A blue-collar employee performs manual labour (ie, not salaried work) and is normally subject to a collective agreement containing the main regulations of the employment. The regulations of collective agreements vary depending on which area of practice the collective agreement governs.
If an employee performs work such as office work, purchase or sales work, technical or clinical assistance or management, the employee will be considered a white-collar (salaried) employee. A white-collar employee is subject to the Danish Salaried Employees Act, if the employee performs salaried work for eight hours or more per week on average. The Danish Salaried Employees Act contains the main regulations of the employment, including compensation in the case of unreasonable termination, severance pay, notice periods, etc. However, the act does not contain any regulations regarding a white-collar employee’s normal salary and this solely depends on an agreement between the employer and the employee.
If the employee is not subject to the Danish Salaried Employees Act or a collective agreement, the employment is regulated by the individual employment agreement.
An employee who performs work for three hours or more on average per week over a reference period of four consecutive weeks is subject to the Danish Employment Contract and Certain Working Conditions Act.
This act requires that an employer must provide an employee with the following, in writing:
If an employer does not comply with the act, an employee may be entitled to compensation of between DKK1,000 and DKK25,000, depending on the severity of the breach.
Types of Contracts
Employment can be non-fixed term or fixed term, and it can be part time or full time.
The employment will be non-fixed term, unless otherwise agreed in the individual employment agreement or in an applicable collective agreement.
If the employment is fixed term, the employment lapses on a specific date or when a specific project is completed. Such employment is subject to the Danish Temporary Employment Act, under which an employer is not entitled to treat an employee who is fixed term any differently compared to an employee who is non-fixed term. Under this act, an employer can only extend the duration of fixed-term employment if the extension is based on objective reasons. Such objective reasons include seasonal work, the employee being a substitute for employees on leave, the extension of a project, etc.
If the employment is part time, it is subject to the Danish Part-Time Act under which the employer is not entitled to treat an employee who is employed part time any differently compared to an employee who is employed full time.
If an employer does not comply with these acts, an employee may be entitled to compensation paid by the employer.
A full-time employee in Denmark normally performs work for 37 hours per week, but there is no general regulation of an employee’s working time, unless this is agreed in an applicable collective agreement.
This means that an employer and an employee can agree that the employee must perform work for more or less than 37 hours per week. Furthermore, the parties can agree that employees are obliged to perform overtime work with or without any additional payment.
Several collective agreements regulate flexible working hours, overtime payments and payments in relation to such work, and these regulations must be complied with, if the employment is subject to a collective agreement.
Regardless of the above, however, the employer is obliged to comply with the Danish Working Time Act, which stipulates that an employee is not allowed to perform work for more than 48 hours per week on average over a four-month period, that an employee is entitled to a weekly day off, and that an employee must have a break of 11 hours between each work shift. However, the break of 11 hours can be reduced to eight hours, if certain requirements are met.
If an employer does not comply with this act, an employee may be entitled to compensation, which varies depending on the severity of the breach. Furthermore, the employer may be fined by the Danish Working Environment Authority.
As a main rule, an employer and an employee are entitled to freely agree on the employee’s salary as there are no statutory minimum salaries in Denmark.
However, most collective agreements contain minimum salary requirements, which must be complied with, if the employment is subject to such collective agreement.
Bonus
An employer and an employee can freely agree on a bonus agreement, but there is no mandatory 13th-month bonus/salary in Denmark.
However, if an employee who is entitled to a bonus and who is subject to the Danish Salaried Employees Act resigns from their position during a bonus accrual year, the employee is entitled to a proportional bonus based on the bonus that the employee would have been entitled to receive, if they had still been employed at the end of the bonus accrual year, and on how long the employee was employed during the bonus accrual year. The same can also be agreed in a collective agreement.
Vacation and Vacation Days
Under the Danish Holiday Act, an employee accrues 2.08 holidays each month during the vacation accrual year (1 September – 31 August the following year), which can be taken the month after being accrued until 31 December the following year (1 September – 31 December the following year, ie, 16 months).
