This country-specific Q&A provides an overview of Employment & Labour Law laws and regulations applicable in Denmark.
Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful?
In Denmark, if an employee is not subject to the Danish Salaried Employees Act or a collective bargaining agreement (collective agreement) under which the employees are protected against unfair dismissals, employers are generally free to terminate the employment(barring reasons of discrimination).
Under the Danish Salaried Employees Act, if the employee has been employed for at least one year, when notice is given, the termination must be based on fair reasons.
If the employee is subject to a collective agreement, the same, usually, applies, however, the seniority requirements in the collective agreement (before the protection applies) is, usually, less than a year (6 – 9 months).
Under the Danish Salaried Employees Act and collective agreements, a lawful termination must be based on fair reasons such as the employer’s circumstances or the employee’s behaviour.
Examples of the employer’s circumstancesare shortage of work, financial difficulties, restructuring, etc. In these situations, the employer isgenerally entitled to terminate the employee.
Examples of the employee’s behaviourarepoor performance, lack of co-operation, dis-loyalty etc. As a main rule, the employer is obligated to give the employee a warning prior to terminating the employee due to the employee’s behaviour. Such warning must contain a description of the unwanted behaviour and the consequences, if the employee does not change the unwanted behaviour. If the employee continues with the unwanted behaviour after the employee has received a warning, the employer is a main rule entitled to terminate the employee.
In case of gross negligence (assessed on a case by case basis), the employment may be terminated without the employer giving the employee a warning prior to the termination.
If the employer cannot document that a termination is based on the employer’s circumstances or that the employee – if necessary – has received a warning prior to the termination, the termination will be considered as unlawful.
Some collective agreements also regulate, which reasons are considered as fair and unfair and, therefore, affects whether a termination is lawful or not.
Further, if a termination directly or indirectly is based on the employee’s gender, age, nationality, race, parental leave, disability, skin-colour, sexual orientation, political orientation, religious orientation, fixed-term- and part-time employment, etc., it is unlawful under the Danish Non-Discriminations– or Equal Opportunities Acts.
What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?
The Danish Mass Redundancies Actcontains additional procedural requirements, if the employer within 30 days:
terminates 10 employeesor more and employsbetween 20 and 99employees,
terminates 10 % of the employees or more and employsbetween 100 and 299employeesor
terminates 30 employees or more and employs300 or more employees.
If the Conditions are fulfilled, the employer is obligated to initiated negotiations with the employees or the employees’ representatives to mitigate the number of terminations and/or the terms of the terminations.
Prior to commencing negotiations, the employer is obligated to inform the employees or the employees’ representatives of:
the cause of the mass redundancy,
the number of the employees that may be terminated due tothe mass redundancy, which category of employees might beterminated and when the mass redundancyis expected to occur,
the overall number of the employees employed by theemployer and the categories of employees within the company,
the criteria that the employer will use to decide,which employees will be terminated under themass redundancy and
if any of the affected employees are entitled to a severancepayment under legislation, a collective agreementor an individual agreement.
When the employer informs the employees or the employees’ representatives of the above-mentioned, the employer is also obligated to forward the above-mentioned information to the Danish Regional Labour Market Council (the “Council”) (the “First Letter”).
If the employer after completing the negotiations still entails to terminate employees and fulfils the Conditions, the employer is obligated to inform the Council hereof in a letter (the “Second Letter”). If the employer entails to terminate 50 % or more of the employed employees, the Second Later cannot be forwarded to the Council prior to 21 days after the negotiations commenced.
The Second Letter must contain information of relevance to the expected terminations, including the reason for the termination, the overall number of the employees employed by the employer and when the terminations are expected to take place.
When the employer has forwarded the Second Letter, the employer is obligated to as soon as possible and within 10 days inform the Council in a letter of,which employees, who are going to be terminated (the “Third Letter”). At the same time, these employees must be informed of the terminations.
Lastly, the employer is obligated to inform the Council of the result of the terminations in a fourth letter as soon as possible after finalizing the terminations (the “Fourth Letter”).
If the employer does not comply with the above-mentioned and terminates less than 50 % of the employees, the employees, who are terminated in connection with the mass redundancy, is entitled to a compensation amounting to 30 days’ salary. If 50 % of the employees or more are terminated, the compensation amounts to 8 weeks’ salary per employee.
Further, the employer can also be fined as a consequence of the breach.
What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?
If a business is transferred as a result of a share transfer, no additional considerations apply.
If a business is transferred as a result of an asset purchase, the Danish Company Transfer Act regulates the employees’ terms and conditions in connection with the transfer.
