The Legal 500

Compared to many other European countries, the Danish labour market is quite dynamic. It is relatively simple to carry through changes in employment and to dismiss employees.

Compared to many other European countries, the Danish labour market is quite dynamic. It is relatively simple to carry through changes in employment and to dismiss employees, and in general, the company will not be liable to pay huge compensations to employees in case of changes in employment or dismissals.

To a wide extent employments are governed by statutory law.

Some areas are subject to statutory law applicable to all categories of personnel; the right of receiving a proper employment letter, holiday entitlement, maternity leave, anti discrimination, working environment, rights in connection with business transfer etc.

Outside said areas, the applicable rules will depend on the category of employees involved. Salaried employees are subject to the Danish Salaried Employees Act, which regulates most of the matters relevant to the employment, and derogations to the detriment of the employee are not allowed. In addition to the said act, many salaried employees are subject to a collective agreement. Blue-collar workers are not subject to a general law regulating general subjects relevant to blue-collar workers. However, rights and obligations of blue-collar workers are often governed by a collective agreement.

Compared to other countries, the percentage of employers and employees being members of associations or unions is high. If a company is a member of an employers' association, the company is automatically obliged to abide by the collective agreements entered into by the said employers' association and relevant employees' associations. 

The Employment Agreement
The Danish Act on Statements of Employment Particulars, which is based upon an EU regulation, contains minimum requirements as to the contents of the employment agreement. If an employer fails to meet such requirements, the employee may be entitled to compensation.

Notice periods and severance payments

Salaried Employees
According to the Salaried Employees Act, the employment may be terminated by the company subject to the following notice, the length of which depends on the duration of the employment at the time of giving notice of termination:

• 0 < 5 months: 1 month
• 5 months < 2 years and 9 months: 3 months
• 2 years and 9 months < 5 years and 8 months: 4 months
• 5 years and 8 months < 8 years and 7 months: 5 months
• 8 years and 7 months or more: 6 months.

The employee may terminate the employment giving one month's notice to the end of a month.

The notice periods may be mutually prolonged by agreement.

The parties may agree on a probationary period of 3 months, during which both parties can terminate the agreement with 14 days' notice to expire at the end of the 3-month period at the latest.

It follows from the Salaried Employees Act, that salaried employees are entitled to a severance payment of

Blue collar workers
In Denmark, termination of blue collar workers is not governed by law, but by agreements only.

If a collective agreement applies, the collective agreement will contain rules upon the length of the notice period. It must be noted that such periods may have been prolonged by agreement between the employer and the employee.

Unfair dismissals

Salaried employees
Dismissals must always be objectively motivated. If a dismissal is not deemed reasonably justified in the conduct of the employee and/or the circumstances of the company, the employee will be entitled to a severance payment, cf. the Danish Salaried Employees Act, if he is more than 30 years old and has been employed for more than 12 months at the time of termination. The relevant provision allows for a severance payment corresponding to a maximum of three months' salary, however increasing to six months' salary in case of termination after 15 years of employment. Any compensation as a result of unfair dismissal will be based on the lengths of employment and an evaluation of the circumstances in question. 

Blue-collar workers
If the employment is covered by collective agreements, the collective agreement in question will typically contain provisions regarding compensation in case of unfair dismissals. The compensation may amount to up to 52 weeks' salary, but in general, the compensation granted is considerably lower and typically within the limits applicable to the salaried employees.

Protection of specific groups of employees

Pregnancy, maternity leave etc.
In Denmark, employees are protected against dismissals due to pregnancy, maternity leave or a­dop­­tion. If the employer dismisses an employee during pregnancy, maternity leave or a­dop­­tion, the employer has to prove that the dismissal is neither wholly nor partly due to the said circumstances.

If the employer is unable to prove that the dismissal is completely due to other circumstances, the employee is entitled to compensation. The size of the compensation is determined on the basis of the employee's seniority and the specific circumstances, under which the dismissal took place. According to Danish case law, the compensation is typically fixed between 6 and 12 months' salary, but depending on the circumstances it may be even higher.

