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Denmark – Employment Law Review 2017

Written by
Norrbom Vinding, the largest labour and employment law practice in Scandinavia and the market leader in Denmark.
This article summarises the main developments in Danish employment law in 2017.

2017 was a very interesting year in Danish employment law. A holiday bill changing the entire holiday regime in Denmark was introduced, new collective bargaining agreements on the private labour market were concluded, and we saw new case law from the Danish Supreme Court on the definition of a disability.

A new Holiday Act

Holiday regulation is currently an extremely hot topic in Denmark. Late last summer, a commission presided over by the former Supreme Court President delivered its white paper report on a new Holiday Act. The commission was established after Denmark received a letter of formal notice from the EU Commission stating that Danish holiday regulation was contrary to the Working Time Directive. The EU Commission’s main objection was that the Danish way of accruing paid holiday – under which paid leave accrues at staggered intervals – was preventing people new to the labour market from having four weeks paid leave as required by the Working Time Directive. Therefore, new legislation has been proposed that will change the Danish system on accruing leave from being based on accruing paid holiday in one year and taking that holiday in the following year to being based on simultaneous holiday accrual, meaning accruing and taking holiday in the same year.

The new legislation proposed by the commission will be gradually introduced from 2019.

Bill on Data Protection introduced

It is well known that the EU General Data Protection Regulation (2016/679) will come into force on 25 May 2018. The Danish Ministry of Justice has proposed supplemental legislation in areas where the Regulation leaves Member States liberty of action.

The general opinion is that the prevailing Danish data protection legislation is essentially in accordance with the Regulation and this is reflected in the proposed new legislation.

Bereavement leave for fathers and co-mothers

Under the Danish ‎Act on Entitlement to Leave and Benefits on Childbirth mothers who have a stillborn child or whose child passes away or is adopted within 32 weeks of birth are entitled to leave.

With a proposed amendment to the Danish ‎Act on Entitlement to Leave and Benefits on Childbirth, fathers, co-mothers and adoptive parents will be given equal rights with the mother of the child.

Renewal of collective bargaining agreements in the private sector

In April, a renewal of collective bargaining agreements in the private sector was concluded.

Notable changes to the Industrial Collective Agreement, which is the collective agreement with the most extensive coverage in Denmark, include an increase in the minimum base wage, a right to full pay during 13 weeks of parental leave, better flexibility in work planning and higher contributions to education for employees.

It was a hard-fought process to reach a compromise. The parties had to go to the State Conciliator who mediated and submitted a proposal for the industrial partners to have approved by their constituencies. The respective ballots came out with positive results and both sides approved the compromise, resulting in the renewal of the collective bargaining agreements.

The Supreme Court finding on the concept of ‘disability’

In the HK Danmark case from the European Court of Justice (C‑335/11 and C‑337/11), the concept of ‘disability’ was defined as follows:

‘The concept of ‘disability’ in Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation must be interpreted as including a condition caused by an illness medically diagnosed as curable or incurable where that illness entails a limitation which results in particular from physical, mental or psychological impairments which in interaction with various barriers may hinder the full and effective participation of the person concerned in professional life on an equal basis with other workers, and the limitation is a long-term one. The nature of the measures to be taken by the employer is not decisive for considering that a person’s state of health is covered by that concept.’

Since this judgment, it has been established case law in Denmark that in order to constitute disability, illness must be medically diagnosed.

Following two judgments from the Danish Supreme Court delivered on the same day last November, the prevailing case law has been overruled. In these cases, the Supreme Court ruled that a medical diagnosis is not necessarily a requirement for a finding of disability. The Supreme Court observed that in determining whether an employee is disabled within the meaning of Directive 2000/78/EC an overall assessment of all factual circumstances must be made, particularly taking into account data from doctors or other medical professionals.

The 120 days rule and part-time illness

The Danish Salaried Employees Act states:

‘The employer is entitled to terminate the employment by giving one month’s notice to expire on the last day of a month if the salaried employee has received pay during sickness for a total of 120 days during a period of 12 consecutive months. In order for such termination to be valid, notice must be given immediately after the expiry of the 120 sick days and while the salaried employee is still sick, whereas the validity of the termination is not affected by the salaried employee having resumed work after the date of notice.’

This means that employers in such a situation are entitled to terminate an employee with reduced notice compared to the general notice periods under the Act.

