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New law on temporary employment agency work - International Law Office

International Law Office

Employment & Benefits - Sweden

New law on temporary employment agency work

February 20 2013

Introduction
Regulation
Consequences
Comment


Introduction

On January 1 2013 a new legal act entered into effect. The act has its roots in the EU Temporary Agency Workers Directive (2008/104/EC). The directive has two separate aims:

  • the protection of employees in temporary employment agencies; and
  • the recognition of temporary employment agency work.

The new law regulates both temporary employment agency companies and client companies.

Regulation

The act - which has mandatory application for the benefit of the employee - covers workers employed by a temporary employment agency in order to be hired out to client companies. The act is therefore not applicable to other cases where a worker physically performs work at another company - for example, contracting work or lending of manpower. Nor does the act apply to a temporary employment agency's business where this consists of recruitment services only.

The principle of equal treatment is characteristic as regards the protection of workers under the act. The basic rule is that an employee should be treated in the same way as if he or she were employed directly by the client company. However, this applies only to certain terms of employment - mainly relating to wages and working hours. Such terms for a worker should correspond to those determined by the general rules - as stipulated in collective agreements or other general standards policies - applicable to the client company. Each specific term of employment should be on a comparable level; it is insufficient that the overall benefit level is more or less the same as in the client company. Further, the de facto level of benefits must apply. According to the act's preparatory works, the principle of equality shall not include pension benefits.

The principle of equal treatment is conditional. Thus, it does not apply to workers who have a permanent employment contract with the temporary employment agency and receive a salary between assignments when they are hired out. More important is the possibility to deviate by being party to a collective agreement. Through a collective agreement entered into or approved by a central trade union, parties may diverge from the principle of equal treatment, provided that the agreement sufficiently respects the overall protection of workers which the directive prescribes.

A temporary employment agency worker is also protected in other ways. A temporary employment agency may not, by means of contract terms or otherwise, prevent a worker from taking up employment with a client company. Further, a temporary employment agency may not request, agree on or receive compensation from a worker in order to place him or her at a client company. Nor may an obligation of compensation be made in cases where the worker enters into employment with a client company.

Further, a worker in a temporary employment agency has certain rights in relation to the client company. The worker must be offered access to common facilities and establishments under the same conditions as client company employees. This refers primarily to premises and the equivalent, such as canteens, gyms and vacation resorts. Temporary employment agency workers are not entitled to all staff benefits that apply in the client company, but have the right to access common facilities only. Client companies must further inform the temporary employment agency workers of vacant permanent and probationary employment positions. Such information need not be given individually - it is sufficient to post it generally. If the temporary employment agency workers have access to the client company's intranet, it is sufficient that the information be posted there.

If the temporary employment agency violates its obligations, the worker may seek both lost benefits and general damages. Similarly, the client company may be liable to pay damages where it violates its obligations. Additionally, in some situations agreements - or provisions therein - may be deemed invalid. This may be the case where, for example, collective agreements do not provide the protection afforded by the directive or certain terms of the commercial contract.

A special form of temporary employment agency work concerns foreign companies that post workers internationally by means of hiring them out. This is regulated by the Foreign Posting of Employees Act (1999/678). The legislature has concluded that the equal treatment principle shall not apply to these workers. Instead, they will be given increased protection by providing trade unions with greater rights to demand collective agreements by using strikes.

Consequences

A key question has been whether the different models for collective agreements that have existed in Sweden would continue to apply. The answer is that most collective agreements will remain valid, meaning that the principle of equal treatment will not be applicable on a large scale. In cases where the temporary employment agency has a collective agreement, this can normally be applied regardless of what applies at the client company. If the temporary employment agency does not have a collective agreement, the principle of equal treatment shall apply to workers who do not receive a salary between assignments. In this situation, temporary employment agencies face a number of practical problems when it comes to gaining access to information regarding both what the client company's terms of employment are and how these terms are applied to employees de facto.

With regard to conditions that prevent a worker from taking employment with a client company, this regulation does not focus only on conditions included in employment contracts. It is not unusual that rules prohibiting the client company from employing a temporary worker are included in the commercial contract between the temporary employment agency and the client company. Such rules will be invalid in the future. It is also common that recruitment fees are included in the commercial contract and apply to cases where the client company employs a temporary employment agency worker who has been previously hired out to the client company. The directive states that it is be possible for the temporary employment agency to charge a reasonable fee in such situations. It may be assumed that such a fee should correspond to the cost incurred by the temporary employment agency. Otherwise, such a fee may be considered an unjustified obstacle to the worker's ability to gain employment in the client company.

The act contains no additional rules that apply between the companies. Should either of the companies incur increased costs by reason of the act, the parties' business contract shall determine who should carry the final cost (recourse).

Comment

For the client company, the act changes very little. Some marginal duties will apply: to advertise vacant positions and to provide temporary workers with access to common facilities. If the temporary employment agency is not party to a collective agreement, this will entail increased administration, due to the fact that the temporary employment agency may need to examine the client company's terms of employment.

For temporary employment agencies that are party to a collective agreement, it is 'business as usual'. In all normal situations, the temporary employment agency's collective agreement will be applicable. The temporary employment agency cannot include rules in its commercial contracts that prohibit, or present unjustified obstacles to, a worker accepting employment in the client company.

For temporary agencies that are not party to a collective agreement,sho the act entails significant changes. If the temporary agency does not pay a worker's salary between assignments, the principle of equal treatment typically applies. This involves a great deal of administrative work for the temporary agency to determine what the hired-out worker's pay should be; particularly in the event of short assignments. The worker's salary can vary from assignment to assignment.

For further information on this topic please contact Erik Danhard or Julia DeMarinis Giddings at Hamilton by telephone (+46 8 505 501 00), fax (+46 8 505 501 01) or email (erik.danhard@hamilton.se or julia.demarinis-giddings@hamilton.se).


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