The Swedish Agency Work Act in light of a recent EU case

The Directive applies to workers who have an employment contract or employment relationship with a temporary work agency and are assigned to user undertakings for temporary work under their supervision. Key definitions under the Directive include the following:

• Temporary-work agency: any natural or legal person who, in compliance with national law, concludes contracts of employment or employment relationships with temporary agency workers in order to assign them to user undertakings to work there temporarily under their supervision and direction.
• Temporary agency worker: a worker with a contract of employment or an employment relationship with a temporary-work agency with a view to being assigned to a user undertaking to work temporarily under its supervision and direction.
• User undertaking: any natural or legal person for whom and under the supervision and direction of whom a temporary agency worker works temporarily.

The CJEU addressed whether companies not formally recognized as temporary-work agencies under national law could still be included in the scope of the Directive. It clarified that an entity shall be classified as a temporary-work agency if its business involves employing workers to be temporarily assigned under the control and direction of a user undertaking. This applies although the entity lacks official recognition as a temporary-work agency in its home country.

Key criteria for classification include (i) the existence of an employment relationship between the agency and the worker, and (ii) temporary assignment of the worker to a user undertaking under its control and leadership. The CJEU emphasized that hiring out some employees occasionally, or general service contracts, do not constitute temporary agency work unless these specific conditions are met.

Under the Swedish Agency Work Act, the 24-month rule is a central provision. Workers hired through a temporary-work agency for more than 24 months during a three-year period must be offered permanent employment by the user undertaking or receive compensation equal to two months' salary. 

The CJEU ruling clarifies which companies that should be regarded as temporary-work agencies, and thereby which businesses that will be affected by the 24-month rule. Following the CJEU ruling, it has been clarified that the definition of temporary-work agency is rather narrow, which means that it will not apply to e.g. consultancy companies which provide a mix of services, which are not necessarily hiring-out all their employees continuously. Their primary business activity involves providing specialized consultancy services rather than temporarily assigning workers under the direct supervision of a user undertaking. However, an assessment on a case-by-case basis will be necessary. Furthermore, specialist consultants would not be considered temporary agency workers unless the user undertaking has the necessary expertise, and resources, to define, supervise, and control how the work is performed.

For legal advice regarding the Swedish rules and how this impacts your business, please reach out to our employment law team at Schjødt's Stockholm office.