Report in which the committee requests to be kept informed of development - Report No 294, June 1994

Case No 1760 (Sweden) - Complaint date: 17-FEB-94 - Closed

1. 544. In a joint communication of 17 February 1994, the Swedish Trade Union Confederation (LO), the Swedish Confederation of Professional Employees (TCO) and the International Confederation of Free Trade Unions (ICFTU) submitted a complaint of violations of freedom of association against the Government of Sweden.
2. 545. The Government supplied its observations on the case in a communication dated 2 May 1994.
3. 546. Sweden has ratified the Right to Organize and Collective Bargaining Convention, 1949 (No. 98) and the Collective Bargaining Convention, 1981 (No. 154).

A. The complainants' allegations

1. 547. In their complaint of 17 February 1994, the LO, TCO and ICFTU allege that a decision taken by the Swedish Parliament on 16 December 1993, which amends the Act on Security of Employment of 1982 (hereinafter "the 1982 Act") and which would nullify concluded collective agreements, violates Conventions Nos. 98 and 154, both of which have been ratified by Sweden. The complainants explain that in the 1982 Act there are, among other things, stipulations on employment contracts. The guiding principle of the legislation is that the employment contract is valid until further notice. There are, however, regulations on time-limited employment. The employer and the individual employee may conclude an agreement on probationary employment if the probationary period does not exceed six months. Furthermore, employment contracts may be concluded for a certain limited period of time, for example in case of temporary work loads, for a maximum period of six months over the course of two years. However, the Act regulating this matter is subject to derogation which implies that the employer and the trade union organization may, through collective agreements, further regulate this kind of matter, including periods of time and regulations for co-determination.
2. 548. The complainants contend that the decision of Parliament, in this matter, implies the following: (i) that the lawful period of using temporary employment in case of work loads will be extended from a total maximum of six months to a total maximum of 12 months during a two-year period; (ii) that the maximum period of probation in probationary employment will be extended from six to 12 months; and (iii) that the existing collective agreements which do stipulate shorter maximum periods for temporary and probationary work than those stipulated in the new regulations will be set aside. This appears from point 2 of the transitional stipulations to the new legislation (Act 1993: 1496), a copy of which is enclosed by the complainants in Swedish.
3. 549. The complainants consider the decision taken by Parliament to declare null and void already concluded collective agreements to be contrary to Article 4 of Convention No. 98. They claim that these collective agreements had been concluded voluntarily between employers' and workers' organizations in Sweden. If the State is entitled to abolish existing collective agreements, the right to free negotiations by the social partners becomes very weak in practice. This would further imply that the social partners are deprived of their autonomy and could not rely on their own agreements without there being a potential risk of the State interfering. The complainants do not consider that the State had justified reasons to intervene in the exercise of free collective bargaining nor that the nature of the matters in question concerning temporary and probationary employment justified such an intervention from the State.
4. 550. The complainants contend that the decision by Parliament to abolish collective agreements is also contrary to Convention No. 154 on the promotion of collective bargaining which defines the importance of the State promoting independent and voluntary collective bargaining and the objectives of such measures. In addition, workers' representatives submitted that the Government proposition was contrary to Conventions Nos. 98 and 154 before the decision was taken by Parliament, to no avail.
5. 551. In short, the complainants conclude that Parliament's decision to make null and void prevailing collective agreements constitutes an interference in the right to free collective bargaining, contrary to Conventions Nos. 98 and 154. The issue of such interference is of fundamental importance since if such interference is permitted in the way described above there might, in the long run, be an obvious risk of interference in other matters also which are regulated through collective agreements. The complainants submit that this legislation should be changed so that Sweden complies with its commitments as regards this matter.

