Memorandum. General Overview Employment Law/Denmark

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1 Memorandum General Overview Employment Law/Denmark

2 1. General The legal regime governing employment relationships in Denmark is generally more liberal and favourable towards the employer than in many other EU countries. This is basically due to the fact that the Danish labour market model is a negotiation model and accordingly, the labour market is basically ruled by the labour market parties, however framed by mandatory legislation protecting employees rights, including a legal framework originating from the EU. According to the principle of freedom of contract, the parties of an employment agreement are free to agree on the content and terms of their agreement to an extent that is substantially greater than in most other European jurisdictions. Danish employment law, however, does contain basic mandatory provisions. Almost all disputes are settled in civil court proceedings. Where collective bargaining agreements apply, the instance is either the nationwide Labour Court or Labour Arbitration. It should be noted that quite a number of disputes are solved by the parties before court proceedings are initiated. Key Points Employees who are not from EU/EEA will find it very difficult to obtain permission to work in Denmark; The legal framework surrounding employment relationship is, compared to other European jurisdictions, considered very liberal and in favour of employers interests; The Danish labour market model is a negotiation model; accordingly mandatory legislation on basic terms such as salary level and the number of daily working hours do not exist and will be based on agreement; Denmark has the highest tax level in the World, but a special 25 % tax scheme applies to foreign experts taking up work in Denmark; The Danish labour market is well-organised and wildcat strikes happen very rarely. 1. Legal Framework A Danish employment law matter must be assessed from various angles such as whether the employee in question is an executive, a white-collar employee or a blue-collar employee. The legal framework surrounding members of the top-management is solely a matter of contract interpretation, but at employee level, a clear distinction must be made between white-collar and blue-collar employees. White-collar employees are protected by the Danish Act on Salaried Employees, while the legal framework protecting blue-collar employees is determined by either individual or collective bargaining agreements, and of course, mandatory legislation as well. Certain rules cover all 1

3 Danish employees, and certain rules solely protect special employees, e.g. seamen, or specific areas, e.g. share options or holiday provisions. Unfortunately, in Danish employment legislation no such thing as an aggregate employment law constitution exists. 2. New Developments Recent case law within employment law field continues a strong focus on interpretation of EU based non-discrimination legislation and especially focusing on age-discrimination and discrimination of disabled employees, including a number of cases focusing on the definition of a handicap. 2. Employment Contracts 1. Minimum Requirements According to the Employment Protection Act, the employer is obliged to provide the employee with an employment certificate with certain information containing the most important terms of the employment in writing within one month from the starting date. At least the following information must be included: Information about the identity of the employer and the employee Date of employment and work place Information about the position Employment term Notice period Salary and other benefits Number of vacation days Working hours Collective bargaining agreement, if applicable In addition, the certificate must include information regarding, inter alia, bonuses (and how such bonuses are calculated), overtime pay, time off in lieu of payment for overtime and salary during maternity/paternity leave. It is the responsibility of the employer to ensure that the information provided is accurate, up-to-date, and not misleading. Non-compliance with the Act may entitle the employee to a compensation, which, according to the most recent case law, will be in the level of EUR , depending on the circumstances. 2

4 2. Fixed-term/Open-ended Contracts The Danish Act on Fixed Term Employment provides that the employer cannot treat a fixed term employee differently than a comparable permanent employee, unless justified by objective circumstances. Consequently, fixed term employees are generally entitled to receive the same benefits as permanent employees. In a fixed term employment, the end of the employment is determined by objective conditions such as a specific date, completing a specific task, or the occurrence of a specific event. However, the Act does not apply to fixed term employees employed through a temporary employment agency. Non-compliance with the Act may entitle the employee to compensation. 3. Trial Period New white-collar employees are generally employed subject to an initial probationary period of maximum three months during which either party may terminate the relationship on short notice and without the need for just cause. Such an arrangement must be agreed expressly as it will not be implied into the contract. For blue-collar employees, individual or collective agreements also often provide for new employees to be subject to no or a very short notice period during the first period of employment. 4. Notice Period For white-collar employees, the Salaried Employees Act stipulates the following notice periods based on the individual employee s length of service: Seniority Less than 5 months of employment: Less than 2 years and 9 months of employment: Less than 5 years and 8 months of employment: Less than 8 years and 7 months of employment: At least 8 years and 7 months of employment: Employer s notice period 1 months notice effective as of the end of a month. 3 months notice effective as of the end of a month. 4 months notice effective as of the end of a month. 5 months notice effective as of the end of a month. 6 months notice effective as of the end of a month. 3