Here are some examples:
Leave
An employee is entitled to pregnancy leave, maternity leave, paternity leave, co-mother leave and parental leave under the Danish Act on Leave in Connection with Childbirth.
This act entails that a female employee giving birth is entitled to take:
A male employee or co-mother is entitled to take:
Furthermore, an employee is – as a rule – entitled to state benefits during leave in connection with childbirth in accordance with the overview below:
The above-mentioned also applies to employees who adopt.
In addition to the above, female employees who are subject to the Danish Salaried Employees Act are entitled to leave with half salary four weeks prior to giving birth (pregnancy leave) and 14 weeks of half salary after giving birth (maternity leave).
Usually, collective agreements cover regulation of salary during leave in connection with childbirth.
An employer and an employee can also freely agree to additional salary during leave due to childbirth.
Under certain circumstances, an employer is entitled to receive reimbursement from the government covering (parts of) the salary that the employer paid to an employee in connection with child leave.
Sick Leave
An employee who is subject to the Danish Salaried Employees Act is entitled to salary during sick leave. The same is applicable under certain collective agreements and can be agreed individually. If an employer pays salary during illness, such employer is usually entitled to receive reimbursement from the government for (a part of) the salary paid out to the employee during an illness lasting more than 30 days.
If an employee is not subject to salary during illness, the employee may be entitled to illness benefits from the government.
Liability
If an employee’s negligent actions entail that an employer must pay damages, the employer is entitled to claim damages from the employee, if this is reasonable in regard to the employee’s negligent action, the employee’s position and the surrounding circumstances.
An employer and an employee can enter into non-compete, non-solicitation and combined non-compete and non-solicitation clauses under certain requirements in the Danish Employment Clauses Act.
A valid non-compete clause prohibits an employee from performing competing work after the lapse of the employment, and a valid non-solicitation clause prohibits an employee from having any commercial relationship with their previous employer’s customers, clients and collaboration partners after the lapse of the employment.
Non-compete Clauses
A non-compete clause must meet the following requirements:
Non-solicitation Clauses
A non-solicitation clause must meet the following requirements:
Combined Non-compete and Non-solicitation Clause
If the parties enter into a combined non-compete and non-solicitation clause, the above-mentioned requirements must be met with the following amendments:
If any of the above-mentioned requirements are not met, the clause will be invalid and unenforceable in its entirety.
If an employee breaches the obligations of a clause, the employee may be obliged to pay damages to the employer. Furthermore, the employee may also be obliged to pay a penalty payment, if this has been agreed in the clause.
See 2.1 Non-competes.
The employer is obliged to comply with the Danish Personal Data Act, as well as the European General Data Protection Regulation.
If a foreign employee performs work in Denmark, the employee is subject to the Danish Aliens Act. Under this act, non-EU employees must obtain a work and residence permit to perform work in Denmark.
Furthermore, if a foreign employee is permanently employed outside Denmark and is seconded to work in Denmark for a temporary period, such secondment is subject to the Danish Posting of Workers Act.
Under the Danish Posting of Workers Act, an employer who seconds employees to work in Denmark, must ensure that such employees are registered in the Register of Foreign Service Providers in Denmark (the “RUT”) prior to commencing work in Denmark.
If the employer does not report the mandatory information in time or if any of the information is incorrect or inadequate, the employer might be penalised with a fine.
As a rule, an employee who performs mobile work in Denmark is subject to the same employment regulation as other employees.
See 1.5 Other Employment Terms concerning leave in connection with childbirth.
There is no other statutory regulation concerning sabbatical leave. However, collective agreements may contain regulations relating to sabbaticals, and an employer and employee are entitled to enter into an agreement concerning sabbatical leave.
No new regulation in Denmark has been passed concerning “new work”. However, the Danish Work Environment Authority has issued orders concerning codes of guidance regarding working from home, remote working places, etc, which must be complied with in relation to “new work”.
