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Read the fine print

March 2011 - Employment. Legal Developments by Norrbom Vinding Law Firm, member of ius laboris.

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The Copenhagen Maritime and Commercial Court recently ruled that employer pension contributions and compensation for reduced capacity to work do not always have to be paid to the employee.

Compensation for reduced capacity to work and employer pension contributions are usually payable to the employee. But this general rule may be varied by agreement, and the employee will then bear the risk of reading the fine print. This can be seen from this case from the Copenhagen Maritime and Commercial Court.
An employee joined the employer’s pension scheme when she was hired and was given the terms and conditions of the scheme. Under the terms and conditions, the employer would be released from its obligation to pay pension contributions if the employee's capacity for work was reduced. In that case, the pension provider would pay the employer’s pension contributions – and if the employer had overpaid on the contributions, it would be refunded. Also, compensation for reduced capacity to work would be paid to the employer if the employer was paying salary to the employee.
The employee’s capacity for work was reduced and the pension provider refunded the overpaid pension contributions to the employer – and the pension provider also paid the compensation for the employee’s reduced capacity to work to the employer because the employer was paying salary to the employee.
This was too much for the employee, and her trade union therefore sued the employer.
But the Court ruled in favour of the employer. The employee had had time and opportunity to read the terms and conditions of the pension scheme when she joined it and the terms and conditions could not be set aside. In so finding, the Court had regard to the fact that the pension scheme was continued by the pension provider and that the term about payment of compensation was both normal and justified.

Norrbom Vinding notes:
  • that the case shows that employer pension contributions do not belong to the employee in all situations and that terms providing for payment of compensation for reduced capacity to work to the employer are okay so long as the employer is paying salary to the employee.

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