Sweden: The repeal of Lex Laval

The controversial Lex Laval amendment to Swedish law has been repealed. The 2010 measure significantly restricted unions’ ability to take industrial action against international companies who deny their posted workers parity with Swedish working conditions. Unions have welcomed this, but employer organisations argue it could reduce the number of companies operating in Sweden.

Background

The ‘Lex Laval’ controversy began in 2004 when a Latvian construction company, Laval un Partneri Ltd, posted workers to Sweden and refused a request by the Swedish Building Workers’ Union (Byggnads) to sign a collective agreement for its workers. Byggnads and the Swedish Electricians’ Union (SEF) then blockaded the construction site.

Laval claimed this infringed its right to free movement of services. The Swedish Labour Court ruled that the blockade was legal, but referred the matter to the Court of Justice of the European Union (CJEU). In 2007 the CJEU ruled in favour of the posting company stating that the union had acted unlawfully and called for Swedish law to be amended.

The law regulating posted workers was amended in 2010 with the changes referred to as ‘Lex Laval’. The core amendment was a significant restriction of the unions’ ability to use industrial action against employers who had refused to allow their posted workers to be covered by Swedish collective agreements.

However, after Sweden’s change of government in 2014, the new government led by the Social Democrats and the Green Party said it wanted to change the law and in 2015 an official inquiry was commissioned (PDF). In April 2017, the Swedish parliament voted to repeal the Lex Laval regulation, with the new rules coming into effect on 1 June.

Repeal of regulation

With the Lex Laval regulation,  unions were not permitted to use industrial action against foreign enterprises claiming to apply working conditions for posted workers that were ‘comparable’ to those agreed in Swedish collective agreements. With the new rules, unions will now be able to negotiate for, and agree on, collective agreements for posted workers. Ylva Johansson, Minister for Employment, said the unions' strengthened role is the most important change in the repeal. Ms Johansson also said the repeal was an important measure for the development of the Swedish model, which enshrines collective agreements negotiated between social partners as a key feature of Swedish social dialogue and industrial relations.

Ms Johansson said collective agreements were crucial to ensure good working conditions, especially in the absence of a statutory minimum wage, adding that with the repeal of Lex Laval, the government aims at making the Swedish system better at protecting posted workers by providing them with the same conditions guaranteed as a minimum to Swedish workers.

Claes-Mikael Jonsson, legal expert at the Swedish Trade Union Confederation (LO), agrees that the unions’ role has indeed been strengthened. In recent years it has been particularly difficult for unions to prove that foreign companies have not applied working conditions in line with those agreed in Swedish collective agreements. Furthermore, unions have generally not been willing to risk potentially costly processes, such as the one Byggnads sustained in the Laval case. The new rules clarify when unions may legally use industrial action as a tool in any dispute over posted workers.

However, opposition political parties have expressed concerns that foreign companies might now choose to move their operations to other countries. The 2015 official inquiry said repealing Lex Laval could improve the competitiveness of Swedish enterprises as it could even out the differences in working conditions between domestic and foreign businesses, and thus also in what companies could charge for their services. The inquiry added that repealing Lex Laval would induce employers either to sign collective agreements as requested by Swedish unions, or to end their activities in Sweden.

Nevertheless, now that Lex Laval has been repealed, the amount of industrial action is not expected to rise considerably, as the unions’ newfound ability to implement it is thought to be effective enough in itself.

Reactions from social partners

LO has welcomed the repeal, saying it will significantly facilitate the unions’ role and is more in line with the Swedish model. However, Mr Jonsson believes the change cannot be called a repeal, arguing that ‘Lex Laval’ is an umbrella term, as some of the legal changes introduced in 2010 still persist.

The Confederation of Swedish Enterprises (SN) on the other hand – in line with the political opposition – expressed concerns that fewer foreign enterprises would choose to operate in Sweden, leading to reduced competition. A representative of SN argued that the repeal of Lex Laval could even affect Sweden’s ability to solve its housing shortage, because the construction sector receives the highest share of posted workers.

However, Johan Lindholm, the chair of Byggnads, said that parliament's decision was an important victory, especially since Byggnads has fought for many years for more reasonable competition between domestic and foreign enterprises. Byggnads’ employer counterpart, the Swedish Construction Federation (BI), was initially critical of the repeal. However, after a government suggestion (made public in February 2017), the employer organisation changed direction and Mats Åkerlind, the vice chair of BI, expressed his cautious approval. He explained this change of mind was due to the fact that BI and Byggnads had recently come to a new agreement on minimum wages. As the two social partners now had a common understanding of how to interpret the collective agreement, Mr Åkerlind saw the repeal of Lex Laval as ‘an opportunity for better transparency and improved chances of skills supply’.

Commentary

The government has stated that it will continue to work for a change in the EU Posted Workers Directive (PDF) so that it becomes possible to ensure the same wage for posted workers as for domestic ones, instead of just guaranteeing minimum levels. LO has a similar agenda. Although the organisation sees the repeal of Lex Laval as a significant success for the Swedish model, its struggle continues for the right to request foreign enterprises to pay the same wages as Swedish enterprises. A few employer organisations, such as BI, are awaiting the effects of the changed regulation before expressing a definitive opinion.

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