As an example, in relation to working from home, the Danish Work Environment Authority’s guidance states that the employer must ensure that:
In Denmark, labour unions and employers’ organisations have a substantial influence on the Danish labour market, as labour unions and employers’ organisations enter into collective agreements regulating the terms of employment of employees who are subject to collective bargaining agreements, without any involvement from the government.
See 6.3 Collective Bargaining Agreements.
The right to have an employee representative is not regulated by Danish legislation and is, therefore, not a legal requirement.
However, collective agreements usually contain a right for employees to appoint one or more employee representatives, who – as a rule – will be subject to mandatory termination legislation due to their role as employee representatives.
In addition to the above, see 7.5 Protected Categories of Employee.
There are no collective agreements in Denmark that have general application. As a rule, collective agreements are only applicable to employers, who:
If an employer becomes a member of a Danish employers’ organisation, the employer will – with certain exceptions – automatically be obliged to comply with the relevant collective agreement entered into between the employers’ organisation and the relevant labour union(s).
The typical material terms and conditions included in collective agreements are:
An employee is entitled to terminate the employment freely and without any reason.
As a rule, an employer is entitled to terminate an employee without any reason.
If the employment is subject to the Danish Salaried Employees Act, the termination must be based on reasonable grounds, if the employee has been employed for 12 months or more on the day of giving notice of termination. Collective agreements usually contain regulation similar to this with some deviations. If the termination is not based on reasonable grounds (described further below), the employee may be entitled to compensation.
An employer’s termination can be based on the employee’s circumstances (such as lack of performance, misbehaviour, collaboration issues, etc) or the employer’s circumstances (restructuring, lack of work tasks, etc).
If a termination is based on the employee’s circumstances, the termination is, as a rule, only reasonable, if the employee has received a warning prior to the termination.
If a termination is based on the employer’s circumstances, the termination is, as a rule, reasonable.
Under the Danish Salaried Employees Act, an employee is entitled to compensation, if the termination is unreasonable. The compensation is dependent on the circumstances of the termination and the employee’s seniority and can amount to one to six months’ salary. The same or similar is usually specified in collective agreements.
If a termination is based on the employee’s race, gender, nationality, ethnicity, age, disability, part-time or fixed-term employment, leave in connection with childbirth, pregnancy, etc, the termination is a breach of the Danish Non-discrimination regulation and the employee may be entitled to compensation of between three and 12 months’ salary.
Collective Redundancies
An employer is required to comply with the Danish Mass Redundancies Act if, within 30 days, the employer:
If the act applies, the employer must initiate negotiations with the employees or the employees’ representative.
In this connection, the employer must inform the employees’ representatives or the employees of the cause for the terminations, the number of terminations, the number of employees employed with the employer, the selection criteria, severance payments, etc.
In addition, the employer is obliged to forward several notices to the Danish Regional Labour Market Council during the duration of the collective-redundancy process.
If an employer does not comply with the above-mentioned requirements, the employees will be entitled to compensation of 30 days’ or eight weeks’ salary (depending on the percentage of terminated employees). In addition, an employer can be fined, if the employer breaches its obligations under the act.
In Denmark, an employment can be terminated in accordance with the terms of the individual employment agreement, the regulation in the Danish Salaried Employees Act (if applicable) and the regulation in an applicable collective agreement.
If neither the Danish Salaried Employees Act nor a collective agreement governs an employment, the employment can be terminated in accordance with the agreed notice. If no notice has been agreed upon, the employment can be terminated with reasonable notice.
Under the Danish Salaried Employees Act, a white-collar employee can terminate their employment with one month’s notice and the employer can terminate the employment in accordance with the following:
The above is based on how long the employee has been employed when the notice period lapses (ie, if the employee has been employed for two years and 11 months when the employer gives notice of termination, the employee will have been employed for more than three years, when the notice period of three months lapses and, in this situation, the employee’s notice period is four months).
The parties are also entitled to agree on a trial period for the first three months of employment.
A notice of termination takes effect at the end of the month in which it is given.
