Sweden: Swedish Labour Court Confirms Bankruptcy Estates Must Observe Trade Unions’ Right to Consult

Author: Karolina Sundqvist

In a recent case from the Swedish Labour Court, a bankruptcy estate, acting through the trustee, was confirmed to be bound by the general duty to consult under Section 10 of the Co‑Determination in the Workplace Act (MBL). Labour law, including MBL and collective and individual employment agreements, continues to apply after an employer has been declared bankrupt.

In AD 2026 no. 6, a trade union had requested consultations with a company concerning three members’ employment status and wage claims. Consultations were initiated but not concluded before the company was declared bankrupt on 10 September 2024. After the bankruptcy, the union asked to continue the consultations with the bankruptcy estate and also requested consultations on whether a consultation obligation existed at all, but the bankruptcy trustee refused to participate.

The legal issue was whether a bankruptcy estate in Sweden is bound by the employer’s duty to consult under Section 10 of the Co-Determination in the Workplace Act (MBL), and thus whether the union’s general right to consult with the employer survives bankruptcy and transfers to the estate. Closely linked to this was the question whether the special rules on wage guarantee and bankruptcy procedure form an exclusive system for handling employees’ claims, displacing the MBL framework. The case also raised the issue of whether the union’s decision to initiate court proceedings should be regarded as a legitimate attempt to clarify its members’ rights, or as an unnecessary and abusive use of litigation.

The Labour Court held that MBL, like other labour legislation, applies even when the employer is in bankruptcy and that the bankruptcy estate, through the trustee, is bound by the employer’s duties to consult and inform. The estate must be regarded as equally bound by collective agreements and employment contracts as the insolvent employer, and the general consultation right in Section 10 MBL continues to apply during bankruptcy. The court found that the union’s questions about the members’ employment status and whether they had wage claims clearly fell within the scope of Section 10 MBL and that the union had not acted in bad faith. The court rejected the argument that wage guarantee and bankruptcy rules constitute an exclusive system that excludes consultations under MBL, emphasising that these procedures do not replace the union’s independent right to consult. Since the trustee had expressly declined to consult, the court concluded that the estate had committed consultation refusal and ordered it to pay general damages in the amount claimed by the union.

Key Action Points for Human Resources and In-house Counsel:

Bankruptcy estates in Sweden assume the employer’s labour law obligations and are therefore subject to the duty to consult with trade unions under Section 10 MBL. A bankruptcy estate that refuses to participate in consultations risks liability for general damages to the trade union.