The actual calculation of days under the provision has historically given rise to many disputes. In one case before the Danish Supreme Court decided in November, the controversy concerned whether and how part-time absence due to sickness should be included in the 120 days. The facts of the case were that an employee who was on sick leave had made an offer to work part time that the employer rejected for operational reasons. The employee was dismissed with reduced notice with reference to the 120-day rule. The days on which the employee had offered to work part-time were included in the calculation of the 120 days. The employee objected to these days being included, since it was the employer’s choice not to accept the employee’s offer to work part time. The case made its way all the way up to the Supreme Court.

The outcome of the judgment relating to the technical calculation of days is not particularly interesting from an international perspective (though of substantial significance from a purely Danish perspective) but the Supreme Court seized the opportunity to note that employers are not obliged to accept an offer from an employee who is on sick leave to work part time.

In relation to the calculation of days in the case, the Supreme Court ruled that the employer was entitled to include the days where the employee offered to work part-time.

Compensation for breaching the 48-hour rule under the Working Time Directive

In November, the Supreme Court examined the level of compensation for breach of the 48-hour rule in the EU Working Time Directive (Directive 93/104/EC as amended by Directive 2000/34/EC). Under the Directive, Member States shall ensure that ‘the average working time for each seven-day period, including overtime, does not exceed 48 hours’. The Directive is implemented in Danish law by the Working Time Directive Implementation Act, under which an employee is entitled to financial compensation if the employee’s rights under the Act (i.e. the Directive) are violated.

Before the Supreme Court judgment, no case law was available in Denmark offering guidance on how to determine the level of compensation for breaching the 48-hour rule.

In its judgment the Supreme Court noted that breach of the rule should generally give rise to compensation of DKK 25,000 (approximately EUR 3,360), unless the factual circumstances justified a lower or a higher amount.

Isolated, trivial and excusable breaches will give rise to lesser compensation. On the other hand, significant, long-standing breaches will justify a higher amount. Unless exceptional circumstances apply, the compensation cannot exceed DKK 50,000 (approximately EUR 6,720).

Retention bonus

Bonuses to salaried employees are regulated by the Salaried Employees Act, which states that:

‘Where a salaried employee whose pay package, according to agreement or custom, includes bonuses or other incentives leaves the enterprise during a financial year, the salaried employee is entitled to a pro rata share of the incentive he would have been entitled to receive had he still been employed with the enterprise at financial year end or such other date as the incentives may be paid.’

Over time this has given rise to disputes as to whether a retention bonus is part of the salaried employee’s pay package, with the consequence that the salaried employee is entitled to a pro rata share of the bonus if they leaves the organisation before the end date according to the retention bonus scheme.

In 2012, the Supreme Court found that a retention bonus scheme was not covered by the provision in the Salaried Employees Act, with the consequence that the employee was not entitled to a pro rata share of a retention bonus if they decided to leave before the end date of their employment. The Supreme Court particularly relied on the fact that the retention bonus was awarded solely on the condition that the employee was still employed at the fixed end date under the scheme.

In a decision from November 2017, the Supreme Court reached a different conclusion. In this case the retention bonus was partially tied to performance criteria.

The prevailing case law now seems to suggest that a retention bonus can only be exempted from the provision in the Salaried Employees Act under exceptional circumstances and where the bonus is not tied to any performance elements.

Focus on withdrawal of employment benefits in the public sector

Generally, public employers in Denmark are looking for areas in which to cut to benefit core welfare for citizens.

One way of doing so is to look at staff costs. In 2017, we saw decisions on two industrial arbitration matters concerning attempts from public employers to withdraw benefits instead of cutting down staff. One case concerned withdrawal of a paid lunch break and another case concerned withdrawal of paid days off. Both employers based the withdrawals on the opinion that these benefits was characterised as an ‘industrial custom’ not supplementing the relevant collective agreement.

In the ‘lunch break case’ a major public organisation notified its employees that their paid lunch break would be withdrawn. The employees protested and the matter found its way to industrial arbitration where it was decided at the beginning of 2017 that the employer did not have the right to withdraw the paid lunch break. The tribunal relied on the historic development of the collective bargaining agreement and statements made over time by the industrial partners.

In the ‘paid days off case’, it was held that the employer had the right to withdraw paid days off. The tribunal did not find any basis for concluding that the custom had become part of the collective agreement over time, and therefore it could be withdrawn based on managerial discretion.

Both decisions indicate that employers should be pay close attention to the historical data relating to collective bargaining agreements and to custom when considering the removal of traditional employee benefits.