Grounds for Termination
Employers may dismiss employees either with or without notice. A dismissal with notice must be based on objective grounds. Objective grounds are not defined by statute or case law, but can be either for objective reasons or subjective personal reasons. Objective reasons are dismissals based on redundancy, re-organisation or the economic situation of the employer, while subjective personal reasons are all dismissals that relate to the employee personally, such as the employee’s conduct or performance.
The Co-Determination Act does not recognise the term “collective redundancies”. In contrast to many other European countries where the obligation to consult collectively is triggered only if there are several redundancies, the provisions on obligations to consult according to the Co-Determination Act are applicable even if the redundancy concerns only one employee. When the labour force has to be made redundant owing to objective reasons, the basic principle to be applied is that the employee with the longest aggregate period of employment with the company should be entitled to stay the longest. The employer must select those to be dismissed on a “last in, first out” basis. A condition for continued employment is that the employee has sufficient qualifications for one of the available positions that may be offered.
Negligent performance, serious misconduct, theft, disloyalty or other aggravating circumstances relating to the employee and his/her individual performance may constitute objective grounds for termination due to personal reasons. The employer has the burden of proof in this regard and it is often very difficult to present sufficient evidence to support the ground of termination of an employee for personal reasons. Further, the employer has an obligation to provide support to the employee to improve through, e.g., education or performance improvement plans. Dismissal without notice is lawful only where the employee has committed a fundamental breach of the employment agreement, such as gross misconduct by disloyalty in working for competitors, and should be implemented only in exceptional cases.
Is severance pay required?
There are no statutory provisions regarding severance pay. However, an employee may be entitled to severance pay in accordance with an employment agreement, a collective bargaining agreement or a separation agreement.
Is a Separation Agreement required or considered best practice?
The employer and the employee are free to enter into a final settlement. Hence, the employment may be terminated disregarding the strict rules of the Employment Protection Act. Normally, but not always, the employee is financially compensated in some way by the settlement. Consequently, an employee may waive his or her contractual rights.
Remedies for employee seeking to challenge wrongful termination
In case of wrongful termination of employment, the termination could be challenged by the employee and declared invalid by the court. The employer may be obliged to pay salary and benefits during the court proceeding, punitive damages (normally not exceeding SEK 100,000), compensation for economic losses (the maximum compensation that follows from the Employment Protection Act is 32 monthly salaries), and the costs for the litigation.
An employee who reports criminal activity or other gross misconduct, of which the employee has a valid reason to suspect in the employer’s business, shall be protected from reprisals from the employer. Protection from reprisals according to the Whistleblowing Act, however, generally requires that the employee try to report information on suspected conduct internally before disclosing it externally. Should the employer not act on the information reported by the employee, the employee may disclose it to the public or to the authorities. Furthermore, the protection offered by the Whistleblowing Act may not be set aside through an agreement, such as a confidentiality clause in the employment agreement.