A basic agreement concluded in 1938 between SAF and LO which is essentially still in force. It represents a milestone and has served as a model for the entire labour market. It has also come to stand for a particular form of industrial relations, the so-called “Saltsjöbaden spirit”, marked by willingness to co-operate, mutual respect, the endeavour to arrive at peaceful solutions based on compromise and a sense of responsibility for developments in the labour market. The Agreement came into being in response to a threat of legislation: certain forms of industrial action, and their effects, were causing serious concern. It therefore also reflected the social partners' wish to safeguard the freedom to regulate their own mutual affairs without interference from the government authorities. The Saltsjöbaden spirit was to characterize the industrial relations climate over the first few decades of the postwar period.

The Agreement lays down rules in primarily three respects, namely, collective bargaining, industrial action and disputes threatening the public interest. There were originally also rules on termination of the employment contract, but in 1974 these were replaced by legislation on employment protection. The rules on bargaining are directed at issues which can give rise to both disputes of interest and disputes of rights. In the case of the former, the rules stipulate that industrial action cannot be initiated until the party concerned has fulfilled its obligation to negotiate. With respect to disputes of rights, the Agreement established a set of rules on bargaining/negotiation incorporating a two-tier system of local bargaining and sectoral bargaining which constitutes the core of the labour market's system of dispute resolution. The rules in the section on industrial action are aimed firstly at prohibiting a number of inadmissible motives for taking action and secondly at protecting uninvolved third parties. The general rule is that industrial action against a neutral third party is prohibited. An exception is allowed in the case of secondary action in support of a lawful primary dispute. Any person who participates in any way in a labour market dispute is deemed to be non-neutral. However, the performance of essential work does not signify the loss of neutral status (see impartiality). See also Development Agreement, Industry Agreement.)

Please note: the European industrial relations glossaries were compiled between 1991 and 2003 and are not updated. For current material see the European industrial relations dictionary.