Seniority rules examined

According to recent research on the effect of Sweden's legal and collective agreed seniority rules which apply in the event of redundancies due to a shortage of work, it is still older, less-skilled employees and women who tend to be given notice of redundancy, despite the provisions of the 1974 Act of Employment Protection. The researcher, Catharina Calleman - who defended her doctoral thesis on the issue in September 1999 - is rather pessimistic about the development of employment protection in Sweden.

Public debate on employment protection - ie protection against dismissal and redundancy - has been going on for a long time, and in 1974 a major Act on Employment Protection (lagen om anställningsskydd, LAS) was passed. The debate started anew at the beginning of the 1990s. The issues of the seniority rules which determine which workers are to be made redundant became very important at at time when unemployment increased considerably.

Recent research conducted by Catharina Calleman, a researcher at the University of Umeå, examines the seniority rules related to redundancy in the event of shortage of work in Swedish law and collective agreements. The research is contained in a thesis (entitled Turordning vid uppsägning) for a Doctor of Civil Law degree, which Dr Calleman defended in September 1999.

The aim of the thesis was to examine the functioning of the legal and collective agreed framework for employment protection in the event of redundancies due to a shortage of work, and the crucial question of the extent to which the seniority rules have protected the groups of employees that the legislation especially aims to protect. The thesis contains both an examination of the existing legal rules and an empirical survey of how the rules have been applied in 30 workplaces. The purpose of the examination of the legislative regulations was to create a basis for discussion as to the effects of the legislation. The purpose of the empirical survey was to provide examples of how employers and trade unions use the regulations to achieve the goals of either protecting employment or of achieving effective and profitable production, or any other interests that they might have.

The Act on Employment Protection

The rules on protection of seniority in employment and advanced age are contained in section 22 of the LAS, with the part essential to Dr Calleman's research stating that "... The employees' order of priority [for remaining in employment] shall be determined based upon each employee's total time of employment with the employer. Employees with longer employment times shall have priority over employees with shorter employment times. In the event of equal employment times, priority shall be given to the older employee. Where it is only possible to offer continued work to an employee with the employer following relocation of the employee, priority shall be contingent on the employee possessing satisfactory qualifications for the continued work."

The procedure that applies where an employer wants to make staff redundant because of a "shortage of work" (arbetsbrist) is as follows. The employer announces to the staff, to the trade unions and to the county labour authorities (if the company wants to dismiss more than five workers), that because of a shortage of work, a certain amount of workers are to be made redundant in the near future. After this "warning" (varsel) has been issued, negotiations start between the trade unions involved and the employer. At this point, nothing is certain about which and how many workers will remain or be made redundant (SE9902141F). In this situation, workers are supported by the abovementioned employment protection legislation and by the provisions of collective agreements (see below). The LAS, one of the major planks of the protective legislation, is an act with "non-compulsory" (dispositiva) rules. This Swedish legal concept means that the provisions of collective agreements may replace the legislative rules.

The survey illustrates how the protectionist purpose of the legislation can be minimised or enhanced as a result of the different decisions made by employers or trade unions, and the deliberations behind the decisions. The empirical survey also shows, roughly, the outcome of the application of these regulations with respect to the surveyed workplaces. The survey covered 30 workplaces evenly distributed between the counties of Stockholm and Västerbotten (north of Sweden).

Seniority

The seniority regulations are built upon the premise that preference for continued employment will be given to older employees with longer periods of employment. Employees therefore compete with one another within the same "employee circle" (turordningskrets) in respect of length of employment. In addition, the legislation gives trade unions the right to expand the group of employees by combining different operational units within the same geographical area. In most cases examined in the empirical survey, the workplace trade unions utilised the possibility to combine different operational units within the same area into one employee circle. The consequence of such mergers to create a larger employee group was that the principle of protection was sometimes given greater effect, but at other times, the legal requirement that employees must have "satisfactory qualifications" (see next section) received greater effect. The effect of using a larger employee group was dependent upon the extent of the reorganisation, which meant that the employees' qualifications were measured according to the rules regarding "satisfactory qualifications." In other words, the larger the employee circle, the more choice for the employer to consider qualifications when selecting the workers who will remain in the company following reorganisation..

The principle of seniority, as defined by the legislation, was completely adhered to by around a quarter of the workplaces in the survey. These, however, were operations where workers had similar or identical qualifications, and where the qualifications demanded were relatively low.

Satisfactory qualifications

A requisite for preference for continued employment is that the employee has satisfactory qualifications for the employment available after the reduction in operations. The empirical evidence demonstrates, among other factors, that the manner in which a shortage of work is established determines the consequences that the employment protection regulations will have. If a work shortage is established for those positions in which the lowest-qualified personnel work - as for example in telephone reception, cleaning or simpler despatch operations - a transfer to other positions is often not possible for these workers.