5 The white-collar employee may terminate the employment with one month s notice regardless of seniority. It may be agreed in writing that a longer period of notice shall apply, provided the period of notice to be given by the employer is extended correspondingly. A salaried employee who has been continuously employed for 12, or 17 years is entitled to severance pay corresponding to one, or three months salary in case of dismissal by the employer. The length of notice to be observed when terminating a contract with a blue-collar employee is solely based on an individual or collective bargaining agreement. Typically, such notice is much shorter than for white-collars and will typically be between days depending of seniority. 3. AUTHORISATIONs FOR FOREIGN EMPLOYEES 1. Requirement for Foreign Employees to Work EEA nationals are entitled to apply for work in Denmark and will not need a work permit. They must, however, register with the local authorities in the area where they reside, no later than six months after arrival and apply for an EEA residence certificate if their stay exceeds six months. EEA nationals who do not work or apply for work in Denmark must apply for a residence permit no later than three months after their arrival if their stay exceeds three months. Non-EEA nationals are, as a basic rule, not allowed to enter Denmark without obtaining a residence permit and a work permit from the Royal Danish Embassy or Consular General in the relevant non-eea country of residence. Permission will automatically be granted to applicants possessing special skills and qualifications according to the so-called job-card regime as defined by the Immigration Service, which maintains a positive list of skills and qualifications deemed to be special and in demand on the Danish labour market. Individuals who have been offered a highly paid job (DKK 375,000 / EUR 50,000 per year in 2015) may be granted a permit under the Pay Limit Scheme. There are no specific requirements with regard to education, field or the specific nature of the job. The Corporate Scheme is an initiative that makes it possible for companies or corporations in Denmark to bring employees with special skills or qualifications from the company s foreign affiliates or departments to Denmark to projects of limited duration with an innovative, developmental or educational purpose. For non-eea nationals who are not covered by any of the above schemes, the possibility of obtaining a work and residence permit is very remote. Pursuant to the Aliens Act, the employment of an individual who does not have a valid Danish work permit is an offence committed by the employer, which is punishable by a severe fine or imprisonment. 4

6 4. Working Conditions 1. Minimum Working Conditions The terms and conditions for employment are regulated in the individual employment agreement and/or in the collective bargaining agreement (if applicable). Mandatory rules regarding, inter alia, working hours, working environment, equality and non-discrimination, must also be observed. 2. Salary There are no provisions regarding minimum salary stipulated in law. Thus, the employer and the employee are free to agree on any salary level. However, collective bargaining agreements will as a general rule contain provisions regarding a minimum salary level as well as a minimum annual salary rise. 3. Maximum Working Week The Danish Act on Working Hours provides that the average working hours in a period of seven days, as calculated over a period of four months, cannot exceed 48 hours including overtime. The Danish Act on Working Environment stipulates that, within a period of seven days, the employees are entitled to a weekly day-off. The weekly day-off should as far as possible be on a Sunday. Furthermore, the working hours should be arranged in such a way that the employees are given a time of rest of at least 11 consecutive hours within each period of 24 hours. 4. Overtime There are no statutory rules regarding the extent of overtime, that can lawfully be worked, nor the payment for overtime work. However, the Act on Working Hours must be observed. In the absence of a collective agreement, it is presumed that the employee has an implied duty to undertake overtime work to a reasonable extent. Depending on the agreement, the payment for overtime work is either included in the salary or paid at a special hourly rate. 5. Holidays The Danish Holiday Act provides that employees are entitled to five weeks holiday per year corresponding to 25 working days, irrespective of whether the employee has earned the right to paid holiday. The employee earns the right to 2.08 days of paid holiday for each month of employment in a calendar year (qualifying year). Holidays must be taken during the holiday year from 1 May to 30 April following the qualifying year. The employer shall, after consultation with the employee, fix the time at which the holiday is to be taken. However, as a general rule, the employee is entitled to take three consecutive weeks of 5