B. The Government's reply

1. 552. In its communication of 2 May 1994, the Government first of all describes in a general manner the system of fixed-term hiring in connection with backlog of work and probationary employment. It states that Swedish law, viz section 4 of the Security of Employment Act of 1982, makes indefinite-term hiring the normal practice. Section 5 of the 1982 Act, however, provides for fixed-term hirings in certain specified cases. These include, for example, backlog of work. In addition, section 6 permits the conclusion of fixed-term probationary agreements.
2. 553. Through a statutory amendment, effective 1 January 1994, new maximum periods were defined for fixed-term hiring in connection with backlog of work and probationary employment. Before the amendment, fixed-term hiring in connection with a backlog of work could continue for up to six months in any two-year period. The purpose of this rule was to enable the employer to deal with situations requiring a temporary reinforcement of personnel. Similarly, probationary employment could last for up to six months before the amendment. Probationary employment was normally intended to be followed by indefinite-term employment after the probationary period. If the employer or the employee did not wish for the employment to continue after the expiry of the probationary period, notice to this effect had to be given to the other party at the latest when the probationary period had expired. Failing this, probationary employment automatically became indefinite-term employment. As from 1 January 1994, the scope for hiring personnel in connection with a backlog of work has been expanded by extending the permissible period from the previous six months to 12 months in any two-year period. The longest permissible duration of probationary employment has been similarly extended to a maximum of 12 months.
3. 554. Reasons given in the Bill for prolonging the maximum permissible hiring period in connection with a backlog of work include the following. Indefinite-term employment will continue to be the normal hiring procedure. The statutory time limit on hiring in connection with a backlog of work is intended to prevent abuses and evasions of the law. A time limit effectively prevents the employer from abusing the rules by hiring one and the same employee over a long period of time for backlog of work. The time limit, however, must not be so narrow as to rule out an excessive number of justifiable fixed-term hirings. If, for example, a company receives a big order for work which is expected to take more than six months to complete, it is absurd that the employer should be forced to hire, on an indefinite-term basis, extra personnel who will then have to be given notice or transferred to other duties in a redundancy situation. Thus the permissible duration of fixed-term hiring in connection with backlog of work needs to be extended. If an employer still needs an employee after a total of 12 months, there is no justification for saying that the need is prompted by a backlog of work. If the employer wishes to go on using the employee's services, he will have to offer him indefinite-term hiring instead. The wider scope for hiring in connection with backlogs of work will presumably be of benefit mainly to smaller undertakings with few employees. These undertakings can often have difficulties in meeting an unusually large order without hiring new personnel. At the same time it may be doubtful whether, in the long term, they can permanently employ one or more additional workers. This being so, indefinite-term hiring is not a real option.
4. 555. Reasons given for extending the permissible probationary period include the following. The purpose of the probationary period is for the employer, without immediately assuming the responsibility which indefinite-term hiring entails, to have an opportunity of judging how well the employee copes with the work. Conversely, the probationary period gives the employee an opportunity of forming an opinion of the job. In order for probationary hiring to serve its purpose, the probationary period must be long enough to provide sufficient basis for these assessments. The existing rules, for example, do not provide any possibility of extension if the employee is taken ill or goes on holiday. In many cases a six-month probationary period is perfectly sufficient, but there are situations where a longer period is desirable and necessary. The question is how long the maximum period ought to be. The National Labour Market Board submitted that probationary employment for a relatively long period can enhance the prospects of a permanent foothold in the employment section and that probationary periods have also proved to have an essential bearing on rehabilitation. The Board recommended that probationary employment should be allowed for up to one year. The Government endorsed the recommendation and therefore proposed a maximum permissible probationary period of one year. This wider scope for probationary hiring will above all benefit small undertakings, giving them more time in which to assess an employee's capacity. In addition, as argued by the National Labour Market Board, the change should be of benefit to employees, young ones especially, because in practice probationary hiring is often their only chance of entering the regular labour market and showing their capabilities.
5. 556. The Government explains that section 3 of the Act, even after amendment, makes it permissible for collective agreements concluded or approved by a central organization of employees to deviate from the statutory provisions concerning fixed-term hiring and fixed-term probationary employment. Thus the amendment does not affect the right of the parties, for example, to agree on different periods, shorter or longer, from those which the Act prescribes for hiring in connection with backlogs of work or probationary employment. The Government backs up its argument by stating that the interim provisions accompanying these amendments (point 2) lay down as follows:
   • A collective agreement concluded prior to the entry into force of this Act shall be null and void in so far as it contains provisions for shorter contracting periods for fixed-term hiring in connection with backlogs of work and probationary employment than sections 5 and 6 of this Act as now worded. The agreement shall be valid, however, if concluded in derogation of sections 5 and 6 of the Act as now worded.
6. 557. The Government states that the principal reasons given in the Bill for this arrangement were the following. The right of entering into agreements on fixed-term hiring in connection with backlogs of work was not regulated by statute until the passing of the 1982 Security of Employment Act. When that Act was passed, however, collective agreements deviating from its provisions were left unaffected. In substantial areas of the labour market today, there still exist collective agreements providing for contracting periods of less than six months for hiring in connection with temporary backlogs of work and probationary employment. These provisions of the collective agreements emanate to a great extent from the period, pre-1982, when these forms of hiring were only permissible if a collective agreement had been concluded on the subject. It is important that the statutory amendments now proposed, in the form of longer permissible periods, should apply to the whole of the labour market and not only to that part of it which is not regulated by collective agreements. If this were not to be the case and, accordingly, the old collective provisions were to remain in force, there would be an obvious danger of the statutory amendments failing to produce, with sufficient rapidity, the positive effects which can be expected during the impending upturn.