The most comprehensive way for an employer to determine areas of work shortage is to draw up a personnel plan and use it as the basis for the decision as to where work shortages are to be established. The survey found that this was done mostly in relation to white-collar professional staff in private employment. Within the workplaces surveyed employing a high level of professional employees, reorganisations involving new individual work descriptions could change the entire job structure, with each employee potentially the object of an investigation as to whether she or he could be considered as having satisfactory qualifications for continued employment.

At several workplaces, the term "qualifications" was used in a manner that had negative consequences for older employees, who were considered to have lagged behind developments or to possess obsolete knowledge. In a couple of cases, this led to the oldest employees being made redundant to a larger extent, with early retirement being used. In the survey, there were a number of examples where qualifications were determined in a manner that proved discriminatory towards women - namely where greater body strength was deemed necessary.

Collective agreements

Large segments of the Swedish labour market are covered by national collective agreements, which in certain cases may deviate quite substantially from the employment protection legislation's regulations. Some such agreements - for example those covering a relatively large segment of the private sector blue-collar employees represented by the Swedish Trade Union Confederation (Landsorganisationen, LO) and the entirety of state employment - contain clauses concerning the division of employee circles, which are unilaterally applied by the employer. In other cases, the agreements contain a "delegation clause", with or without guidelines as to establishing seniority.

Collectively agreed regulations providing for a more strictly defined employee circle than that defined in the employment protection legislation exist within agreements for skilled employees in the private sector represented by LO unions, as well as within all public employment. The most important consequence of such rules is that seniority is determined entirely by reference within the work group concerned to length of employment and age, and that qualifications beyond training are not considered. The principle of seniority has a long tradition within LO and it has been more strongly held onto by this group than by other groups of workers. It was common among survey companies with this type of circle division that employers viewed the employees concerned as having very different qualifications, and were disposed to make exceptions from the seniority principle and make redundant employees seen as not having the qualifications required by the operations. This affected both employees who, according to the employer, had neglected their duties, and those employees who the employers considered to possess obsolete training or as having one of several different types of work-related injuries.

Contract listing

A "contracted listing" of seniority is an agreement between an employer and the local trade union concerning the establishment of seniority in specific cases. The regulations concerning contracted listings give substantial leeway to deviate from the protectionist regulations contained in employment protection legislation. Employees are not allowed to sue to have a termination of contract made null and void, or for damages, if notice of redundancy is issued in accordance with such a contracted listing. A review of the case law shows, according to Dr Calleman, that the protection of employment is eroded when a contracted listing of seniority has been agreed.

The background for the decision to use a contracted listing, as well as the content, varied greatly between the surveyed workplaces. The contract's clauses can take the form of determining the division of the employee circles, or of stating which qualifications would be necessary in the continued operations, or of determining different treatment for personnel of different ages etc. From the survey interviews, it emerges that none of the parties in the cases surveyed can be considered to have overstepped the wide boundaries permitted for the content of contracted listings.

Summing up, Catharina Calleman states that the protection given in the redundancy regulations, based upon length of employment and age, is very effective at those workplaces or within those operations where the employees perform similar or identical tasks. The more differentiated the tasks become, the less the effect of the protection. In the survey as a whole, older employees were given notice more often than others. Women were given notice to a larger extent than men at several workplaces. This was true mainly within state or previously public operations; in the remaining workplaces, the proportion of redundancy notices between the sexes was equal. Employers within the area covered by LO occasionally did not avail themselves of the regulations concerning "satisfactory qualifications" as often as was possible. Instead, local contracts were applied when a deviation from the seniority rules was considered desirable.

Catharina Calleman told EIRO that she is somewhat disappointed with the findings of the empirical survey: "the situation is about the same as it was before the legislation arrived at the beginning of the 1970s. Nothing much has happened."

Commentary

According to official statistics from the Labour Market Board (Arbetsmarknadsstyrelsen) between 40,000 and 50,000 employees in Sweden are given notice of possible redundancy because of work shortages every year. In most of these cases the seniority rules in labour law and in collective agreements are applied. The survey conducted by Dr Calleman illustrates how the protectionist purpose of the legislation can be minimised or enhanced as a result of the different decisions made by employers or trade unions. The current legislation is 25 years old and one conclusion of the research may be that the law has not worked sufficiently well to protect all the employees, as was intended, in the event of work shortages.

Public discussion has lately focused especially on the creation of certain exceptions from the seniority rules. One example is the employers' demand that two employees should be excepted from the rules in order to help small enterprises keep so-called key staff members. A majority in parliament voted against the Social Democrat government's proposals for changes in the law in spring 1999 (SE9905158N) and the government was due to come back with a bill in early 2000. (Annika Berg, Arbetslivsinstitutet)

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