Can employers and employees agree to deviate from collective agreed provisions?

In March 2000, the Swedish Labour Court issued its ruling in a case centring on the validity or otherwise of an agreement between workers and their employer to deviate from the terms of a sectoral collective agreement (in this case, rules on payment for weekend working). The Court ruled that such agreements are invalid.

In late March 2000 the, Swedish Labour Court (Arbetsdomstolen) presented its judgment (AD dom nr 29/00) in a dispute over a collective agreement, involving five workers and their employer, a sawmill company, Rudsågen AB, situated in the Lake Mälar district in the outskirts of Stockholm. The Swedish Forest and Wood Trade Union (Skogs- och Träfacket) represented the employees in court, while the Association of the Swedish Wood Products Industry (Träindustriförbundet, TIF) represented the employer side.

The case involved employees who worked on a number of free weekends during 1998. According to the sectoral collective agreement, they should have received extra payments for this work, but they did not do so. The workers' trade union was notified that they had not been paid and protested to the employer. Rudsågen AB then produced a fax message, signed by the employees, wherein they renounced their rights to the extra remuneration. The document was drawn up a few days after the trade union had raised the matter, in September 1998.

The Labour Court had to decide if the renunciation of the right to extra pay at weekends, set out in the abovementioned document signed by the employees, was valid or not according to the Co-Determination Act (Medbestämmandelagen, SFS 1976:580, MBL). The relevant section of the Act (section 27) states, quite simply, that employers and employees who are bound by a collective agreement may not enter into any contract that does not comply with such a collective agreement.

Background facts

From 23 February to 29 March 1998, the five workers concerned worked at the sawmill on three weekends without receiving the additional weekend pay, as laid down in the sectoral collective agreement (Träindustriavtalet). On 23 September 1998, the workers signed a document which states: "We, all the employees at Rudsågen, declare our solidarity with the company on the issue of overtime pay. We also disclaim all further activities with Skogs- och Träfacket on this issue. We have made an agreement with the employer on wage-setting on special occasions and we stand firm by this agreement."

The document was written by a management representative, referred to in court as Gunnar W. According to the employees, he had threatened to put the company into bankruptcy if the workers did not sign. The workers alleged that they signed the document because they were afraid of losing their jobs. The trade union's opinion was that the document was invalid, according to the collective agreement as well as according to the law.

The employer side - the company and the employers' association - told the court that while the current economic situation, two years after the event, is fairly good, the picture was different at the beginning of 1998 and the company was threatened with bankruptcy. In February 1998, the company received a large order and, according to Gunnar W, a verbal agreement was concluded with the workers, providing that those working weekends while the order was carried out should not demand the additional weekend pay rates set by the sectoral collective agreement. In September 1998, the trade union made claims for such payments on behalf of the five employees who had worked during weekends in February and March 1998. The workers, Gunnar W told the court, still held to their verbal agreement. Gunnar W therefore wrote the document in question and the workers signed it before it was faxed to the trade union.

Labour Court judgment

The Labour Court begins its judgment by stating that the workers in question had not been paid weekend pay rates in accordance with the sectoral collective agreement. Neither party had declared during the trial that the sectoral agreement admitted divergences from the regulations on weekend payments through individual agreements, and neither of the collective bargaining parties (the trade union and the employers' association) had stated that they had accepted such divergences after the event.

If a verbal agreement was reached to waive weekend payment for some weekend work, it is obvious that this agreement is contrary to the sectoral agreement as well as to section 27 of the Co-Determination Act (see above), the court states. But had there really been a verbal agreement? In fact, it was not demonstrated during the trial that such an agreement existed. The parties gave different accounts of what really happened and, even if the fax message to the trade union to some extent supported the employer side, this was not enough to prove the existence of an earlier verbal agreement, the Court reasons.

The fax message itself should be seen as a special legal document and not just as a confirmation of the earlier alleged verbal agreement, the employer side had argued. As the trade union had not objected to this assumption, this employer's argument would appear to be justified to some extent. The court considers that not until the fax message was sent did the workers give up their right to the weekend payment.

The employer side had stated that the fax message was binding. They claimed that it was not unusual for workers to give up their rights to remuneration after the claim had become due, in spite of regulations in collective agreements and in legal rules. In modern practice, this system was becoming more and more accepted, the employers stated.

Precedents and arguments

In its judgment, the Labour Court refers to a number of similar earlier cases, including a judgment dating from 1933 (AD 1933 nr 122), when the legal position on deviations from collective agreements was the same as after the Co-Determination Act was passed in 1976 This cases related to a dispute on the validity of agreements that had been reached between a restaurant keeper and a number of waiting staff. The employees had on two occasions agreed to renounce a so-called "guarantee wage", regulated in the sectoral collective agreement. The employer went into bankruptcy and the trade union concerned claimed in the courts that the guarantee wage, as laid down in the collective agreement, should be paid to the workers concerned. The Labour Court ruled the agreements in question between the employer and the staff were invalid, being contrary to the existing legislation.

Although the legal arguments in the Rudsågen case seemed to favour the union's position, the employer side deployed a number of arguments in support of its views. It referred during the trial to earlier assertions by Jonas Malmberg, a labour law expert, stating that the Labour Court's practice from the time before the Co-Determination Act was introduced should no longer be valid. One of Mr Malmberg's arguments was that it is unnecessarily complicated still to refer to the older legal situation, as there are enough possibilities in the Co-Determination Act for claiming damages for breaches of collective agreements. Another argument was that the strict way in which the compulsory effects of collective agreements are preserved today seems somewhat old-fashioned. While collective agreements were formerly the dominant form of regulation on the labour market, they are nowadays completed from time to time by legislation and individual agreements.

The Labour Court states in its judgment that the Court, without any exceptions, has in the past upheld the rule that agreements in breach of collective agreements are invalid, as laid down in the former and current legislation (ie section 27 of MBL) on collective agreements. What the court had to decide was if there were any reasons to abandon this earlier practice, and its answer is "no". A change in the interpretation of the current rules could lead to different applications of the same collective agreement for different workers and employers, the court argues. Such a system may reduce the normative function of collective agreements, which could in turn decrease the willingness to conclude collective agreements. Finally, the Court rules that there are no reasons in the current case important enough to abandon its earlier practice. The workers renunciation in September 1998 of claims for weekend payment (the fax message in question) is therefore invalid.

Thus, Rudsågen has to pay the weekend working payments to the workers. The company also has to pay damages of SEK 50,000 to the trade union and damages of SEK 5,000 each to the five workers.

Two members of the Court held different opinions than the majority, arguing that, as the workers concerned had full knowledge of the right that they were renouncing, their repudiation of this right was therefore valid.

Commentary

At a time when the use of individual agreements is tending to increase, if only moderately, the Labour Court has in the current case shown firm support for, and strict adherence to, the collective agreement tradition. It is evident that the Court backs up the traditional bargaining system.

The system of collective bargaining has long formed a solid basis for Swedish industrial relations. There exists, especially on the employer side, a wish for some flexibility and for some more modern adaptations. To comply in part with this wish, possibilities have recently been created for the parties to negotiate matters such as pay rises and working time issues in local agreements. However, these local agreements are framed by sectoral collective agreements. It is not permitted to deviate from the latter agreements if they do not permit such deviations, as the Labour Court has just confirmed. (Annika Berg, Arbetslivsinstitutet)