Just curious, how does that work out usually. Seems there would be a loss of trust between employee and employer that would make continuing that relationship untenable for one side or the other.

The employer pays up according to some schedule. And then you're free to go to work elsewhere. Or they can take you back (but that would happen very rarely).

Which will make the managers bully them until they leave.

Luckily, union membership is widespread in Sweden and they'll most definitely help you with this.

Fun fact: managers have their own union in Sweden as well! ("ledarna", literal translation: "leaders") And as the other commentator mentioned, you'd most probably lose your position as the company if you participate in bullying, and if your union finds out, you'll most likely get kicked out of the union as well.

This is called mobbing and you will get removed from manager position ASAP if someone can collect slightest proof (in EU)

Not happening. Not unless said manager wants to be in a whole lot of trouble.

Correct. The courts can annul a baseless termination.

But the employer can then still refuse to take the employee back. In that case the employer owes the employee 6-32 months pay in damages, and the employment contract becomes legally terminated.

Source: The Swedish law on employment protection, paragraph 39:

"Where an employer refuses to comply with a judgement by which a court has annulled a dismissal or redundancy or has declared a fixed-term contract to be of indefinite duration, the employment relationship shall be deemed to have been terminated. The employer shall pay damages to the employee for his refusal in accordance with the following provisions."

https://lagen.nu/1982:80#P39S1