AD 2025 No. 70 – Genuine or fictitious redundancy

In the Swedish Labour Court’s judgment AD 2025 No. 70, announced in October 2025, the issue was whether a termination was truly due to redundancy or whether the employer had in fact relied on other reasons for the termination, so-called fictitious redundancy. The District Court found in favour of the employee on the issue of fictitious redundancy, but the Labour Court reversed. The Labour Court instead concluded that the termination was objectively justified on the grounds of redundancy. The employee’s claim for damages was therefore dismissed by the Labour Court. The case confirms the Labour Court’s previous case law on fictitious redundancy.

The judgment concerns an employee at a helicopter company whose employment ended through termination on grounds of redundancy. The employee primarily claimed that there had been a summary dismissal without justification, and in the alternative that the termination lacked legal grounds, arguing that the redundancy was fictitious. The employee further alleged that the employer had not fulfilled its obligation to investigate the possibility of reassignment. On this basis, the employee sought damages under the Employment Protection Act (EPA).

The company argued that redundancy existed because the navigator function had been removed and replaced with new technology as part of a planned streamlining. The company further claimed that order intake had decreased and that parts of the operations had changed, and that helicopters had been leased abroad. The District Court dismissed the employee’s claim regarding summary dismissal but found that the employee was correct that the termination lacked objective grounds. Based on the oral evidence in the case, the District Court concluded that the company had not conducted a sufficiently thorough and serious assessment of the corporate economic situation to demonstrate that redundancy existed. According to previous case law from the Labour Court, such a thorough assessment must be carried out if the company’s decision is prompted by external factors, and terminations on grounds of redundancy may not be made as a precautionary measure or just in case. The company appealed the District Court’s judgment.

The Labour Court stated that when an employee alleges that the redundancy is fictitious, the court must examine whether redundancy has in fact existed and not conduct a suitability assessment of the company’s business decision. The assessment should focus on whether the stated changes have actually been implemented and are connected to the operations, and whether external factors that affected the operations actually existed. The Labour Court should, unless there is an allegation of discrimination, proceed directly to the question of whether genuine redundancy occurred. If that is the case, the court does not need to proceed to examine the objection that personal or other reasons also existed. This follows from the Labour Court’s earlier case law.

The Labour Court considered that the company was able to show that the helicopter navigators’ duties had been replaced by an application and that helicopters had been leased out for economic reasons. The company could also show that incoming orders had decreased. The court found that the decision to remove the navigator role was motivated by business‑related reasons and had also been implemented. A genuine redundancy situation therefore existed. There was therefore no reason to proceed to examine whether personal reasons had also underpinned the decision to terminate the employment.

With regard to reassignment, the Labour Court noted that nothing indicated that there had been any vacant positions to offer the employee or that the employer had conducted a deficient investigation of the possibilities for reassignment.

The Labour Court therefore concluded that the termination was objectively justified.

Setterwalls’ comments: The judgment confirms an important principle of Swedish employment law, namely that redundancy is a broad concept and encompasses the employer’s decision to reorganize, streamline, or wind down parts of the business. If the employer can show that the alleged external factors that negatively affected the business existed, and that the planned operational changes were in fact implemented, the employer is entitled to reorganize its operations. The court examines whether the factors and changes are real, not whether the reorganization was the best or most economically advantageous solution. The judgment thus establishes the principle that the issue of redundancy lies within the employer’s decision-making sphere as long as it is genuine – then it is not fictitious even if there may be other reasons for the decision. For employers, good documentation and credible evidence of the actual circumstances and changes remain important in order to be able to show, in any potential future review, that a redundancy was real.

With regard to the duty to reassign, the Labour Court confirms that the company must make a reasonable effort to do so, but that the obligation does not extend so far as to require the company to create new positions or restructure the organization to create an opportunity for reassignment.

In summary, the judgment confirms that employers have significant scope to streamline operations and eliminate roles when circumstances change, provided that there is a genuine operational change.