Observation (CEACR) - adopted 2012, published 102nd ILC session (2013)

Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87) - Sweden (Ratification: 1949)

The Committee notes the information provided by the Government on the impact of legislative changes and the comments of the Confederation of Swedish Enterprise (CSE) attached to the Government’s report. It further takes note of the supplementary comments dated 10 August 2011 and 13 November 2012 made by the Swedish Trade Union Confederation (LO) and the Swedish Confederation of Professional Employees (TCO). The Committee invites the Government to provide any further information it considers relevant in reply to these comments.

The Committee recalls that in its previous observation it had taken note of the comments provided by the LO and the TCO concerning the application of the Convention within the framework of the European Court of Justice (ECJ) judgment in the case Laval un Partneri v. Svenska Byggnadsarbetareforbundet (Laval). The LO and the TCO referred in particular to the ex post facto application of the interpretation given to European Union law in the Laval judgment to the industrial action taken in that case and the punitive damages and legal fees levied against the unions, as well as the subsequent legislative amendments to the Foreign Posting of Employees Act and the Codetermination Act of 1976. The LO and the TCO denounce the new legislation which it states only permits industrial action against a foreign employer where it is aimed at bringing about a collective agreement restricted to the minimum terms covered by article 3(1)(a)–(g) of the Posting of Workers Directive (PWD). They emphasize that industrial action against a foreign employer is thus forbidden as regards any demand for a term or condition of employment higher than the absolute minimum set out in a central collective agreement and in relation to a range of other issues not set out in the PWD, such as insurance coverage for foreign workers. Moreover, section 5(a)(2) provides that industrial action may not be taken if the employer shows that the employees’ terms and conditions in substance are as favourable as the minimum conditions in the central collective agreement. The LO and the TCO contest that there are no specific details on how the employer may show this. The Committee had requested the Government to monitor the impact of the legislative changes on the rights under the Convention and provide a detailed report.

General appreciation

The Government in its latest report, observing that the LO and TCO have submitted a similar complaint to the European Committee of Social Rights (ECSR), provides the following information. The Government specifies that a parliamentary committee was assigned on 27 September 2012, composed of representatives of all parliamentary parties, to look at the situation of posted workers and, following its investigation: (1) evaluate whether the application of the regulation ensures that fundamental employment conditions of posted workers in Sweden can be safeguarded; (2) in terms of foreseeability, assess and evaluate the practice of the Swedish Work Environment Authority’s statutory task of providing information and the trade unions’ obligation to submit information on collective bargaining agreements to the Swedish Work Environment Authority, and if necessary propose legislative changes in this regard; and (3) consider necessary changes to safeguard the Swedish labour market model in an international context. The Committee shall pursue a dialogue with representatives of the social partners on the Swedish labour market and include an analysis of the consequences, if any, in relation to relevant international regulations and present its work on 31 December 2014.

The Government also refers to a Bill regarding agency workers which was submitted to the Swedish Parliament on 18 September 2012 and includes a proposal that would increase the trade unions’ possibilities to take industrial action in order to regulate the terms and conditions of employment of posted agency workers. The legislative changes are proposed to enter into force on 1 January 2013. Finally, the Government refers to the directive to improve the application of the EU Posting of Workers Directive which is being negotiated at EU level.

The Committee notes the concerns raised by the LO and the TCO that the new situation makes it difficult to determine in advance what is lawful, and the risk of large claims for damages have made trade unions in Sweden more cautious about demanding collective agreements. No trade union industrial action with a view to bringing about a collective agreement with a foreign company has taken place at all in recent years in the Swedish labour market, leading to a sharp fall in collective agreements. This means that foreign workers are entirely without protection as regards reasonable terms and conditions of pay and employment when they are working in the Swedish labour market and that Swedish workers are exposed to competition from workers with very low pay and wretched employment conditions. A further implication is that Swedish companies can no longer compete on equal terms with foreign companies. In the long term, there is a risk that this will have negative repercussions for the entire Swedish labour market model.

The Committee notes the comments of the Confederation of Swedish Enterprise that: the free movement of services throughout the EU is one of the foundations of the EU which requires that the barriers to providing services between Member States be abolished; the free movement of services is of vital importance in creating growth within Europe, and the positive effects of this in areas such as exports and consumption leading to increased employment and welfare in European countries; the EU’s rules also give people the opportunity of employment and work in other countries; the aim of the Posting of Workers’ Directive is to enable this free movement without barriers, while ensuring that employees who work temporarily in other European Economic Area (EEA) countries are provided with an adequate level of protection. As Sweden is a small country which is dependent on trade for its prosperity, these rules are of crucial significance. The service sector is expanding in both Sweden and in Europe and the provision of services across borders will become increasingly important.

