Sweden adopted the law on employee involvement in the European Company (SE) in March 2005.
There are employee representatives on the boards of all but the smallest companies in Sweden. Sweden made a rapid start in transposing the directive, setting up an expert group in the summer of 2002. The proposals for employee involvement were uncontroversial, but there was greater discussion on the possibility that Swedish companies might use the new legal form to avoid taxation.
Employees are represented on the boards of all companies with more than 25 employees (Sweden has a single-tier board system.) There are two or three employee members and they account for around one third of board members in most companies. They are chosen by the unions and are generally the key figures in a whole range of employer-union relations. The idea of employee representation at board level is very familiar in Sweden.
Sweden made an early start in transposing the directive. The government agreed to set up an expert group in June 2002 and it started work in August 2002. It was helped by a reference group made up of legal officers from the main union confederations and the employers. In the course of its examination of the issues, the group asked whether the two sides wanted to transpose the directive through a collective agreement, but both unions and employers considered that this would be inappropriate. In its report, published in June 2003, the expert group set out its proposals for legislation, stating that its starting point was “that the directive shall be implemented in such a way as to follow the traditions of the Swedish labour market as far as possible” (Utredningen om arbetstagarinflytande i europabolag SOU 2003:64). In practice this means that it is the unions who choose employee representatives.
In March 2004 the Swedish government presented draft legislation implementing the directive to the Swedish parliament which approved it in May 2004. Two other linked pieces of draft legislation were presented to the parliament at around the same time. Legislation adapting Swedish company law to the Regulation on European companies was also presented in March and approved in May 2004, and legislation making changes to the Swedish tax system to accommodate European companies, was presented in April and approved in May 2004. The legislation on employee involvement was approved without debate in parliament, but there was more discussion on the other proposals, linked to the fear that Swedish companies might choose to become European companies and move their headquarters outside the country to avoid Swedish taxation. The legislation passed allows the Swedish tax authorities to intervene to prevent this in certain circumstances. For more details see the 2004 reports by Claes-Mikael Jonsson and Niklas Bruun.
Directive was transposed by law in June 2004, four months before the October 2004 deadline.
The directive on employee involvement in European companies was transposed through legislation approved by the Swedish parliament on 13 May 2004 and finally adopted on 10 June 2004. Its full title is Act (2004:559) on the involvement of employees in European companies (Lag (2004:559) om arbetstagarinflytande i europabolag).
There was separate legislation making the changes necessary to adapt Swedish company legislation to the Regulation on European companies. It was also adopted on the same date in June 2004.
Special negotiating body (SNB)
Swedish SNB members for a European company are chosen by the unions, normally by agreement between them but by the unions in order of size if they cannot agree. Only if there is no union are the SNB members directly elected by all employees.
Swedish members of the SNB are selected by the local union organisations that have collective agreements with the companies involved. In most Swedish companies the choice will normally be agreed between the two or three unions present. However, if there are several local union organisations and they cannot agree, then the body representing the largest number of employees has the first choice. If there are several members to be chosen and the unions cannot agree then the detailed rules which apply to the selection of employee board members in national Swedish companies are used (§16). These state for example that if one union represents 80% of the employees it appoints all Sweden’s SNB members but if no organisation represents more than 80%, the seats are shared between the two unions that represent the largest number of employees (Board Representation (Private sector employees) Act 1987:1245).
If the company or plants involved do not have a collective agreement with a union, the local union organisation with the largest number of members will choose the Swedish members of the SNB, unless it agrees otherwise with other union organisations (§17)
Where there is no local union organisation the SNB members are selected by the employees themselves (§18).
There is no specific provision allowing external union representatives from Sweden to be members of the SNB and under normal Swedish practice they would not be present.
The legislation does not specifically state that only employees must be chosen. However, normal Swedish practice is that external union representatives do not have this sort of role. It would be very unusual if SNB members from Sweden were not employees.
Funding not formally limited to a single expert, but in normal cases a single expert will be sufficient
The Swedish legislation does not include a specific limit on the number of experts paid for by the companies. It states only that they should bear the expenses “to the extent required” to enable the SNB “to carry out its tasks in the appropriate manner” (§27).
However, the government proposal setting out the legislation states that, while no explicit limit will be applied, in most cases a single expert will be sufficient and companies will therefore only be expected to pay for one. Despite this, the government accepts that there may be cases where it is necessary to pay for more than one expert, for example to cover several separate issues. (Regeringens proposition 2003/04:122 Arbetstagarinflytande i europabolag 5.6.7)
Standard rules under the fallback procedure
Members of the SE representative body are chosen in the same way as Swedish members of the SNB – by the unions. There is no provision for direct elections.
