote a good work environment and prevent risk of ill health due to organizational and social conditions in the work environment. The provisions stipulate, among other things, that the employer shall ensure 

  • that managers and supervisors have knowledge about how to prevent and deal with an unhealthy workload and victimization at work, and
  • that work tasks and authority assigned to the employees do not give rise to unhealthy workload, and
  • that there are procedures for how victimization at work is to be handled, including who receives information that victimization is occurring, what happens with the information, what action the recipient of reported victimization is to take and how and where the person who is subject to victimization can quickly find help.

The employer shall furthermore clarify, for example in a policy, that victimization will not be accepted in the operations and set targets for the organizational and social work environment, which shall be documented in writing by employers who employ at least ten people.

The new provisions entered into force on 31 March 2016 and have been given very much attention. It is important that employers and managers are aware of them. We at Elmzell regularly advice on the new provisions and the systematic work environment management in general and we also offer courses in the subjects.

New agreement on non-compete clauses

The confederation of Swedish Enterprise (Swe: Svenskt Näringsliv) and the Federation of Salaried Employees in Industry and Services (Swe: PTK) have negotiated a new collective bargaining agreement on non-compete clauses (“the New Non-Compete Agreement”) that replaces the previous agreement from 1969. The New Non-Compete Agreement will apply to non-compete clauses entered into by employers bound by it as of 1 December 2015.

The New Non-Compete Agreement governs employers' use of non-compete clauses in employment contracts. It is not applicable to non-solicitation or confidentiality clauses. The scope for using non-compete clauses is wider under the New Non-Compete Agreement than under the previous agreement from 1969. All companies that rely on trade secrets may now use non-compete clauses and given the broad concept of "trade secrets" almost all companies will be able to apply non-compete clauses. However, the use of non-compete clauses shall continue to be restrictive and only used for certain positions.

As a main rule, the restricted period may not exceed 18 months past the last day of employment. If the period during which the trade secret constitutes a risk in relation to competitors is short, the restricted period should not exceed 9 months. The restricted period may only be extended beyond 18 months under special circumstances. Thus, compared to the previous agreement from 1969 that allowed a maximum restricted period of 24 months, it can generally be said that the restricted period through the New Non-Compete Agreement has been shortened.

The compensation for loss of income is capped at 60 percent of the employee's average monthly income and is to be paid during the entire restricted period. The compensation is dependent on the loss of income caused by the non-compete restriction, and the employee is obliged to try to mitigate the loss of income e.g. by applying for a new job.

The penalty for an employee’s breach of a non-compete clause must be in proportion to the employee's salary. Normally, the penalty should not exceed six times the employee’s average monthly income for each breach. In addition, the New Non-Compete Agreement introduces a possibility to claim recurring penalty if the employee's breach is of an ongoing nature.

The previous agreement from 1969 has been used extensively by the courts when determining whether a non-compete clause should be deemed unreasonable under Section 38 of the Swedish Contracts Act. It may, therefore, be expected that the courts will consider the New Non-Compete Agreement when assessing non-compete clauses in the future. Thus, the New Non-Compete Agreement is expected to be of significance also for employers that are not bound by a collective bargaining agreement. Consequently, all employers are advised to consider the New Non-Compete agreement prior to including non-compete clauses in their employment contracts. 

New conversion rules for temporary employments

According to section 5 of the Swedish Employment Protection Act a general fixed term employment contract or a substitute employment contract that last for more than two years in aggregate within a period of five years, will be automatically transformed to an employment for indefinite term (permanent employment). It is necessary that the employee must be employed for at least two years in aggregate either as general fixed term or as substitute (e.g. if the employee is employed for 1 year as general fixed term and 1,5 years as substitute, the employment will not be transformed). This regulation has been amended as from 1 May 2016. It is now easier for fixed term employment contracts to transform into permanent employment contracts. The requirements are still that the general fixed term employment lasts for more than two years in aggregate. But this no longer has to be within a period of five years.

The employee will be entitled to include a period of employment if:

(i)          no longer than the maximum of 180 days has passed between the different periods of employment (e.g. employment as a substitute, general fixed term etc.). 

(ii)        the employee has been employed for at least two years in aggregate as general fixed term (as per the current legislation).