The CSE and the Swedish Association of Local Authorities and Regions do not consider that the changes made in the Posting of Workers Act and the Codetermination Act in response to the Laval judgment violate ILO Conventions. The Confederation adds that they were necessary to fulfil requirements of EU law in respect of the free movement of services and non-discrimination. With respect to the right to strike, the Confederation stresses that Convention No. 87 does not include any right to strike, which remains therefore a matter for national regulation. The Confederation adds that, in Sweden, it is normal that a trade union which takes illegal industrial action may have to pay compensation for losses arising from that action, as is the case in most legal systems.

The Confederation states that the changes to the legislation only affect the ability of trade unions to take industrial action against foreign companies and do not in any way affect the right to organize and the ability to enter into voluntary collective agreement negotiations. Swedish trade unions are free to request the conditions which they consider appropriate and are not limited to core rights in this regard. Nor are there any barriers preventing employees posted to Sweden from joining a Swedish trade union, nor preventing foreign employers from joining a Swedish employers’ association. The Confederation considers that the rules introduced represent a significant improvement in so far as it is now easier for companies from the EEA to operate temporarily in Sweden. The new system is more predictable and legally secure, enabling companies to identify in advance the conditions which they are obliged to apply while working in Sweden, and the conditions which trade unions are entitled to demand through collective bargaining. The Confederation states that Swedish trade unions continue to request foreign companies to sign collective agreements and that the foreign companies usually sign them. It is not aware of any disputes having arisen in this regard, or of steps taken by a foreign employer to protect against industrial action. The Confederation further recalls that the Posting of Workers Act states that high standards of reliability must be placed on statements advanced by the employer to be protected from industrial action so it is likely that the employer would have to demonstrate the salaries and conditions actually provided beyond just citing the employment contract. The Confederation does not consider that the current system would prevent Swedish companies from being able to compete with foreign companies which comply with current Swedish regulations.

The Confederation does however regard with great concern the proposed legislation which the Swedish Government has recently introduced (Bill 2011/12:178, Law on Hiring of Workers) in which the Government proposes that foreign temporary work agencies are to be treated differently than other foreign companies by permitting industrial action against the former with the object of demanding conditions within the areas included in the core rights but not restricted to the minimum levels in collective agreements. The Confederation believes this would likely lead to an increase in collective disputes with foreign companies and will create uncertainty in the differences between those covered by this Bill and other foreign businesses making it unreasonably difficult to predict the precise conditions that they would need to apply when active in Sweden.

In its additional communication dated 13 November 2012, the LO and the TCO welcome the Government’s submission which they hope will enable the Committee to carry out its work. They regret however that the Parliamentary Committee set up to evaluate the changes in the Foreign Posting of Employees Act was not given the mandate to review the Act in light of Conventions Nos 87 and the Right to Organise and Collective Bargaining Convention, 1949 (No. 98). While the LO and TCO consider that the new legislation on posted agency workers is a step forward, they consider that this does not resolve the issue of the collective agreement free zones on issues outside the Posting of Workers Directive. Finally, they indicate that the discussions within the EU on a directive to improve the application of the Posting of Workers Directive are irrelevant as the proposal being discussed does not address the issue of the right to take collective action.

The Committee requests the Government to continue to provide information on the impact of the legislation and in particular the outcome of the work of the Parliamentary Committee and any proposed legislative changes, as well as the developments relating to the Bill regarding agency workers.

Sanctions for industrial action

In their previous communication, the LO and the TCO refer to the €342,000 in punitive damages, litigation costs and interest that the Swedish Building Workers’ Union (Byggnads) and the Swedish Electricians’ Union were forced to pay to Laval’s Latvian trustee in bankruptcy. In this regard, the LO and the TCO state that the unions were being held liable for an ex-post facto application of the interpretation given to European Law through the Laval judgment. Despite the fact that the initial consideration by the Swedish courts in December 2004 found that the collective action was lawful under Swedish Law (a decision which cannot be appealed), the Swedish labour court revisited the case in 2009 in the light of the 2007 ECJ judgment and, given that the trade unions now conceded that the action was unlawful, ordered payment of damages. While having made the full payment of damages in October 2010, the unions continue to claim that they should not be held liable for industrial action which was considered to be lawful at the time it was undertaken; any expectation that the unions should have known that the action would be found unlawful under European Law several years later is wholly unreasonable.

The Committee, observing that the Government has still not provided any reply to this point, first wishes to recall its considerations when examining the impact of the International Transport Workers’ Federation and the Finnish Seaman’s Union v. Viking Line ABP (Viking) and Laval judgments in another European country. As in that case, the Committee wishes to recall that its task is not to judge the correctness of the ECJ’s holdings in Viking and Laval as they set out an interpretation of the European Union Law, based on varying and distinct rights in the Treaty of the European Community, but rather to examine whether the impact of these decisions at national level is such as to deny workers’ freedom of association rights under Convention No. 87. The Committee raised the concern at the time that the omnipresent threat of an action for damages that could bankrupt the union, possible in the light of the Viking and Laval judgments, created a situation jeopardizing the exercise of the rights under the Convention. In this specific case, the Committee is deeply concerned that the union in question has been held liable for an action that was lawful under national law and for which it could not have been reasonably presumed that the action would be found to be in violation of European Law. The Committee recalls that imposing sanctions on unions for leading a legitimate strike is a grave violation of the principles of freedom of association. The Committee considers that this principle is all the more relevant in the circumstances where the action was lawful at the time it was exercised. While aware that the payment has already been made to the trustee in bankruptcy, the Committee requests the Government to review this matter with the social partners concerned so as to study possible solutions for compensation of the two unions, particularly in light of the 2004 court judgment leading the unions to believe their action was lawful.