Swedish members of the SE representative body, known in the legislation as the employees’ council (Arbetstagarrådet) are chosen largely in the same way as Swedish members of the SNB. In other words, they are chosen by the local union organisations that have collective agreements with the companies involved, with rules setting out how this should operate if the unions cannot agree (§39). (See section on national SNB members.) If the company or plants involved do not have a collective agreement with a union, the local union organisation with the largest number of members will choose the Swedish members of the SNB, unless it agrees otherwise with other union organisations (§40). However, in contrast to the paragraphs on SNB membership, there is no provision for elections by the employees if there is no local union organisation.
The funding of the representative body should be sufficient for it to carry out its tasks in an appropriate manner. This will normally mean funding for a single expert. But there may be cases where more will be paid for.
The Swedish legislation states that the funding for the representative body – the employees’ council in Sweden – should be borne by the European company and should be enough to enable it “to carry out its tasks in an appropriate manner” (§54). There is no specific limit on the number of experts who should be paid for.
However, as with the SNB, the government proposal setting out the legislation states that, while no explicit limit will be applied, in most cases a single expert will be sufficient and companies will therefore only be expected to pay for one. Despite this, there may be cases where it is necessary for the company to pay for more than one expert, for example to cover several separate issues. (Regeringens proposition 2003/04:122 Arbetstagarinflytande i europabolag 5.8.6)
Employee representatives at board level from Sweden are chosen in the same way as the members of the representative body – by the unions.
The legislation states that board members who represent Swedish employees “shall be selected by the local trade unions in Sweden” and it refers to the paragraphs on the selection of the members of the representative body as providing the rules on how this should be done (§59). This means that they are chosen by the local union organisations that have collective agreements with the companies involved, with rules setting out how this should operate if the unions cannot agree (see section on national SNB members.) If the company or plants involved do not have a collective agreement with a union, the local union organisation with the largest number of members will choose the Swedish members of the SNB, unless it agrees otherwise with other union organisations. There is no provision for elections by the employees if there is no local union organisation.
However, the unions can, if they choose, transfer the right to select board-level representatives to the SE representative body – the employees’ council in the Swedish legislation.
Misuse of procedures and structural change
European companies may not misuse procedures to deprive employees of their rights, and during the first year the burden of proof is on the company to show that changes which reduce or remove employees’ rights, were not made with this aim in mind. However, there is no reference to automatic renegotiation.
The Swedish legislation states clearly that the rules governing European companies “may not be misused with the aim of removing or denying” the right of employees to be involved.
More specifically, where there are major changes within one year or there are changes which mean that employees have fewer rights than would otherwise have been the case, then these are deemed to be a misuse, unless the company can prove the opposite (§67).
However, although the legislation makes it clear that misuse of this sort is not permitted, it does no state that the agreement must be renegotiated. It would be presumably for an employee body to take the company to court, and for the court to decide on the next steps.
There is no requirement in the Swedish legislation to renegotiate the agreement if there has been structural change, although this could occur where the procedures have been misused to deprive employees of their rights.
The legislation does not include a requirement to renegotiate the agreement if there have been major structural changes. Changes designed to remove or curtail employees’ rights to be involved are not permitted, and could lead to renegotiation (see section on misuse of procedures). But in other circumstances there is no requirement for the agreement to be renegotiated.
Unions and employers were consulted in detail on the introduction of the legislation and the main points do not appear to have been contentious. The key area of difference relates to what happens when the employees cannot agree on the make up of the SNB.
Legal officers from the main union confederations and the employers were deeply involved in the work of the expert groups, which made proposals to the government on the shape of the draft legislation and both sides appear to have been happy with the final report, which sought to follow the Swedish tradition of industrial relations and leave employee representation to the unions.
There were differences, however, on what happens when the employees cannot agree on the composition of the SNB.
In the employers view, the arrangements set out in the directive give the employees an effective veto over the establishment of a European company. This is because it cannot be set up unless there is either an agreement with the SNB or, after six months of negotiations, the two sides have failed to agree and the fallback provisions are implemented. In both cases an SNB is essential, and if the employees do not agree to set one up, no further progress can be made. The employers saw this as unacceptable and wanted the legislation to take account of this.
The unions, while accepting the logic of the employers’ argument, were unwilling to see changes in Swedish implementation, which would have gone beyond what the directive itself proposed. For more details see the March 2004 report by Claes-Mikael Jonsson and Niklas Bruun.
