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Income from Another Employer Deducted from Salary that Employer Must Pay for Wrongful Dismissal

Precedential Decision by Judiciary or Regulatory Agency

Author: Anna Jerndorf, Partner and Head of Employment – TM & Partners

The Swedish Labor Court recently ruled in a case (AD 2023 no. 2) where an employee was dismissed based on allegations of serious misconduct. After the Labor Court invalidated the dismissal, the question arose whether an employer may deduct salary that the employee has received from another employer after the dismissal from the salary that the employer is obliged to pay due to the wrongful dismissal. The Labor Court held that the principle for an invalidation of a dismissal is that the employment relationship will continue in the same way as prior the dismissal. This means that the employer is obligated to pay salary for the period after the wrongful dismissal.

The Labor Court pointed out that an employee who has been wrongfully dismissed and only claims financial damages receives financial damages corresponding to the actual loss, i.e. compensation for lost salary with a deduction for any salary from other employment. According to the Labor Court, there are significant systematic reasons and reasons of principle why the compensation in question should be calculated in the same way. The Labor Court held that it is not acceptable that an employee who has sought annulment of a wrongful dismissal receives higher compensation than the actual loss. The Labor Court also referred to the fact that it appears unreasonable and unfair that an employer would have to pay full salary for time when an employee performed work for someone else and received salary for this. Thus, the Labor Court found that the salary from the other employer should be deducted from the employee's salary claim.