An asset transfer does not – in itself – constitute a fair reason for termination. However, if the termination is based on economical, technical or structural issues caused by the asset transfer, the termination will, generally, be considered as lawful.
What, if any, is the minimum notice period to terminate employment?
There are no general requirements under Danish legislation regardingminimum notice periods.
The notice periods are regulated in the Danish Salaried Employees Act, collective agreements and individual agreements.
If an employee is subject to the Danish Salaried Employees Act, the employers and the employees (the parties)are entitled to enter into an employment agreement with a trial period under which the parties separately can terminate the employment agreement with a 14 days’ notice period during the first three months of the employment.
After the employee has been employed for more than three months or if the parties have not agreed on a trial period, the employee can terminate the employment agreement with one month’s notice. The employer can terminate the employment agreement in accordance with the overview below:
Seniority when giving notice of the termination
Max. 5 months
Between 6 months and 2 years and 9 months
Between 2 years and 10 months and 5 years and 8 months
Between 5 years and 9 months and 8 years and 7 months
Above 8 years and 7 months
Collective agreements also regulate notice periods. The notice periods in collective agreements differ from collective agreement to collective agreement depending on the applicable work andarea of practice.
If an employee is not subject to the Danish Salaried Employees Act or a collective agreement, the parties are entitled to enter into an individual agreement regulating the notice period. However, Danish case law has determined that such notice periods must be reasonable under the specific circumstances of the employment such as the employee’s seniority, area of practice and the circumstances of the termination.
Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?
Payment in lieu of notice is, generally, accepted under Danish law,unless the employment is subject to a collective agreement or an individual agreement that stipulates otherwise.
Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to say at home and not participate in any work?
Yes, unless the employment is subject to a collective agreement or an individual agreementthat stipulates otherwise.
Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, describe the requirements of that procedure or procedures.
There are no general procedural requirements under Danish legislation when terminating employees.
However, see question 2concerning mass redundancies.
Some collective agreements also contain procedural requirements when terminating an employee such as having joint meetings, meetings in front an appointed board, etc. before the employer proceeds to terminate the employee.
Further, individual agreements can also contain procedural requirements when terminating an employee.
The consequences of breaching such procedural requirements are determined in the specific collective or the individual agreement. Usually, a breach of procedural requirements entails that the employee is entitled to a compensation.
If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?
If employers do not comply with the procedural requirementsin collective agreements or individual agreements, the consequences depend on the terms stipulated in the collective agreement or the individual agreement. Normally, an employee will be entitled to a compensation.
How, if at all, are collective agreements relevant to the termination of employment?
As a main rule, collective agreements contain regulation regarding termination of employees. The regulation depends of the terms in the specific collective agreement, which differ from collective agreement to collective agreement. Further, see question 4, 5, 7 and 8.
Does the employer have to obtain the permission of or inform a third party (eg local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?
Apart from certain collective agreements containing procedural requirements prior to terminating an employee, see question 7, there are no such requirements in Denmark.
What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?
See question 1 concerning the Danish Non-Discriminations- or Equal Opportunities Act.
What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?
If a termination is a breach of the Danish Non-Discriminations–or Equal Opportunities Acts, the employee will be entitled to a compensation, which usually amounts to 6 – 12 months’ salary.
Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?
An employee, who has been elected as a shop steward under a collective agreement, is,normally,subject to specific protection.
Firstly, the shop steward may be entitled to an extended notice period compared to employees, who are subject to the same collective agreement.
Secondly, a termination of the shop steward is unlawful;
if the termination is based on the shop steward’s duties as a shop steward, or
if the employer does not choose the shop steward as the last employee to be terminated among peers in connection with a reduction of the staff.
If a termination of a shop steward is unlawful, the shop steward will be entitled to a compensation as stipulated in the specific collective agreement, which differ from collective agreement to collective agreement.
Safety representatives are subject to the above-mentioned on the same basis as a shop stewards within the same area of practice. This entails that a safety representative – which performs work within an area of practice where shop stewards are not subject to any special protection – is also not subject any special protection and vice versa.
Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?
Employees, who have made disclosures in the public interest (whistle-blowers), are not, currently, subject to any special protection from termination.
However, the European Union has passed a European Directive on whistle-blowers on 7 October 2019, which entails thatsome employers(with 50 employees or more) cannot lawfully terminate an employee due the employee making a disclosure in the public interest.
All EU-member states are obligated to implement to the European Directive within two years after which whistle-blowers will be subject to special protection. Denmark has at the present not implemented the Directive.