A notice of termination from the employer must be given in writing to the employee. Furthermore, the employer must inform the employee of the reason for the termination in writing, if this is requested by the white-collar employee.
Collective bargaining agreements also contain regulations concerning termination similar to the regulations in the Danish Salaried Employees Act, but normally with shorter notice periods. Furthermore, collective agreements may contain procedural requirements, which the employer must comply with prior to terminating an employment (such as joint meetings, meetings in front an appointed board, etc). The same procedural requirements may be agreed in individual agreements.
The employee may be entitled to compensation, if the employer does not comply with the applicable procedural requirements.
Payments in Connection With Termination
Employees are entitled to their normal salary during the notice period.
Furthermore, under the Danish Salaried Employees Act, employees who have been employed for more than 12 years are entitled to severance pay of one month’s salary and those who have been employed for more than 17 years are entitled to compensation of three months’ salary, if the employer terminates the employment, regardless of the grounds on which the termination is based. Collective agreements usually contain the same regulation and the same may also be agreed in individual agreements.
If a termination is unreasonable, employees who are subject to:
See 7.1 Grounds for Termination and 8.2 Anti-discrimination concerning terminations that are a breach of the Danish Non-discrimination or Equal Opportunities Acts.
If an employee is entitled to compensation under both the Danish Salaried Employees Act and the Danish Non-discrimination or Equal Opportunities Acts, the employee will only be entitled to one (the highest) of the compensations.
Payment in Lieu
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.
Employers and employees are entitled to terminate the employment without notice (dismissal), if the other party has breached its obligation substantially under the employment contract. In such cases, the employment will lapse on the day of termination and the employee’s entitlement to salary will lapse simultaneously.
If an employee terminates the employment due to the employer’s substantial breach, the employee is entitled to claim damages from the employer.
If an employer terminates the employment without notice and such termination is unreasonable, the employee will be entitled to damages for lost salary, equivalent to the salary during the ordinary notice period, and any other losses.
There are no general procedural requirements in relation to a termination without notice. Collective agreements and individual agreements may, however, stipulate specific procedural requirements regarding termination without notice, which must be complied with.
An employer and an employee are entitled to enter into a severance agreement regulating the terms of termination of the employment.
Such severance agreement must be reasonable and must comply with the mandatory requirements in the Danish Salaried Employees Act (if applicable) and applicable collective agreements.
An employee who has been elected as an employee representative under a collective agreement will, as a rule, be subject to specific protection. Such specific protection entails, inter alia, that:
The employee representative is entitled to compensation regulated in an applicable collective agreement, if the termination of the employee representative is not reasonable. The size of the compensation will differ depending on the applicable collective agreement and the circumstances of the termination.
The same protection applies for safety representatives elected under Danish work environment legislation.
See 7.1 Grounds for Termination and 7.2 Notice Periods.
See 7.1 Grounds for Termination.
See 7.1 Grounds for Termination and 7.2 Notice Periods.
Under the Danish Non-discrimination regulation, the burden of proof differs depending on the circumstances of the termination.
If the termination occurs during a pregnancy or an employee’s statutory leave in connection with childbirth, the employer bears the burden of proof that the termination is not based on the employee’s pregnancy or leave in connection with childbirth. This burden of proof is challenging in practice.
In other cases, the employee has to document factual circumstances indicating that the termination is based on age, gender, race, nationality, ethnicity, part-time or fixed-term employment, etc. If the employee can document such factual circumstances, the employer must document that the termination is not based on age, gender, race, nationality, ethnicity, part-time or fixed-term employment, etc.
The Danish courts and the chairman of an industrial arbitration may decide that a court proceeding or parts thereof (such as witness statements) can occur via video, but there is no legal entitlement to digital proceedings.
In Denmark, employment cases can be tried in front of the ordinary Danish courts, the Danish Labour Court and in front of an industrial arbitration tribunal depending on whether the case concerns issues relating to interpretation or breach of legislation, a breach of a collective agreement or interpretation of a collective agreement.
