Government proposes amendments in wage guarantee legislation

In order to bring Swedish law into line with Community law, the Government has proposed modifications in the legislation on wage guarantee, so that it will afford better protection for workers in case of their employer's insolvency.

On 19 February, the Government presented a bill to Parliament, proposing modifications in the legislation concerning the granting of workers' claims in case of their employer's insolvency. There is no doubt that it will be passed by Parliament. This will then be the second time the legislation has been modified in order to comply with EU Council Directive 80/987/EEC on this subject.

There are two provisions that have been problematic. First there is the so-called qualifying rule (karensregeln) in section 9a of the Wage Guarantee Act, which stipulates that a worker who has already received payment from the guarantee fund may receive no further payment for two years, if the claims relate principally to the same business. This provision was instituted in 1994 to prevent abuse by persons who repeatedly start new businesses and then let them go bankrupt.

During the following year, several cases were brought to court by trade unions challenging the new provision. One of these cases ended up in the EFTA Court, which gave a preliminary ruling stating that the Directive precludes a national provision such as the Swedish qualifying rule. The Government had not convinced the Court that the rule was necessary in order to prevent improper use of the guarantee to deprive workers of the protection they were afforded by the Directive. A short time afterwards, the qualifying rule was modified, allowing workers to receive guarantee payments more than once during two years, if justified by "special reasons".

The trade unions still were not satisfied, and the European Commission started to show an interest in the case. Its Directorate General V sent a letter inquiring about the meaning of the expression "special reasons", and about which party had to prove that such reasons exist. During informal contacts, the Commission gave the Government to understand that it might institute proceedings against Sweden if the law was not modified. The Government has thus now proposed that section 9a be repealed.

The other provision that will be altered at the same time is section 7 of the Preferential Claims Act, which excludes from the wage guarantee employees who by themselves or together with close relatives own at least one-fifth of the bankrupt business. Section 7 excludes a larger group of employees than those who could be lawfully excluded, according to the agreement on Sweden's accession to the European Union, annex I. IV D. The wording is now to be modified so that it corresponds exactly to the wording of the annex.

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