What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?
Employees are entitled to their normal salary during the notice period.
Further, under the Danish Salaried Employees Act employees, who have been employed for more than 12 respectively 17 years, are entitled to a compensation amounting to 1 respectively 3 months’ salary. Collective agreements, usually, contain the same regulation and the same can also be agreed in individual agreements.
If a termination is unlawful, employees, who are subject to:
the Danish Salaried Employees Act, are entitled to a compensation of 1 to 6 months’ salary depending on the employees’ seniority and the circumstances of the termination, or
collective agreements and individual agreements are entitled to a compensation, if this is stipulated in the collective agreement or individual agreement.
Further, see question 12 concerning terminations that are a breach of the Danish Non-Discriminations–or Equal Opportunities Acts.
If an employee is entitled to a compensation under boththe Danish Salaried Employees Act and the Danish Non-Discriminations–or Equal Opportunities Acts, the employee will only be entitled to one (the highest) of the compensations.
Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.
The parties can freely enter into a severance agreement under which the consequences of the termination are regulated. In practice, such severance agreements, normally, contain additionalcompensation to the employee under the condition that the employee waives the right to commence a case against the employer concerning an unlawful termination.
Severance agreements must, however, be reasonable and can be held invalid, if the terms are not reasonable.
Also, see question 5.
Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.
Under the Danish Employment Clause Act, the parties can enter into restrictive covenants, including non-competition– and non-solicitation clauses. Such clauses restrict employees from performing competing work or working for the employer’s customers after the employment has lapsed.
A non-compete clause is valid, if:
the employee holds a position of trust or has signed an agreement with the employer about an invention invented by the employee,
the employer has informed the employee of the circumstances, which makes it necessary for the employee to be subject to a non-compete clause,
the employee has been employedon a continuous base for at least 6 months, when the employment lapses,
the employee receives a compensation during the duration of when the employee is restrictedfrom carrying out competing work (at least 40 % of the employee’ salary, if the clause is applicable for less than 6 months, or at least 60 % of the employee’s salary, if the clause is applicable between 6 months and 12 months),
the duration of the clause is a period of maximum12 months and
the employee has received information of the above-mentioned conditions in writing.
A non-solicitation clause is valid, if:
the clause concerns customers, which the employee has been in commercial contact with the last 12 months of the employment,
the employee has been employed on a continuous base for at least 6 months, when the employment lapses,
the employee receives a compensation during the duration of when the employee is restricted from carrying out work for customers (at least 40 % of the employee’s salary, if the clause is applicable for less than 6 months, or at least 60 % of the employee’s salary, if the clause is applicable between 6 months and 12 months),
the duration of the clause is a period of maximum 12 months and
the employee has received information of the above-mentioned conditions in writing.
Further, the parties can also enter into a combined non-compete– and non-solicitation clause, which is valid, if the above–mentioned conditions are met with the following adjustments:
the employee receives a compensation of 60 % of the employee’s salary during the duration of when the employee is restricted from carrying out competing work andwork for customers and
the duration of the clause is a period of maximum 6 months.
If any of the above-mentioned conditions are not fulfilled, the clauses will not be valid and, therefore, not applicable.
Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?
Employees are subject to the Danish Trade Secrets Act under which employeesare obligated to keep the employer’s trade secrets confidential after the employment lapses.
If an employee breaches the Danish Trade Secrets Act, the employer can commence injunction proceedings against the employee. The employeecan also be liable for the employer’s loss as a consequence of the employee’s breach of the Danish Trade Secrets Act.
Are employers obliged to provide references to new employers if these are requested?
What, in your opinion, are the most common difficulties faced by employers when terminating employment and how do you consider employers can mitigate these?
In practice, it is difficult for employers to bear the burden of proof concerning whether an employee has breached the confidential obligation under the Danish Trade Secrets Act.
To mitigate the risk of the employer suffering a loss as a consequence of the employee disclosing trade secrets, the employer can consider to restrict the employee from – during the employment –having knowledge of trade secrets, which are not necessary for the employee’s work tasks.
In practice, employers also enter into restrictive covenants to ensure that the employee is not disclosing trade secrets to competitors and customers during the duration for the restrictive covenants.
Are any legal changes planned that are likely to impact on the way employers approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?
See question 14 concerning the European Directive on Whistle-blowers.
Further, when Denmark has implemented the European Directive on Whistle-blowers, some employers will be obligated to have an internal policy concerning whistle-blowers. Employers should, therefore, consider drafting such policy prior to when the directive is implemented in Denmark.