Why redundancy must be handled with discipline
Few decisions are as sensitive as dismissing employees. When a business needs to reorganise or downsize, management faces both a human and a legal challenge. The human side is about handling the process with respect. The legal side is about following a framework that is detailed, mandatory and unforgiving of procedural errors.
Dismissal on grounds of redundancy is entirely permissible under Swedish law. An employer has the right to direct and organise work and to adapt the organisation to the needs of the business. But that right is conditional: it requires objective grounds, a correct order of selection for who is to be dismissed, a fulfilled duty to redeploy, and in most cases a completed negotiation with the union before any decision is made.
This article walks through the principles of redundancy dismissals, how the process works, the most common mistakes, and the risks that arise when the rules are not followed. The aim is to give an overview at a principle level – not to replace advice in the individual case.
What redundancy means – and does not mean
The concept of redundancy is often misunderstood. It does not necessarily mean the company is performing badly or has no work. Redundancy is an umbrella term for all grounds for dismissal that are not attributable to the individual employee personally.
Redundancy versus personal grounds
Swedish employment law draws a sharp line between two types of objective grounds for dismissal: redundancy and personal grounds. Personal grounds concern the individual employee’s conduct or capability, such as serious misconduct. Redundancy concerns the business: reorganisation, downsizing, redistribution of duties or a change of direction.
The distinction is decisive, because the two grounds follow entirely different rules. In a redundancy, it is not the individual’s performance that is assessed but whether there is a genuine business need and whether the process was carried out correctly. Conflating the two grounds – calling something redundancy when it is really dissatisfaction with a particular person – is one of the most dangerous traps.
Objective grounds and the company’s discretion
It is the employer who decides how the business should be organised, and courts do not normally review the commercial merits of a decision to downsize or reorganise. What is reviewed is whether it truly is a redundancy, whether there was a real need, and whether the formal steps were followed. The discretion is therefore wide in substance but limited in form.
The duty to redeploy
Before a redundancy dismissal can be carried out, the employer must examine whether the employee can be redeployed to other vacant work in the business. The duty to redeploy is a central safeguard and presupposes that there is a vacant position for which the employee has sufficient qualifications. Only where such redeployment is not possible or cannot reasonably be required do objective grounds for dismissal exist. A poorly conducted redeployment review is one of the most common reasons a dismissal is overturned.
Order of selection
Once it is clear that roles are to be cut, the employer must decide which employees are to be dismissed. Here the order-of-selection rules in the Employment Protection Act apply, which are fundamentally based on length of service: as a starting point, those with shorter service must leave before those with longer service. The order is determined within a defined selection unit, and there are certain exceptions and the possibility of agreeing otherwise, including through collective agreements. The rules are technical, and applying them incorrectly is a classic and costly mistake.
A practical example: the reorganisation that became a dispute
Imagine a company deciding to shut down an entire department and move its tasks to another team. Management views it as a straightforward redundancy situation. In practice, however, the real aim is to get rid of a particular employee management has long been dissatisfied with, and closing the department becomes a way to achieve that.
When the dismissal is carried out, the company skips negotiation with the union, conducts no proper redeployment review, and disregards the order of selection by keeping a recently hired employee with shorter service ahead of the employee it wants to remove. Shortly afterwards, a new person is hired for essentially the same duties.
This is what is known as sham redundancy – a dismissal that purports to be redundancy but is in fact directed at an individual. When the pattern is uncovered, the dismissal risks being declared invalid, and the company may be liable to pay wages during the dispute as well as damages. What was meant to save money instead becomes a far more expensive affair than if the process had been handled correctly from the outset.
Common mistakes companies make
The first mistake is disguising personal grounds as redundancy. If the real driver is dissatisfaction with an individual, and this can be shown, the entire basis for the dismissal collapses.
The second mistake is skipping or rushing the union negotiation. Before a decision on redundancy is made, the employer is normally obliged to negotiate under the Co-Determination Act. Deciding first and negotiating afterwards is doing it in the wrong order.