7 holiday in the period from 1 May to 30 September. The employer shall, with due consideration to the operation of the business, to the widest possible extent meet the employee s wish as regards the timing of the holiday, including the employee s wish to take the main part of the holiday during the school holiday of the employee s child(ren). The employer shall inform the employee of the time of the holiday as early as possible, and not later than three months before commencement of the main holiday period, and not later than one month before the start of the remaining part of the holiday. Quite a number of individual employment agreements and most collective bargaining agreements provide for additional five special days off. 5. Rights of Employees in Case of a Transfer of Undertaking The Danish Act on Transfers of Undertakings provides for a certain protection of the employees in relation to transfers of undertakings. Pursuant to the Act, rights and obligations under individual employment agreements and collective bargaining agreements are automatically transferred to the transferee in the event of a transfer of a business or part of a business. Furthermore, the transferee is considered as having adopted the transferor s collective bargaining agreements unless the transferee gives notice to the unions within a certain time limit after the transfer date, stating that the transferee does not want to adopt the collective bargaining agreement(s) to which the transferor was a party. Pursuant to the Act, dismissal due to a transfer of a business or part of a business is not considered reasonably justified by the circumstances of the company unless the dismissal is due to financial, technical, or organisational reasons which cause occupational changes. If, in connection with the transfer, the employees working conditions are changed to the detriment of the employees, the employees may choose to consider themselves dismissed. Consequently, they may terminate their employment without notice from the date on which the changes have come into effect. The Act also contains provisions on information and consultation of the employees (or the employee s representatives). Non-compliance with these rules is sanctioned with fines. 6. Termination of Employment Contracts 1. Grounds for Termination (List) As a principle, both parties to an employment contract may terminate the employment agreement at any time, subject to either the statutory or contractual notice period, without the 6

8 need to fulfil any statutory grounds for termination. The employer issuing the termination must, however, provide a written explanation of the termination upon the employee s request. 2. Collective Dismissals The Danish Act on Collective Redundancies obligates the employer to inform and negotiate with the employees (or the employees representatives) when the number of employees to be made redundant over a period of 30 days is expected to reach the following thresholds: - at least ten employees in businesses employing more than 20 and less than 100 employees; - at least ten per cent of the employees in businesses employing at least 100 and less than 300 employees; or - at least 30 employees in businesses employing at least 300 employees. Redundancies governed by the Act must be notified to the Regional Employment Council. The Act on Collective Redundancies provides detailed regulation on the negotiation procedure and the deadlines for notifying the Regional Employment Council and the employees concerned. Non-compliance with the Act may result in fines and/or compensation. 3. Severance Payment A white-collar employee a salaried employee who is dismissed without just cause and who has been employed for at least one year at the time of dismissal, is entitled to severance pay. The maximum amount payable is the salary payable for 50 per cent of the statutory notice period. However, if the employee is above 30 years of age, the potential severance pay is increased to an amount equalling 3 months salary. If the employee has been employed for at least 10 years, the severance pay may be increased to a maximum of 4 months salary. The amount payable is further increased to 6 months salary if the employee has been employed for at least 15 years. A dismissal is without just cause if it is not reasonably justified by the conduct of the employee, e.g. poor performance or misconduct or by the circumstances of the company, e.g. restructuring or cost cutting. If the dismissal is due to performance related issues on the part of the employee, a written warning will normally be required in order to render the dismissal just. As a general rule, the fact that a dismissal is considered to be without just cause does not render the dismissal void. Instead, the employee may be entitled to a financial compensation as described above. A blue-collar employee who is dismissed without just cause may, based on collective agreement, be entitled to a severance pay, however, this depends on the rules of the collective agreement in question. 4. Options for Employee The employee may terminate the employment without any cause. The employee must observe 7

9 the notice period pursuant to statutory rules or stipulated in individual agreements or collective bargaining agreements. During the notice period, the employee is obliged to work and is entitled to salary and benefits. 5. Protection against wrongful termination In case of wrongful termination of employment, the termination could be challenged by the employee and may lead to the payment of a severance pay, see above. 7. Trade Unions and Employers Associations 1. Brief Description of Employees and Employers Organizations Denmark enjoys relative stability in labour relations with most conflicts being resolved amicably. The origin of the current system is the 1899 September Settlement between the Danish Employer s Confederation (DA) and the Danish Confederation of Trade Unions (LO). The organisations were founded in 1896 and 1898 respectively, but did not recognize each other s right to exist until 1899, where a major industrial dispute ended with the September Settlement. The settlement provides a set of basic rights and obligations to be respected by the parties, including: (i) the employees right to form trade unions; (ii) the employer s right to manage and control the work; (iii) the right to take industrial action, e.g. strikes and lockouts; and (iv) the peace obligation. The peace obligation is a general principle, which states that where a collective bargaining agreement has been concluded, the peaceful course of work must not be disrupted while the agreement remains in force. The Confederation of Danish Employers (DA) and the Danish Confederation of Trade Unions (LO) are the major umbrella bodies for employers and employees respectively; however, other umbrella bodies exist on the Danish labour market. 8. Employee Representation 1. Types of Representations Danish employees are, under certain rules, entitled to representation in the following fora; a. Works Council b. Board of Directors c. Security at work and health protection committee 8