7. 558. According to the Government, there are basically two ways of ensuring that the statutory amendments have the intended effect. One of them is to make the provisions peremptory. This would mean depriving the parties of the option of concluding collective agreements on these matters and prescribing that agreements contrary to the statutory provisions are invalid. The other way is for the statutory provisions to remain optional for the labour market parties but for provisions sanctioning shorter periods in the existing collective agreements to be eliminated. The Government chose to recommend the latter alternative, and this was the decision arrived at by the Riksdag (Parliament). This alternative was chosen because the Government was anxious for the parties to remain at liberty to adjust the statutory provisions, through collective agreements, to the needs of a particular industry, undertaking or activity.
8. 559. Thus, the Government maintains that the parties are still at perfect liberty, even after the entry into force of the new Act, to agree on different hiring periods from those which the Act prescribes. Accordingly, if the parties have had an agreement for a period of less than six months, a new agreement to the same effect can still be concluded after the amendment. The interim provisions also lay down that, if the parties so desired, they were already entitled, before the Act came into force, to conclude collective agreements in derogation of the amendment. In this way, an agreement identical to the previous one could enter into force on the same day as the legislation itself.
9. 560. The Government admits that it is quite true that a procedure of this kind is open to objections of principle. The question, however, is not altogether a new one. It was closely discussed with reference to the Government Bill resulting in the Co-Determination Act. The interim provisions of that Act similarly prescribed that collective agreements entered into before the Act entered into force would be null and void in so far as they derogated from the rules of the new Act. The grounds given for this were that a reform like the Co-Determination Act should enter into force at a single point in time for the whole labour market and that, accordingly, its entry into force should not be governed by collective agreements entered into under completely different conditions. When the Equal Opportunities Act was passed in 1979, it was similarly prescribed that an agreement entered into before the Act came into force would be invalid in so far as it deviated from the provisions of the Act. The Government adds that prior to the present amendments to the Security of Employment Act, the Council on Legislation stated as follows:
   • Nowadays, however, it must be deemed established legislative practice in the field of labour law for non-compulsory statutory rules to be retroactively applied to pre-existing collective agreements, provided there is found to be an urgent necessity for the new statutory rules to achieve rapid impact throughout the labour market. In the Government's proposal it is claimed that it is important for the statutory amendments now proposed to achieve such an impact, and certain reasons have been given for this. The Council, therefore, does not wish to oppose the introduction of the interim provision proposed in point 2.
10. 561. Furthermore, the Parliamentary Standing Committee on Labour Market Affairs stated partly as follows:
    • The extended contract periods proposed for hiring in connection with backlogs of work and probationary employment are aimed at encouraging businesses to hire new employees and in this way to make it easier for unemployed persons to obtain work. The extremely difficult situation at present makes it vital for the impact of the statutory rules to be as swift and widespread as possible. As the Standing Committee sees it, the changes in the rules should above all benefit groups with high unemployment rates - young persons, immigrants and others lacking a firm foothold in the labour market. As remarked in the statement by the Council on Legislation, it must nowadays be regarded as established legislative practice in the field of labour law for non-compulsory statutory rules to be retroactively applied to pre-existing collective agreements, provided there is found to be an urgent necessity for the new statutory rules to achieve rapid impact throughout the labour market. The Standing Committee therefore sees no legal impediments to an interim provision eliminating such parts of collective agreements as frustrate the very purpose of the statutory amendments.
11. 562. The Government asserts that in accordance with Article 4 of Convention No. 98, Sweden has a long tradition of defining terms and conditions of employment through collective agreements. In addition, labour law provides, where several statutory provisions are concerned, that the parties are entitled to derogate from the statutory rules by concluding collective agreements. Thus the parties in the Swedish labour market have a very important role to play in the regulation of terms and conditions of employment. The Government maintains that the statutory amendment and provision now under consideration, invalidating provisions of collective agreements defining hiring periods of less than 12 months for the two forms of hiring, cannot be deemed contrary to the Convention. As has already been made clear, it is still up to the parties to conclude collective agreements in derogation of the statutory provisions. The Government Bill underlines the essential need for the parties to adapt their agreements to the new provisions on longer hiring periods.
12. 563. Moreover, although the complainants claim that the decision taken by Parliament is contrary to Convention No. 154, the Government contends that they have not defined their standpoint as far as this Convention is concerned, nor have they given any further indication as to which part of the Convention Sweden is in breach of. Article 5 of the Convention lays down that nationally appropriate measures are to be taken for the promotion of collective bargaining, and it prescribes what the purpose of these measures shall be. The Government cannot see that the statutory amendment now enacted is contrary to this or any other article of the Convention since, as indicated above, the parties are at perfect liberty to conclude new agreements.
13. 564. The Government concludes by submitting that it has not contravened either of the two Conventions referred to through the interim provisions accompanying the amendments to the Security of Employment Act. This measure has been prompted by a desire for the statutory amendment to have a rapid impact on the Swedish labour market. The Government and Riksdag have considered this to be of the utmost importance, in view of the difficult employment situation in Sweden at present. For the promotion of freedom of negotiation and collective agreement between the parties, the Government and Riksdag (Parliament) have chosen to make the provisions in question non-compulsory for the labour market parties in future, just as they had been previously. Sweden, in other words, has encouraged the negotiation of collective solutions in this field for the future.