Representatives
Employee representatives, working environment representatives and representatives appointed pursuant to the Act onInformation and Consultation of Employees (in Danish: høringsloven) may only be impartially dismissed provided compelling reasons for this are present. If the said condition is not fulfilled, the representative will be entitled to a compensation for unfair dismissal, confer the above.

Collective Dismissals
According to the Danish Collective Dismissal Act (in Danish: Masseafskedigelsesloven) the employer shall commence negotiations with the employees or their representatives (if such have been appointed), regarding the contemplated dismissals as soon as possible with the intention to reach an agreement regarding avoiding or reducing the number of dismissals or alternatively to mitigate the hardships of the dismissals by activities aiming at replacement or retraining of the dismissed employees. Upon completion of the negotiations with the employees, the employer must notify the relevant Employment Region of the dismissals and the dismissals may take effect no earlier than 30 days (in some cases 8 weeks) after said notification. 

The Act applies if the number of dismissals within 30 days exceeds

• 10 employees in establishments normally employing more than 20 and less than 100 workers.
• 10% of the employees in establishments normally employing more than 100 and less than 300 workers.
• 30 employees in establishments normally employing more than 300 workers.

Non-observance of the rules described above may result in the employer being obliged to pay compensation to the employees in question and fines. 

Collective agreements may contain special rules on collective dismissals.

Salaries and wages
No statutory rules on minimum wages exist, but many collective agreements contain rules on minimum wages.

Salaried employees are entitled to salary during sickness leave (depending on the circumstances, sickness leave may be a fair reason for dismissal).

Blue-collar workers are typically entitled to a very limited salary during sickness leave.

Bonus-agreements are common, but voluntary. It follows from the Danish Salaried Employees' Act that an employee upon termination is entitled to a pro rata share of the bonus, which he would normally have received for the year in which his employment was terminated.

Holiday
Holiday entitlement is covered by statutory law laid down in the Holiday Act. Said act applies to all employees (except general managers).

Employees are entitled to 5 weeks' holiday (in addition to public holidays).

Salaried employees (and other employees whose employment cannot be terminated giving less than 1 month's notice, and who are entitled to pay on days of sickness and public holidays (in Danish: søgnehelligdage)) are entitled to salary during holiday, if and to the extent the employee has accrued right hereto. The entitlement to paid holiday accrues during the calendar year. The holiday year runs from 1 May in the year following the calendar year, in which paid holiday accrued until 30 April the year after. Additionally, salaried employees are entitled to holiday supplement, calculated as 1% of the salary, including benefits, earned in the accrual year.

Blue collar workers are typically not entitled to salary during holiday but to holiday allowance calculated as 12.5% of the salary, including benefits.

If an employee has not spent all his accrued holiday, when he leaves the company, he is entitled to holiday allowance for the remaining holiday calculated in accordance with the 12.5%-rule mentioned above.

The Holiday Act contains rules as to planning and taking of the holiday.

For instance, it follows from the Holiday Act that the employer must give 3 months' notice of the main holiday of 3 weeks (to be held in the period from May to September) and 1 month's notice of any other holiday.

Many collective and individual agreements provide for extra paid holidays (typically 5 days).

Non-competition Clauses
The Salaried Employees Employees Act regulates non-competition and non-solicitation clauses. The compensation for the inclusion hereof shall amount to at least 50% of the employee's monthly salary, including benefits, which amount shall be paid to the employee each month the clauses in question apply after the expiry of the employment.

Clauses regarding non-solicitation of employees are governed by the Act on Employers' use of Job Clauses (in Danish: Lov om jobklausuler) and requires minimum compensation similar to the non-competition clauses. A couple of the exemptions exist. One of these relates to non-solicitation clauses agreed in connection with business transfers (the exemption is conditional).

General managers
General managers (who are not under the orders of an employer, who exercises control over the "what, how and when" of the work) are not comprised by the Salaried Employees Act or the Holiday Act, meaning that the terms and conditions of the service contract in question are based upon individual agreement, for instance notice periods, holiday entitlements, non-competition clauses etc. 

---

For more information please visit www.delacour.dk