Class actions are unusual, but possible.
See 9.1 Litigation.
The prevailing party will usually be awarded its legal costs from the opponent. The awarded costs are decided by the court and are based on fixed rates previously decided by the Danish High Courts.
The complexity of the case, the processing time of the dispute and the size of the claim will determine the awarded costs which, usually, will not cover the prevailing party’s legal costs to its attorney. This means that the prevailing party will still have additional costs, despite being awarded costs from their opponent.
If an employee’s annual gross salary is below a certain threshold, the employee may be entitled to legal aid. The economic threshold for such legal aid is decided annually by the Danish Ministry of Justice.
In addition, an employee’s labour union or an employer’s organisation may also cover the fees of the dispute in accordance with the article of association of the union or organisation.
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LIND@lindlaw.dk www.lindlaw.dkForeign Companies and Employees Performing Work in Denmark
Introduction
This article aims to outline the main implications under Danish employment legislation for foreign companies and foreign employees performing work in Denmark.
The article describes the main implications of labour clauses, the necessity of work permits and the differences and main implications between locally employed and posted employees.
Note that when foreign companies and foreign employees perform work in Denmark, such work can also be governed by general Danish employment regulation and have tax and social security implications for the company and the employee. General Danish employment regulation, tax regulation and social security regulation are not included in this article, but it is recommended that these matters are also considered prior to commencing work in Denmark.
Contractual basis for companies’ work in Denmark – labour clauses
Background – ILO
The International Labour Organisation (ILO) is a United Nations agency where representatives from the governments, companies and employees of the member states create international labour standards and promote social protection and work opportunities for all.
The labour standards, such as ILO Convention No 94, are only binding for the member states.
Clause 2 (1) in the ILO Convention No 94 states:
“Contracts to which this Convention applies shall include clauses ensuring to the workers concerned wages (including allowances), hours of work and other conditions of labour which are not less favorable than those established for work of the same character in the trade or industry concerned in the district where the work is carried on:
(a) by collective agreement or other recognized machinery of negotiation between organizations of employers and workers representative respectively of substantial proportions of the employers and workers in the trade or industry concerned; or
(b) by arbitration award; or
(c) by national laws or regulations.”
The aim of ILO Convention No 94 is to prevent government authorities from entering into contracts involving the employment of employees on conditions below an acceptable level of social protection, and to encourage government authorities to raise the bar and act as model employers.
Thus, a labour clause obliges companies performing work on government projects to ensure – if the work carried out by the company or by its subcontractors or sub-subcontractors is not (already) governed by a collective agreement – that the salary and work conditions are no less favourable than the terms applicable in relation to work of the same type within the relevant industry in the region where the work is carried out.
ILO Convention No 94 was implemented in Denmark in 1955, entailing the Danish government authorities’ obligation to comply with the obligations in the convention. However, Denmark has not incorporated ILO Convention No 94 into Danish private regulation and, therefore, private companies are only bound by a labour clause if this is agreed between the parties.
The content of a labour clause under ILO Convention No 94
ILO Convention No 94 creates the overall framework for labour clauses. However, ILO Convention No 94 does not include sufficient legal rules and substance for any party to rely on, and it does not stipulate the specific requirements which must be complied with under Danish labour and employment regulation.
Based on this, labour clauses usually contain further agreed requirements for foreign companies to comply with when performing work in Denmark for government authorities.
Such requirements are normally that:
Therefore, it is essential that any applicable labour clause is reviewed when a foreign company enters into a contract concerning work in Denmark for a government authority.
Work permits
All employees who are not a citizen of Denmark or an EU country (ie, non-EU citizens) must obtain a work permit prior to commencing work in Denmark, according to the Danish Aliens Act (udlændingeloven).
The schemes under which non-EU citizens can apply for work permits differ depending on the circumstances of the employment:
All applications must be made on the webpage “New to Denmark” – www.nyidanmark.dk/en-GB.
