Swedish legislative changes are affecting companies that use staffing agency workers and potentially consultants

The new Agency Work Act (Sw. Lag 2012:854 om uthyrning av arbetstagare), that became effective as of October 2022, introduced new kinds of protection for staffing agency workers. In practice these legislative changes mean that when employees of staffing agency companies are hired out to customer companies and have worked for the customer company for a certain qualification period, such employees have the right to be offered permanent employment at the customer company.

A staffing agency worker must be offered permanent employment at the customer company as soon as the staffing agency worker has performed services for the customer company (within the same operating unit) for more than 24 months during a 36-month reference period.

Alternatively the customer company can offer to pay the staffing agency worker a compensation corresponding to the worker’s two months’ salary instead, if the customer company determines that it does not want to offer permanent employment. It is also important to note that the customer company is not required to justify its decision for choosing to offer the staffing agency worker compensation instead of permanent employment, as long as the decision is not disadvantageous or discriminatory towards the staffing agency worker.

If the staffing agency worker declines an offer of permanent employment, the customer company has, as a principal rule, fulfilled its obligations under the law and is not required to extend a new employment offer to the same the staffing agency worker if the worker continues to perform services for the customer company. This is the main rule, but companies should monitor the legal praxis moving forward with this new legislation, as offering permanent employment repeatedly to the same staffing agency worker may be interpreted differently in future legal praxis.

A staffing agency company may not prevent a worker from taking up employment with a customer company for which the staffing agency worker performs or has performed work.

Failure to comply with the above rules can lead to liability for damages for the customer company.

Will these legislative changes also impact companies with consultants?

Although the law emphasizes that it only applies to staffing agency workers and staffing agency companies, the difference between staffing agencies and consultancy companies has become more diffuse and harder to distinguish. Many consultancy companies conduct their business in a way similar to staffing agencies, and the Swedish labor market is now eagerly discussing whether the new law would also apply to consultants. Both consultancy companies and customer companies are understandably keen to clarify the applicability of the law.

Normally, staffing agencies hire out workers for the purpose of performing services on behalf of a client, by eliminating the client’s need for recruitment. The entire process of finding a fit candidate may fall on the staffing agency. Staffing agencies often provide resources to their customer companies to help them complete certain projects within a specific time frame, however, the staffing company does not have ownership for the work performed by the worker and the staffing company is not responsible for the completion of a project or deliverable, as the right to direct the work is with the customer company. On the other hand, consulting companies have employed consultants with specific niche competence who are usually requested by customer companies to provide assistance and expertise on specific deliverables. Consultants take on more responsibility and ownership in relation to a customer companies’ demands. The customer company does not usually direct the work of a consultant.

Due to this distinction, the main rule is that consulting companies are not affected by the new law. However, it is not possible to completely rule out the risk that the new law could potentially apply to some consulting companies, if the consulting services are considered to be close to the staffing business and rental of manpower, especially if the customer manages and has control over certain deliverables. This will likely be a case-by-case assessment. Bird & Bird is happy to assess your company’s status with respect to consultants and staffing agency workers and your company’s potential obligation to offer permanent employment. In all cases an assessment is highly recommended, and establishing clear written frameworks in relation to the management and responsibility over deliverables with regards to consultants would be a good starting point.

It is also recommended that companies using staffing agency workers keep track of the length of service of their rented employees and fulfil their obligations according to this new legislation when the qualification period ends.