Will Sweden's new Employment Act fall foul of government crisis?

“The proposals have very broad parliamentary support. So I don’t think we will see an immediate effect,” Irene Wennemo told the Arbetet newspaper when asked what the government crisis might mean for the reform of the Labour Protection Act (LAS).

Wennemo is the Director-General of the National Mediation Office and was previously a state secretary for the Social Democrats. In her interview with Arbetet, which is published by Swedish Trade Union Confederation, she reckons the proposed LAS reform can be postponed due to the government crisis but she does not believe it can be stopped. Right now it is also in its third round of consultations, which will come to an end on 15 September. That means the touchy issue of the shape of a future Employment Act right now is not up for discussion on a government level. 

When the government crisis was a fact, it was less than three weeks since Eva Nordmark together with the Center Party and the Liberals presented the result of three departmental reports which had been commissioned after the Confederation of Swedish Enterprise, the Confederation of Professional Employees PTK, the trade unions Kommunal and IF-Metall presented their joint agreement on LAS and change last autumn. On 7 June it was the government’s turn to present its contribution. 

“This is the largest reform of the Swedish labour market in modern times,” said Minister for Employment Eva Nordmark as she presented the new proposal. 

More people can be made exempt from 'last in, first out'  

The proposal is the contribution from the government and its supporters in parliament to the tortuous and complicated journey towards changing the Labour Protection Act, LAS. Simply put, it would mean that employers can make three rather than two people exempt from the ‘last in, first out’ principle during labour shortages, regardless of a company’s size.  

If an employee misbehaves or is not suitable for the job, it has so far been possible to fire him or her on “reasonable grounds”. This will now be replaced by reasonable or personal reasons and the employment is terminated by making the person redundant even if a grievance is in motion.  

Previously, the worker’s salary would still be paid for as long as the grievance was active, which has come in for criticism from employers who felt it was too expensive to fire employees.   

Martin Ådahl from the Centre Party told a press conference on 7 June that it would be easier and cheaper for employers to “do the right thing”. If a decision of redundancy has been taken on the wrong basis, however, the employer can be made to pay compensation. According to the proposal, it will become more expensive “to make mistakes”. So far the new wording fulfils the wishes of the employers. 

Better chance to study

The employees gain an advantage through a completely new drive to improve retraining and opportunities to study both for the worker who has lost their job, but also for workers who want to improve their skills during their working lives. Another positive change for employees is that they would gain a better chance of securing a permanent job compared to today’s situation. 

“We want to strengthen the companies’ need for flexibility, but also the security of employees. Our proposal gives all wage earners better further education and the chance to train while receiving 80% of their wages for one year,” Eva Nordmark said in an interview with Swedish Radio on the day the proposal was presented.

Eva Nordmark refers to the big changes the labour market is going through right now, and that it is therefore right to make changes to the employment act. Security is linked to permanent employment, but the ability to secure skills in an ever-changing labour market represents security too, she points out.

“We want to see greater mobility in the labour market because we have a matching problem. Employers struggle to find people with the right skills, and meanwhile we have a group of people who are far outside the labour market. If we can use skills development to fill the empty spaces with the employees that the employers seek, we get new spaces to fill,” Eva Nordmark told Swedish Radio.

Changing the Employment Act has been a complicated process. The issue arose in the so-called January agreement when the Centre Party and the Liberals demanded a change to LAS, as one of their main demands, in order to give their support to the Social Democrat government. LAS has been a thorn in the side of the centre-right parties and employers more or less since it was introduced in the mid-1970s. Time and again, employers have pointed out that they need more freedom to fire people.

In the January agreement, the parties agreed to launch an enquiry into the Employment Act. If they could not agree on any change, proposed legislation would be put forward. So the January agreement actually contained a threat of legislation when it came to the Employment Act.  

Last autumn, the Confederation of Swedish Enterprise, the Confederation of Professional Employees PTK, the trade unions Kommunal and IF-Metall agreed on how LAS should be changed and on increased retraining opportunities. Twelve LO unions voted no to the agreement because they felt the changes to the Employment Act were too far-reaching.

Inspired by Finland

Eva Nordmark describes the government's and the supporting parties’ proposal as a well-balanced product. On the other hand, many of the LO unions that rejected the agreement think there is a risk that employees end up with A and B teams when it comes to the retraining agreement which already exists. The trade unions also fear that IF-Metall and Kommunal will benefit from being part of the agreement, while terms will be less favourable for those on the outside. 

The government’s proposal for retraining and education has been inspired by Finland, a country that has served as a model for the reform. In that country, it is mostly public sector employees who have chosen to study. 75% of them are women and half are between 30 and 39. One argument put forward by LO unions opposing the agreement is that older male workers become less secure without really gaining anything that suits them. 

Critics also claim the reform will solidify class – those who perhaps would have been prepared to study regardless of the reform now get economic support to do so, while the reform does not reach the others. 

The consultation round lasts until 15 September and the reform is expected to be executed next summer.