10 d. Collective dismissals e. Transfer of undertakings. The number of representatives, the appointment of representatives and their tasks and obligations depend on the forum in question, the size of the business and/or the number of employees employed. However, such employee representatives enjoy special protection against dismissal at the same level as apply to a shop steward. The employees employed by a company employing 35 employees or more may elect a number of employee board members. Such board members join the Board of Directors and carry out board work in cooperation with board members elected by the annual general meeting. 9. Social Security 1. Contributions The Danish Act on Labour Market Supplementary Pension provides that employers and employees must contribute to a supplementary pension scheme for employees, who are employed in Denmark. The supplementary pension is paid out in addition to the old-age pension, and the employer s contribution is a fixed monthly payment of approximately EUR 25 covering a fulltime employee. 2. Insurances There is no obligation under the law for the employer to provide the employees with different insurances apart from mandatory insurances, such as group life insurance or work injury insurance. However, employers that are bound by collective bargaining agreements are typically obliged to take out certain insurances on death and disability. 3. Maternity Leave The right to maternity, paternity, and parental leave is regulated by the Danish Act on Maternity Leave and Allowance. Pursuant to the Act, a female employee has the right to absence in connection with pregnancy and childbirth from 4 weeks before expected childbirth and until 14 weeks after childbirth. Furthermore, a female employee has the right to absence during 32 weeks of parental leave after the 14th week after childbirth. A male employee is entitled to absence during 2 consecutive weeks of paternity leave within 14 weeks after childbirth. In addition, a male employee is entitled to absence during 32 weeks of parental leave. Some individual employment agreements and collective bargaining agreements provide for full salary during some of the above periods. An employer who pays salary during maternity, paternity, and parental leave may be entitled to reimbursement from the municipality. 9

11 Employees who are not entitled to any payment from their employer may be entitled to maternity/paternity pay from the municipality. The Salaried Employees Act stipulates that a female employee is entitled to 50 per cent of her salary during absence from work due to pregnancy and maternity leave from 4 weeks before expected childbirth and until 14 weeks after childbirth. 4. Pension Danish citizens with permanent residence in Denmark are entitled to old-age pension payable by the State in accordance with the provisions of the Danish Act on Social Pension. There are, however, a number of exceptions to the residential and nationality qualifications following, inter alia, from EU Directives, international treaties and the Danish Act on Social Pension. The old-age pension is financed through the taxes and is consequently not dependent on contributions from the pensioner. The old-age pension is currently payable from the age of 65 to 67 years. It is not mandatory law for employers to provide pension schemes to employees, however, quite a number of individual employment agreements and, in general, all collective agreements will involve the payment of contributions both by the employer and by the individual employee to a pension scheme. The level of contribution is solely a contractual matter and not set by legislation. The pension scheme model will, apart from pension schemes involving civil servants, be a defined-contribution pension scheme model. 5. Sick pay Pursuant to the Salaried Employees Act, salaried employees are entitled to full salary, including bonus, during sick leave. An employee who is not covered by the Salaried Employees Act may be entitled to pay during sick leave under the relevant collective bargaining agreement or pursuant to the individual employment agreement. If the employee is not entitled to pay during sick leave, the employee may be entitled to sickness benefits from the municipality pursuant to the Danish Act on Sickness Benefits. An employer who pays salary during sick leave may be entitled to a refund from the municipality, cf. the Danish Act on Sickness. An employee is entitled to unpaid leave when compelling circumstances in the family, like illness or an accident, make the immediate presence of the employee urgently necessary (force majeure). The right to paid leave on e.g. the child s first sick day must be agreed with the employer or stipulated in a collective bargaining agreement. In general, the right to paid leave on the child s first sick day is a standard benefit on the Danish labour market. 10

12 Labora Legal Denmark The firm of Labora Legal was established in Copenhagen in 2010 and has since its inception been committed towards employment and labour law advice of the highest quality. The firm has experienced a continued growth, and the firm is today a leading Danish boutique law firm committed to employment and labour law. This memorandum has been provided by: Labora Legal Teglværksgade 27 DK-2100 Copenhagen Ø P

13 Contact Us For more information about L&E Global, or an initial consultation, please contact one of our member firms or our corporate office. We look forward to speaking with you. L&E GLOBAL Avenue Louise 221 B-1050, Brussels Belgium Stephan Swinkels, Executive Director This publication may not deal with every topic within its scope nor cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice with regard to any specific case. Nothing stated in this document should be treated as an authoritative statement of the law on any particular aspect or in any specific case. Action should not be taken on this document alone. For specific advice on any particular feature you should seek advice from the L&E Global representative stated in this memorandum. This document is based on the law as of June

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