L. Fulton (2008) Anchoring the European Company in National Law - Country Overviews (online publication, prepared for worker-participation.eu)
SEEurope report – December 2007
LL.D. Bernard Johann Mulder (University of Lund)
This report describes recent changes in SE legislation in Sweden. It also describes the transposition of the SCE directive into Swedish law. The report highlights legal areas of particular concern regarding worker involvement in SEs and SCEs. As of December 2007, only five SEs had been registered at the Swedish Companies Registration Office. According to Office officials, one has tabled plans to move its seat to Germany. Two of the other SEs are shelf companies without active undertakings and are owned by a third shelf company. SEs thus account for a small part of trade and industry in Sweden.
There have been no major material changes to Swedish corporate law, and the SE has had only limited effects on the Swedish corporate structure. The legal discourse on the SE has focused on aspects of fiscal and corporate law. The trade union movement has not expressed any concerns that the SE per se will lead to a lower level of employee involvement. The Board Representation Act ( Lagen [1987:1245] om styrelserepresentation för de privatanställda) has not been debated or questioned. The change in government following the general election in autumn 2006 has not resulted in any proposals for changes in the most important legislation, the Codetermination Act ( Lagen [1976:580] om medbestämmande i arbetslivet), which concerns worker participation in corporations.
The legal framework for SEs has twice been subject to change since the transposition process. First, the law has been changed with regard to situations in which employees do not form a special negotiating body. The initial legislation was not clear on whether employees had a veto, and could halt the registration of an SE. During the debate on the government bill (prop. 2003/04:122 p. 41) questions were raised concerning the consequences of allowing employees such a possibility. The government assumed that the intention was never to grant employees the right to veto SE registrations. The situation was not legislated upon, and the government awaited action from the EU, thus postponing a national law on the matter. The issue was resolved at national level in subsequent legislative acts (prop. 2005/06:170 pp. 100). The so-called employees’ ‘veto’ (not setting up a special negotiating body) is now legislated for in the form of a timeframe for establishment. On condition that the employees are responsible for not setting up a special negotiating body negotiations must commence (within ten weeks), even in the absence of a special negotiating body. The second change in the legislation on worker involvement in SEs is technical and substantially insignificant (prop. 2007/08:20 pp. 65).
In one very recent instance the reshaping into an SE of a large German company with a subsidiary in Sweden was applauded by the trade union of clerical and white-collar workers in industry. The seat of the company is to be in Germany. The Swedish trade union officials say they are content with the degree and forms of employee involvement in the SE. The transformation into an SE of the Swedish bank Nordea has not yet been completed.
The SCE directive was implemented in Swedish law through the following legislation: Act on Involvement of Employees in European Cooperative Societies ( Lagen [2006:477] om arbetstagarinflytande i europakooperativ); Act on SCEs ( Lagen [2006:595] om europakooperativ); and the government regulation on SCEs ( Förordningen [2006:922] om europakooperativ). Preparatory work on the issue of employee involvement is contained in Ds 2005:10 (prop. 2005/06:170, bet. 2005/06:AU9, rskr. 2005/06:315). The corporate law issues are handled in prop. 2005/06:150, while fiscal law issues are handled in prop. 2005/06:36. The government bill for legislation regarding employee involvement passed through parliament without amendment.
In Swedish law, the SCE is based upon the Cooperative Societies Act ( Lagen [1987:667] om ekonomiska föreningar), which deals with the corporate law aspects. The law on employee involvement in SCEs is based upon the corresponding legislation on worker involvement in SEs. The implementation process was not regarded as difficult, although there are two areas in which special concern is warranted. First, the Cooperative Societies Act is based on the premise that such organisations are inherently monistic; Swedish law has traditionally acknowledged only monistic organisations. Introduction of the SCE implies that the law on this matter acknowledges dualistic organisations, as well as monistic ones, when an SCE is formed (prop. 2005/06:170 p. 66). It is too early to evaluate the implications of this change in the law. Secondly, the Swedish Cooperative Societies Act does not allow any one other than members of the cooperative society to vote at the general meeting. The agreement on worker involvement in SCEs therefore cannot contain provisions giving the right to vote at the general meeting to the employees (prop. 2005/06:170 pp. 67, pp. 85).
The new legislation on SCEs has not yet been examined by legal scholars; no articles on the subject, except brief overviews of the legislation, have been published. As of December 2007, the Swedish Companies Registration Office had not registered any SCEs.
