Joint Investigations may break standstill on Employment Act

Sweden’s Employment Protection Act has divided social partners, politicians and experts for a long time. The social partners strongly disagree on how the law affects the structure of the labour market, which caused the negotiations on a new agreement to collapse in 2009. However, in early 2011, two reviews of the Act were initiated by Sweden’s major social partners. If consensus is reached, the structural conditions of bargaining rounds, and the political debate, may change.

Background

The 1982 Employment Protection Act (LAS) regulates the relationship between the employer and the employee and is a central feature of Swedish labour legislation. The Act applies to all employees and is designed to ensure that they are hired in permanent employment, and cannot be dismissed unless the employer is able to prove just cause. The employer is also obliged to consult with the employee’s trade union if the union or the employee concerned so request. The Act also provides that the last person employed in a company should be the first one to lose their job in the event of dismissals. It provides more protection for employees than similar laws in many other European countries. However, employers are concerned that it is too protective and that it creates rigidities in the labour market.

Disagreements among social partners

The Act is a recurring topic of debate among Swedish unions and employers as well as political parties. There have been many disagreements on what effect the law has on the structure of the labour market. Often, these different views are reflections of different ideological standpoints.

In 2009, the country’s major social partners in the labour market, the Confederation of Swedish Enterprise (Svenskt Näringsliv), the Swedish Trade Union Confederation (LO) and the Council for Negotiation and Cooperation (PTK), tried to negotiate a new basic agreement (SE0903029I). It was hoped this agreement would contain uniform and overarching rules applicable to major sectors of the labour market and bargaining rounds.

However, disagreements halted the negotiations. Employers feel the LAS is not compatible with the competitive nature of today’s modern world; it makes recruiting costly and keeps young people outside the labour market. Conversely, trade unions view the LAS as a fundamental employment protection for their members. They also believe the LAS has no negative effect on employment.

Joint investigations

LO initiated a joint investigation with the Confederation of Swedish Enterprise on 17 January 2011 to try to reach a consensus on the actual effects of the Act. The investigation will be carried out by eight people (four from each organisation) and will analyse a number of factors, including how the rules on dismissal are applied in different industries. They will also review the rules on dismissal and collective agreements and study similar legislation in other countries. Since this investigation primarily concerns blue-collar workers, the Confederation of Swedish Enterprise will carry out a similar investigation with PTK focusing on white-collar workers. The reports will be published during spring 2011.

Commentary

The Swedish labour market model is based upon consensus between social partners, so fundamental disagreements are problematic. According to some experts, the parties’ inability to reach an agreement could ultimately lead to the government introducing new legislation on employment. The joint studies indicate that the social partners are taking these disagreements seriously and that they want to maintain the Swedish system of bipartite self-regulation of the labour market.

Mats Kullander and David Björnberg, Oxford Research

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