ILO finds against government for interference in collective agreements on retirement

In March 2003, the International Labour Organisation (ILO) found that the Swedish government had breached ILO Conventions on collective bargaining and the right to organise, following a complaint brought by the LO and TCO trade union confederations. The ILO concluded that 2001 legislation increasing the retirement age from 65 to 67 years interfered in collective agreements by preventing them from obliging employees to retire before the age of 67.

In late March 2003, the International Labour Organisation (ILO) announced its findings in a case (No.2171/GB.286/11) brought by the Swedish Confederation of Professional Employees (Tjänstemännens Centralorganisation, TCO) and the Swedish Trade Union Confederation (Landsorganisationen, LO). These trade union confederations had submitted a complaint to the ILO Committee on Freedom of Association, alleging that the Kingdom of Sweden had breached ILO Conventions No. 87 concerning freedom of association and protection of the right to organise and No. 98 concerning the application of the principles of the right to organise and to bargain collectively, both of which have been ratified by Sweden (SE0201113N). The Committee's conclusions were included in its report adopted by the ILO Governing Body in March 2003. It found against the Swedish government and requested it to take appropriate remedial measures and resume thorough consultations with all parties concerned.

The complaint

In May 2001, the Swedish parliament added a new compulsory rule to the Employment Protection Act (lagen om anställningsskydd, LAS, SFS 1982:80). The amendment gives all employees the right, but not the obligation, to remain in employment until the age of 67 (SE0103186F). It is thus not permitted to conclude collective agreements providing for obligatory retirement before the age of 67. The average retirement age set out in collective agreements is currently 65 years. Collective agreements covering the age at which employees have a right to leave employment and receive a retirement pension are, however, still allowed. A provisional regulation covered collective agreements concluded before the change in the law came into force. These 'old' agreements were still valid, in spite of the new rule, until they expired, but no later than 31 December 2002

Thus, the amendment entitles workers to remain in employment until the age of 67 and prohibits, with effect from 1 September 2001, collective and individual agreements obliging employees to terminate employment before the age of 67. The complainants, TCO and LO, alleged that the amendment to the LAS: violates fundamental ILO principles on the right of social partners to act as independent, autonomous organisations with the power of regulating their dealings through collective agreements; limits the social partners’ freedom of negotiation and forbids them to conclude agreements on compulsory retirement before the age of 67; and invalidates existing rules on obligatory retirement contained in collective agreements expiring after the end of 2002.

In its response to the trade unions' charges, the Swedish government stated that that the legislative amendment was prompted by Sweden's new system of old-age pensions, fundamental to which is the 'life income principle', whereby a person's pension is influenced by their full lifetime income. One of the underlying purposes of this principle is to encourage work and to enable people to influence their pension benefits by working longer than had been the case previously. The government considers that it must still be possible for people to improve their pension by working, even after starting to receive a pension. This depends to a large extent on a reduction of impediments to employment, in order to enable a larger group of people to improve their pension status. It was therefore essential to raise the compulsory retirement age.

ILO conclusions

The ILO Committee on Freedom of Association found that Sweden had indeed breached the provisions of ILO Conventions Nos. 87 and 98 regarding the right to organise and to collective bargaining.

With regard to collective agreements concluded before 1 September 2001, the Committee observes that the amendment to the LAS nullifies, as of 31 December 2002, the legal validity and application of clauses stipulating a compulsory age of retirement before the age of 67. This is contrary to the principles on collective bargaining, because the voluntary negotiation of collective agreements, and therefore the autonomy of the bargaining partners, is a fundamental aspect of freedom of association. The Committee concludes that agreements previously negotiated should continue to produce all their effects, including those concerning compulsory retirement before the age set in general legislation, until their expiry date, including after 31 December 2002.

As for the effects on future collective bargaining, the Committee notes that, under the amended legislation, the bargaining partners are still able to conclude agreements specifying an age, lower than that prescribed in the general legislation, at which an employee may retire on a pension, but that from 1 September 2001, such agreements cannot make retirement compulsory, given the wording of the law - 'an employee is entitled to remain in employment until the end of the month in which he or she is 67 years old' (section 32a of the LAS, as amended). While this provision, the Committee states, has an enabling character for individual workers, it clearly amounts to circumscribing the scope of collective bargaining on a subject matter where the parties previously had wider room for negotiation. The Committee further notes that this substantial restriction of the scope of bargaining has apparently been imposed against the will of all social partners since, according to the complainants, in addition to the major trade union confederations, the leading representative employers' organisation also opposed the amendment on two occasions, as did the Swedish tripartite ILO Committee. The Swedish government did not challenge these allegations.

In the Committee’s opinion, if the government deemed it necessary to change the existing system, which apparently met with a wide consensus, it would have been much preferable to obtain the agreement of the parties concerned. A legislatively imposed measure such as the LAS amendment in question, which amounts to reversing unilaterally a system accepted by social partners and which has led to negotiated agreements adapted to particular job circumstances, would have been justified only in a situation of acute crisis, for instance if the non-adoption of urgent measures had endangered the very existence of the pension system. The Swedish government did not provide evidence that there indeed existed such an emergency situation.

The Committee thus requested the Swedish government to take appropriate remedial measures, so that agreements already negotiated on compulsory retirement age continue to produce all their effects until their expiry date, including after 31 December 2002. It also requested the government to resume thorough consultations on retirement and pension issues with all parties concerned, with a view to finding a negotiated solution which would be mutually acceptable to all parties concerned and in conformity with the Conventions on freedom of association and collective bargaining ratified by Sweden.

Commentary

The ILO conclusions are very important in terms of the social partners' right to regulate certain issues in collective agreements, commented Sture Nordh, the head of TCO, in a press statement. Respect for the Swedish 'labour market model' demands that parliament and the government respect collective agreements and do not nullify them, he said. The ILO findings were welcome but expected, commented Håkan Meyer, a senior LO official. Hans Karlsson, the Minister for Working Life, stated that the government took seriously the criticism from the ILO.

Legally, the ILO decision implies that it will not be possible, neither retrospectively nor in the future, for the government to annul collective agreements. Furthermore, there will be a very limited space for the state in future to reduce by legal means the social partners' room for manoeuvre in collective bargaining.

The issue of governmental regulation of the retirement age is a further example of the perennial issue in Sweden of who runs the labour market, the social partners or the government. There is a long history of negotiating pay and other employment conditions through collective agreements, and the social partners have strong positions and generally prefer to control and decide matters themselves, with no interference from the state. In the current case, the comments of the social partners have generally reflected this point of view. The government retorted in its submission to the ILO Committee that one of the reasons that it had decided to resort to legislation in this case was that the social partners had shown no interest in the matter at that stage. This allegation was, however, rejected by the social partners. (Annika Berg, Arbetslivsinstitutet)