The third mistake is a careless redeployment review. Failing to seriously examine whether vacant positions exist, or dismissing redeployment without documentation, leaves the dismissal vulnerable.
The fourth mistake is applying the order of selection incorrectly, for instance by keeping a recent hire ahead of someone with long service without legal support. A fifth mistake is re-hiring for the same role soon after the dismissal, which can both undermine the redundancy argument and trigger a priority right to re-employment for the dismissed employee.
Legal risks when the rules are not followed
The most serious risk is that the dismissal is declared invalid. A dismissal lacking objective grounds can, at the employee’s request, be declared invalid, meaning the employment continues. During such a dispute the employer may be liable to pay wages, and the process can be drawn out.
Alongside this is the risk of damages. Procedural failings – such as omitted negotiation, incorrect order of selection or an inadequate redeployment review – can give rise to both general and economic damages, even where the dismissal could in principle have been carried out correctly. In other words, a correct decision can become a basis for damages purely because of errors in the process.
A third risk is reputational harm. A reorganisation perceived as arbitrary or unfair affects both remaining employees and the employer’s reputation, something that rarely shows up in a legal assessment but has real business value.
Recommended actions
Start by being honest with yourselves about the grounds. If it is really about an individual’s performance, redundancy is the wrong route, and the matter should be handled as personal grounds under the rules that apply there.
If it is a genuine redundancy situation, plan the process in the right order. Define the business need, identify which roles are affected and establish the selection units before proceeding. Conduct the union negotiation before any decision is made, and give notice of major cutbacks in the required manner.
Carry out a genuine redeployment review and document it. Apply the order-of-selection rules correctly and check whether collective agreements affect their application. Document every step, because it is the documentation that carries the evidence if the process is later questioned. And hold off on re-hiring for the same function, so that the redundancy argument is not undermined and the priority right is respected.
Frequently asked questions about redundancy dismissals
Can you dismiss for redundancy even if the company is doing well?
Yes. Redundancy does not require the company to be performing badly. Even a profitable company can reorganise, move tasks or improve efficiency, and such changes can constitute objective grounds as long as there is a genuine business need and the process is handled correctly.
What is sham redundancy?
Sham redundancy is a dismissal formally justified by redundancy but in reality directed at a particular individual on personal grounds. If this can be shown, the dismissal lacks objective grounds and risks being declared invalid.
Do we have to negotiate with the union?
In the vast majority of cases, yes. Before a decision on redundancy is made, the employer is normally obliged to negotiate under the Co-Determination Act. The negotiation must take place before the decision, not after, and skipping it is a serious procedural error.
How does the order of selection work?
The order is fundamentally based on length of service within a selection unit: as a starting point, shorter service leaves before longer. There are exceptions and the possibility of agreeing otherwise, including through collective agreements. The rules are technical and should be handled with care.
What happens if a dismissal is overturned?
If the dismissal lacks objective grounds it can be declared invalid, meaning the employment continues. The employer may be liable to pay wages during the dispute and to pay damages. Even purely formal errors can give rise to damages even where the grounds themselves were correct.
Does the dismissed employee have a right to return?
An employee dismissed for redundancy may have a priority right to re-employment for a certain period, if the employer again needs to hire for similar work. This is why one should be cautious about quickly re-hiring for the same function.
Conclusion
A reorganisation is often necessary and entirely lawful, but it tolerates no shortcuts. It is rarely the decision to downsize that fails in a dispute, but how it was carried out: in what order, with what documentation, and with what respect for negotiation, redeployment and the order of selection. The difference between a manageable change and a costly dispute almost always lies in the process.
Lawgent helps companies plan and carry out reorganisations and redundancy dismissals in a way that holds up legally. We combine experienced employment law advice with AI-driven efficiency, so that you get a secure and well-documented process – faster and more cost-effectively than a traditional firm. Facing a reorganisation and want to get it right from the start? Contact Lawgent for a review of your process.
