Government to amend labour law in light of European Court ruling on Laval case

The Swedish government has announced guiding principles for an investigation into the consequences of the Laval verdict by the European Court of Justice (ECJ) in relation to the country’s labour law. On this basis, the government will propose amendments to current legislation in order to fulfil the requirements stipulated by the ECJ. However, the social partners have criticised the announced guidelines for a number of reasons.

Background

Since the European Court of Justice (ECJ) delivered its verdict in the Laval case (117Kb PDF), in December 2007 (see also EU0706029I), the impact of the court’s decision on the Swedish labour market has been a central topic of discussion for the social partners (EU0801019I, SE0801019I, SE0505104N). The ECJ ruled that the Latvian company, Laval, which posted workers to Sweden, is not required to adhere to the collective agreement within the Swedish construction industry. Many commentators were surprised by the verdict, stating that the blockade and sympathy actions taken by the Swedish Building Workers’ Union (Svenska Byggnadsarbetareförbundet, Byggnads) was in conflict with Council Directive 96/71/EC concerning the posting of workers in the framework of the provision of services.

In connection with the courts verdict, the Swedish Minister for Employment, Sven-Otto Littorin, announced that amendments to the Swedish labour legislation might be necessary in order to avoid similar cases in the future. The Swedish Trade Union Confederation (Landorganisationen i Sverige, LO) has expressed concerns that the judgement on the Laval case might lead to problems in preventing social dumping. However, the Confederation of Swedish Enterprises (Svenskt Näringsliv) welcomed the court’s decision in the hope that it will increase the free movement of services (SE0803029I, SE0706029I).

Government’s guiding principles

In April 2008, the government announced the guiding principles for an investigation into the impact of the ECJ’s verdict in the Laval case on national labour law and possible labour law amendments as a result of this judgement. The investigation will be led by the Director General of the National Mediation Office (Medlingsinstitutet), Claes Stråth, and a final report is due to be published in mid December 2008.

Accordingly, two general objectives should guide the investigation’s recommendations:

  • the Swedish labour market model should, as far as possible, be applicable to foreign workers employed in Sweden;
  • EU law, particularly provisions relating to the free movement of services, the prohibition of discrimination due to national belonging and Directive 96/71/EC relating to posted workers, should be fully respected in accordance with the ECJ’s interpretation.

More specifically, the government’s guidelines highlight two particular objectives for the investigation. First, the investigation should consider if the so-called ‘Lex Britannia’ provision – a provision that allows industrial action in order to remove foreign collective agreements, when operating in Sweden – in the Co-determination Act (Medbestämmandelagen, MBL) should be abolished, amended or replaced in order to be compatible with EU law. Secondly, the investigation should also evaluate the degree to which it is possible to refer to collective agreements within the posted workers’ directive.

Reactions of social partners

Prior to the announcement of the government’s guidelines for the investigation, the social partners were invited to give their views on the investigation and offer suggestions on what the main focus of the investigation should be. Despite the cooperation with the social partners in the process of shaping the recommendations, the final guidelines were criticised by both Svenskt Näringsliv and Byggnads, albeit from different perspectives.

Svenskt Näringsliv’s expert on labour law, Lars Gellner, expressed disappointment about the fact that the guidelines did not include an assignment to investigate the possible introduction of a proportionality rule in Swedish labour law, similar to the one existing in European labour law. In general, Mr Gellner argues that the government has not listened to the argument put forward by Svenskt Näringsliv and claims that the guidelines are ‘far too LO-friendly’.

In contrast, LO is generally satisfied with the guidelines for the investigation, even though its Negotiation Secretary, Erland Olauson, argues that the deadline for the close of the investigation could have been shorter. However, Byggnads, which is affiliated to LO, has been more critical of the guidelines. The trade union’s President, Hans Tilly, argues that the investigation should not accept the ECJ’s decision entirely. Moreover, he believes that the general aim of the investigation should be to prevent, through all means necessary, the Laval verdict from affecting the Swedish labour market.

Commentary

At present, some four months after the Laval decision, the general view of the situation is that the ECJ’s ruling will result in a number of changes to Swedish labour market policies and legislation.

Thomas Brunk and Michael Wahman, Oxford Research

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