In the preparatory work for the legislation on SEs and SCEs, the government discussed the aspect of gender equality at board level. The national legislation on both the SE and the SCE is based upon respect for voluntary measures; no mandatory rules in the shape of affirmative action or quota systems have been put forward. Those who propose delegates both to the special negotiating body and the works council are required to propose both men and women in equal measure (prop. 2003/04:122 pp. 50, prop. 2005/06:170 p. 55, 72).
The new Swedish government has announced that it is not willing to follow through with previous proposals (cf. government inquiry committees SOU 2003:16, Ds 2006:11) to legislate on affirmative action or quota systems regarding board level representation. The equal representation of men and women on executive boards is thus a goal that must be achieved voluntarily.
By LL.D. Bernard Johann Mulder, Senior Researcher at Lund University and Senior Lecturer at Växjö University. LL.M. Niklas Selberg, doctoral candidate at Lund University, assisted in the preparation of this report.
Claes-Mikael Jonsson and Niklas Bruun (National Institute of Working Life)
This report provides a brief overview of Swedish implementation of the directive on employee involvement in SEs (prop. 2003/04:122). The SE directive will be implemented by a special law, the Act on employee involvement in SEs. The new act is accompanied by changes in the Act on private-sector employee board representation of 1972. Transposition of the directive on employee involvement in SEs, and other complementary SE legislation, has now been completed in Sweden. Three separate proposals on SEs were approved by parliament in May. The legislative proposal on employee involvement (prop. 2003/04:122), together with a legislative proposal complementing the company law provisions in the SE regulation (prop. 2003/04:112) were presented to the Swedish parliament on 11 March 2004 and approved on 13 May. The third government proposal – on taxation of SEs (prop. 2003/04:134) – was presented to parliament in April and approved on 28 May. All three proposals will enter into force as legislation on 8 October 2004.
The proposal on employee involvement in SEs passed through parliament without discussion, while the proposal on complementary SE legislation caused some debate regarding the conditions of transferring an SE’s corporate seat to another Member State. The government proposal states that the tax authorities can, under certain conditions, hinder such a transfer. Not all MPs found this acceptable and asked for amendments to reduce the influence of the tax authorities on the creation of SEs.
The legislative proposal containing the new Act on employee involvement in SEs is largely based on the proposals of the inquiry committee (SOU 2003: 64) on transposition into national Swedish law of the Directive on employee involvement in an SE.
The act on employee involvement in SEs – in brief
The government decided against transposing the directive by making changes in existing law on workers’ involvement: in those parts of the directive where national interpretation is possible the underlying aim of the act is to adhere to existing law as far as possible.
The Act lays down that the special negotiating body is to negotiate arrangements for employee involvement with the employers. In Sweden, seats in the special negotiating body will be allocated among the employees of participating companies, subsidiaries and establishments, giving priority to the first. The principle of distribution is one seat for each company, with any extra seats being distributed on the basis of number of employees in a given company.
The Act lays down that selection of members of the special negotiating body shall take place according to the Swedish model of trade union representation in the workplace. If there is a collective agreement, members are appointed by the trade union organisations party to that agreement. If these organisations cannot agree, the Act says that selection of employee members in accordance with the Board Representation Act should form the basis of the procedure. If there is no collective agreement at any of the workplaces involved, the local employee organisation that represents the most employees in the participating companies, subsidiaries and establishments shall appoint the members of the special negotiating body.
The Act does not address what rules should apply in the event of a failure to establish a special negotiating body. The directive does not resolve this issue either. The issue also separated the social-partner delegates on the inquiry committee. The government declares in its legislative proposal that it does not believe that the employees are intended to have a veto on the creation of an SE; however, it does not think that the issue should be solved at national level, leaving the matter to be dealt with either by the Commission’s working group or in conjunction with a review of the directive. Nevertheless, the government also states in the legislative proposal that national measures might be considered if needed.
If the parties do not reach agreement, according to the Act the reference provisions on information and consultation shall apply on condition that the special negotiating body does not decide to relinquish employee involvement. Application of the reference provisions on participation further depend on various conditions related to the way the SE was established.
- Link to the legislative proposal complementing the company law provisions in the SE regulation (prop. 2003/04:112) http://www.regeringen.se/content/1/c6/01/22/75/5b8bfc7d.pdf
- Link to Legislative proposal concerning taxation of SE companies (prop. 2003/04:134) http://www.regeringen.se/content/1/c6/01/76/38/28fcc3eb.pd
The object of this national report is to provide a brief overview of Swedish implementation of the SE Directive. This report also presents some of the committee’s proposals on optional issues contained in the Directive, some of which may be put forward as legislation by the government. The final government proposal for legislation on employee involvement in the SE has not yet been published.Trans