Lex Laval

The Committee notes the Government’s reiteration that the legislative changes made following the Laval ruling, which entered into force on 15 April 2010, do not violate any of the ILO Conventions on freedom of association or collective bargaining. The Government has explained that the core of the relevant change is a new section 5(a) which only refers to the Swedish trade unions rights to take industrial action against a foreign employer who posts workers to Sweden and does not affect either the workers’ rights to form or join trade unions or to engage in collective bargaining. Moreover, the restriction only refers to industrial action aimed at conditions going beyond the hard core of the PWD. The Government adds that the amendments do not affect industrial action in a purely national situation and contends that the Convention primarily protects national conditions and not workers who have been posted to another country. Moreover, the Government stated that the Convention primarily protects industrial action against the employee’s own employer which is not the case if the posted workers are not members of the Swedish trade union.

The Committee notes the comments of the LO and the TCO that the explicit purpose of the Swedish legislation prior to the Laval case, and in particular the Lex Britannia rule which permitted industrial action with the purpose of compelling a foreign employer to enter into a collective agreement regardless of whether the employer was already bound by a collective agreement with a trade union in its home country, was to achieve equality of treatment on the Swedish labour market of foreign and Swedish companies and employees. The Committee notes that the LO and the TCO denounce the new legislation which it states only permits industrial action against a foreign employer where it is aimed at bringing about a collective agreement restricted to the minimum terms covered by article 3(1)(a)–(g) of the PWD. They emphasize that industrial action against a foreign employer is thus forbidden as regards any demand for a term or condition of employment higher than the absolute minimum set out in a central collective agreement and in relation to a range of other issues not set out in the PWD, such as insurance coverage for foreign workers. Moreover, section 5(a)(2) provides that industrial action may not be taken if the employer merely shows that the employees’ terms and conditions in substance are as favourable as the minimum conditions in the central collective agreement. In other words, the employer does not even need to be bound by a collective agreement with a trade union in its own country or prove in a legally binding way the assurance of minimum conditions in order to be protected from industrial action. Finally, the LO and TCO indicate that, while the Swedish trade union movement has been making great efforts to organize foreign workers posted to Sweden, the restriction on industrial action makes no distinction as to whether or not the union has members in the foreign enterprise.

In its latest report, the Government, while observing that there has not yet been any unbiased and comprehensive evaluation of the legislative changes, provides statistics from the Swedish National Mediation Office showing that these statistics show that the number of disputes with foreign employers is low; there was one dispute in 2007 and 2008 and no disputes from 2009 through 2011. There was a slightly higher number of disputes prior to 2007 ranging from five in 2002 and 2003 to 12 in 2004, 11 in 2005 and four in 2006.

As a general matter, the Committee recalls that when elaborating its position in relation to the permissible restrictions that may be placed upon the right to strike, it has never included the need to assess the proportionality of interests bearing in mind a notion of freedom of establishment or freedom to provide services. The Committee has however suggested that, in certain cases, the notion of a negotiated minimum service in order to avoid damages which are irreversible or out of all proportion to third parties, may be considered and if agreement is not possible the issue should be referred to an independent body (see 2012 General Survey on the fundamental Conventions concerning rights at work in light of the ILO Declaration on Social Justice for a Fair Globalization, paragraphs 136–139). The Committee considers, however, that the principles of the Convention does not impose the recognition of a Lex Britannia rule, which is very particular to Sweden. This would be a matter to be determined at the national level.

The Committee does observe with concern, however, that the amendments to the Foreign Posting of Employees Act restrict recourse to industrial action to conditions corresponding to the PWD minimum conditions and further bar unions from taking industrial action even if they have members working in the enterprise concerned and regardless of whether a collective agreement covers the workers concerned, provided that the employer can show that the employees’ terms and conditions are as favourable as the minimum conditions in the central collective agreement. The Committee considers that foreign workers should have the right to be represented by the organization of their own choosing with a view to defending their occupational interests and that the organization of their choice should be able to defend its members’ interests, including by means of industrial action. The Committee therefore requests the Government to review with the social partners the 2010 amendments made to the Foreign Posting of Employees Act so as to ensure that workers’ organizations representing foreign posted workers are not restricted in their rights simply because of the nationality of the enterprise.