C. The Committee's conclusions

1. 565. The Committee notes that the allegations in this case concern violations of collective bargaining principles following amendments to the Security of Employment Act of 1982 (the Act), effective from 1 January 1994, which amongst other things nullify previously concluded collective agreements (on matters of fixed-term employment in certain specified cases) which do not conform to the requirements of the new legislation. The Government maintains that while the interim provisions of the amendments to the 1982 Act do invalidate provisions of previously concluded collective agreements which do not conform to the requirements of the new legislation, they do not violate collective bargaining principles since the parties can still conclude new collective agreements in derogation of the new statutory provisions.
2. 566. The Committee, for its part, notes that under the terms of point 2 of the transitional provisions of the 1993 amendments, previously negotiated collective agreements which provide for periods of less than 12 months for fixed-term hiring in connection with backlog of work and probationary employment are in effect cancelled. In this respect, the Committee would, first of all, draw the Government's attention to the principle that the right to bargain freely with employers constitutes an essential element of freedom of association and that the public authorities should refrain from any interference which would restrict this right or impede the lawful exercise thereof. Moreover, the Committee has stressed the importance it attaches to the principle of the autonomy of the parties to the collective bargaining process, a principle generally recognized in the preparatory discussions that led to the adoption by the International Labour Conference in 1981 of the Collective Bargaining Convention (No. 154) (see Digest of decisions and principles of the Freedom of Association Committee, 3rd edition, 1985, paras. 583 and 593).
3. 567. The Committee notes the Government's detailed explanations that this legislative measure was dictated by the state of the economy as well as by socio-economic policy concerns. While mindful of the Government's various concerns in this respect, it is not for this Committee to express an opinion one way or another on the economic justification of this legislative measure. It notes, however, that the Government maintains that free collective bargaining will continue in any event since the parties can, under the terms of point 2 of the transitional provisions, conclude new collective agreements in derogation of the new legislation which could provide for the same hiring periods as those stipulated by the cancelled collective agreements. However, in the Committee's view, the existence of this possibility does not alter the basic position that the legislation overrides the provisions of existing collective agreements.
4. 568. Furthermore, while admitting that legislation of this kind is open to objections of principle, the Government indicates that this issue is not a new one since the interim provisions of two other Acts, namely the Codetermination Act of 1976 and the Equal Opportunities Act of 1979, prescribed that collective agreements entered into before the entry into force of these Acts would be null and void in so far as they derogated from the rules of these Acts. The Government states that those measures as well as the present one are justified on the grounds that the said amendments should enter into force at a single point in time for the whole labour market and that their entry into force should not be governed by collective agreements entered into under completely different conditions.
5. 569. In this connection, the Committee feels bound to point out to the Government that repeated recourse to legislative restrictions can only, in the long term, prejudice and destabilize the labour relations climate, and that if the legislator intervenes to suspend or terminate the exercise of rights recognized for unions and their members, this may have a detrimental effect on workers' and employers' interests in unionization.
6. 570. For all the above-mentioned reasons, the Committee considers that the new legislation, in so far as it overrides previously negotiated collective agreements, constitutes an act of interference which restricts the right of trade unions and employees to bargain freely with employers, thereby violating the principle of the autonomy of the parties to the collective bargaining process. The Committee requests the Government to refrain in future from having recourse to such measures of legislative intervention. It further requests it to ensure that point 2 of the transitional provisions of the 1993 Act amending the 1982 Act is amended so that previously concluded collective agreements are not overridden and to keep it informed of developments thereof.

The Committee's recommendations

1. 571. In the light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendations:
   • (a) Considering that the 1993 Act amending the Security of Employment Act of 1982, in so far as it overrides previously concluded collective agreements, constitutes an act of interference which violates the principle of the autonomy of the parties to the collective bargaining process, the Committee requests the Government to refrain in future from having recourse to such measures of legislative intervention. It further requests the Government to ensure that the 1993 Act is amended so that collective agreements concluded prior to its entry into force are not overridden, and to keep it informed of developments thereof.
   • (b) The Committee draws the legislative aspects of this case to the attention of the Committee of Experts on the Application of Conventions and Recommendations.