If a non-EU employee performs work in Denmark without a valid work permit, this may result in penalties for the company and the employee, and can have a detrimental effect on the company’s chances of winning public procurements in Denmark, and its relationships with Danish labour unions.
Choice of law
Under the Rome Convention (applicable in Denmark) and the Rome I Regulation (applicable in the other EU member states), an employment agreement is – as a rule – subject to the employment legislation in the country in which the employee performs work.
However, if the employment has a closer connection to another country than the country in which the work is performed, the employment can be governed by that country’s employment legislation.
The parties of an employment agreement are also entitled to enter into a choice-of-law agreement under which the parties can agree that a specific country’s employment legislation governs the employment. It is highly recommended to enter into such choice-of-law agreement to ensure that it is clear which country’s legislation regulates the employment.
However, regardless of an employment having a closer connection to another country than the country in which the work is performed or a choice-of-law agreement, the employee will be entitled to some fundamental rights in the country where the employee performs work.
For example, the parties may agree that the employment is governed by German employment legislation and that the employee is entitled to 21 days’ leave per year. However, if the employee performs work in Denmark, the employee will be entitled to 25 days of leave in accordance with their fundamental right under Danish employment legislation (ie, the employee will be entitled to four more leave days).
Locally employed or posted
Employees who perform work in Denmark can be locally employed in Denmark or posted to perform work in Denmark.
Whether the employee is considered as locally employed in Denmark or posted to perform work in Denmark, affects the regulation of the employee’s work in Denmark and can also have an effect on the company’s and employee’s tax and social security (which is not outlined in this article).
Locally employed
An employee who is employed in Denmark on a permanent basis is locally employed in Denmark. Such employees are subject to general employment regulation on the same basis as an employee, who is a citizen of Denmark, unless the employment has a closer connection to another country or a choice-of-law agreement is entered into, as discussed above.
Posted employees
An employee who is employed outside Denmark on a permanent basis and who performs work in Denmark on a temporary basis, is considered as a posted employee, cf Section 3 in the Danish Posting of Workers Act (udstationeringsloven) and Section 2 in the EU Posting of Workers Directive (udstationeringsdirektivet).
A posted employee is subject to the Danish Posting of Workers Act, which implements the EU Posting of Workers Directive in Denmark. This act entails that posted employees are entitled to certain minimum entitlements under Danish employment legislation from the first day of the posting to Denmark, regardless of which country’s employment legislation otherwise applies to the employment. This concerns the entitlements outlined below:
When an employee has been posted to perform work in Denmark for 12 months (or 18 months, if the company applies for an extension of the period), the employee is entitled to the same minimum employment entitlements as an employee, who is locally employed in Denmark, regardless of the applicable choice of law. This does not, however, apply to notice periods, non-compete clauses, the requirements of the employment agreements, nor supplementary labour pension payments.
Labour unions in relation to posted employees
In Denmark, collective agreements usually only apply to employees who are directly employed by a company that is subject to a collective agreement, and not to employees who are employed with a foreign company and posted by such to perform work for an entity in Denmark.
Danish labour unions are in this respect entitled to raise a claim of entering into a collective agreement against the foreign company posting employees to perform work in Denmark.
In this connection, labour unions are entitled to apply industrial action (strikes, etc) to ensure that the employees’ salary corresponds to the minimum salary under the applicable regulation for the area of work where the posted employees perform work.
The normal salary includes the following:
Labour unions are, however, only entitled to raise a claim for entering into a collective agreement for posted employees in relation to salary. Other working conditions are not included in this right.
Register of Foreign Service Providers
A foreign company is obliged to register certain information in the Register of Foreign Service Providers in Denmark (“RUT”) prior to an employee, who is posted to perform work in Denmark, commences work in Denmark.
This obligation applies to all employees, who are locally employed in another country, and who perform work temporarily in Denmark, regardless of whether the employees are considered as white-collar or blue-collar employees, or if the employees are only in Denmark for a short period of time.
A breach of the obligation to register in RUT can result in penalties and be detrimental to the company’s relationship with the Danish labour unions.
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