Employer agrees substantial payments following sudden closure of factory

In March 1999, the US-owned car seat manufacturer, Lear Corporation, suddenly announced that its factory in Bengtsfors, Sweden, was to close immediately. The Metalworkers' Union stated that the company was in breach of co-determination legislation and that it would be seeking the largest damages ever awarded in Sweden. The employer countered that the workers were guilty of illegal action. Some weeks later, following negotiations between management and trade unions, a favourable agreement for the employees was reached, involving substantial payments by the company.

On 17 March 1999, the US-owned car seat manufacturer, Lear Corporation, announced without any notice that its factory at Bengtsfors, a small town in the south west of Sweden, would close immediately, with the loss of 860 jobs. Production was to be moved immediately to factories in Gothenburg, Portugal and Thailand. An angered Göran Johnsson, the chair of the Swedish Metalworkers' Union (Svenska Metallindustriarbetareförbundet, Metall) said that the union would sue the employer, alleging that it had not only deprived many workers of their employment but also broken the law blatantly. The relevant law is the Co-determination in the Workplace Act (Medbestämmandelagen,SFS 1976:580), which is seen as being important to Swedish workers' sense of justice, particularly in relation to a right to negotiate and receive information.

The Act states that before an employer takes any decision with respect to significant changes in its operations, it shall, on its own initiative, enter into negotiations with the employees' organisation with which it is bound to negotiate (section 11). The other section of present interest applies to the right of information (section 19): an employer is obliged regularly to inform a recognised trade union about the financial and production situation in the business (there are similar rules suggested in the European Commission's recent proposed draft Directive on national information and consultation rules - EU9812135F). An employer or an employee which does not obey the Act can be ordered by the Labour Court to pay damages.

Metall prepared to sue Lear Corporation, in line with the provisions of the Co-Determination in the Workplace Act. Mr Johnsson, with widespread local and national support, as well as the support of the government through Björn Rosengren, the Minister of Industry and Commerce, declared that the union was seeking to claim the highest damages ever in Swedish labour law history. The sum was not specified, but the figure of SEK 50 million was cited in the media.

The company countered by arguing that the workers had taken illegal action. Several workers had been conducting a "go slow" and had refused to turn up to work, claimed the managing director Raymond Bomya, who told the Association of Swedish Engineering Industries (Verkstadsindustrierna, VI) that he wanted to serve a summons on the employees.

The government subsequently announced that it intended to put SEK 60 million into a development project in partnership with the UK-owned firm TWR, and promised jobs for 500 workers in two years' time in Bengtsfors. Mr Bomya then agreed to start negotiations immediately with the unions at local level. Within 10 days, negotiations were complete and the 860 workers were all promised that their wages would be paid in full until 1 August 1999, with no obligation to work. After that date, the workers would receive their legal redundancy pay, of one to six months depending on length of service. Mr Bomya also agreed to pay the rent for the abandoned factory for two years. The agreement between the Lear Corporation and the three trade unions involved meant an extra wage cost of about SEK 50 million for the employer. Lear Corporation is one of the largest 200 companies in the USA, with 104,000 workers worldwide and an expected turnover of SEK 100 billion in 1999.