New sick pay legislation brings severe problems in interpretation

Since the beginning of 1997, Swedish employers are now responsible in law to pay sick pay for 28 days instead of the previous 14. This change has caused severe interpretation problems in collective agreements on sick pay.

On 19 February, Arbio, the employers' association for the forestry industry, sued the Swedish Paper Workers' Union before the Labour Court. Formally, the parties are arguing over a sum of less than SEK 50, though in practice the case concerns an unlimited amount of money. This is a test case, and the question that the Court has to address is: how is the collective agreement on sick pay for employees in the paper industry to be interpreted?

This dispute is only one out of many that has been indirectly caused by a modification of the 1991 Sick Pay Act, that came into force on 1 January 1997.

Sick pay law changed

Before 1 January 1997, employers had to pay sick pay, that is 75% of the worker's wage and other benefits, from the second up to the 14th day of absence from work because of illness. If the worker had not recovered by then, the public health insurance system assumed responsibility, paying 75% of the income that the worker would otherwise have had.

When these provisions were still in force trade unions and employers' organisations in all sectors of the labour market, private as well as public, concluded collective agreements on sick pay. The technical solutions differ from sector to sector, but their factual content is the same. According to these agreements, employees are entitled to an extra 10% of their wages from day 15, in addition to the benefits they receive from health insurance with the effect that after two weeks they should receive a total of 85% of their normal income.

Now that the Sick Pay Act has been changed, the law requires the employer to pay the 75% for 28 days (minus the first one) before public health insurance assumes responsibility. That has led the employers' organisations to claim that the collectively-agreed extra 10% should not be paid until after 28 days have elapsed. As they see it, the new regulation forces them to pay even more from day 15 to day 28 than they undertook to do through collective agreements. The trade unions, on the other hand, argue that the intention of the parties was that employees should receive more than the minimum compensation if they are ill for more than two weeks.

Unions bring cases

The sick pay controversy has so far resulted in two cases, one before an Arbitration Board and the other before the Labour Court.

In the first case, LO (Landsorganisationen, the Confederation of Blue-collar Trade Unions) has asked the Arbitration Board to interpret the agreement between the LO and SAF, (Svenska arbetsgivareföreningen, the Confederation of Employers' Organisations in the private sector) on the so-called AGS. AGS is one of five supplementary insurances based on agreements between LO and SAF, and means that for blue-collar workers, the 10% collectively-agreed sick pay is not paid directly by their employers but by the AGS. SAF invokes inter alia Article 20 in the terms of this insurance, that states that employees cannot obtain benefits from the AGS and also receive sick pay for the same period. LO replies that this provision was intended to prevent overcompensation, and nothing else. SAF also refers to section 6, second paragraph in the Sick Pay Act, the meaning of which is that AGS benefits shall be included in the 75% sick pay that the law obliges the employer to pay. LO quotes the Minister of Health and Social Affairs, Maj-Inger Klingvall, who has given assurances that the legislation is intended to be neutral to the contents of the collective agreements. The decision of the Arbitration Board is expected to be given in April at the earliest.

The case before the Labour Court relates to the interpretation of the sick pay agreement between Arbio and the Paper Workers' Union. Although the latter is a member of LO, the paper workers are not affiliated to the AGS. In the paper industry, blue-collar and white-collar workers have uniform agreements on sick pay, which are almost identical with other sick pay agreements for white-collar workers in the private sector. So it may well be that all disputes regarding sick pay for this category of employees can solved once this case is settled.

The case concerns a worker at theVargön paper mill, who found that his employer had deducted 25% from his salary for his 15th sick day, as well as for the days before that. The Paper Workers' Union then used its prerogative of interpreting the collective agreement in disputes about pay. This is regulated in Section 35 in the Act on Joint Regulation of Working Life (Medbestämmandelagen, MBL) and it means that the employer has to pay what the union regards as the correct pay according to the agreement, or sue the union before the Labour Court within 10 days. Vargön chose to sue. The judgment will probably not be made until the beginning of the summer.

The unions in the public sector are biding their time. They know that the public employers on the whole regard the agreements on sick pay in the same way as the private employers do, but they still have not had reason to take legal action. TCO-OF (the Confederation for White-collar Unions in the Public Sector) has not even decided if it should do so, says legal adviser Anders Lindgren. It may be that the organisation will enter negotiations with the employers for a new agreement instead.


The Government had apparently not foreseen these effects of the new provisions. Already it has proposed another modification, namely that the second paragraph of Section 6 of the Sick Pay Act be repealed from 1 May 1997. The bill will be read in the Parliament in the middle of March, but before that the LO and SAF will have a meeting with the Minister of Health and Social Affairs, at which they are going to repeat their joint request that the Act should be returned to its state before 1 January 1997. This is not because of the disputes referred to above: SAF claims that employers simply cannot afford to pay 75% sick pay for 28 days; while LO fears that the new regulation will make it even more difficult for people in a poor state of health to get a job. (Kerstin Ahlberg. Arbetslivsinstitutet)

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