The Employment Law Review: Denmark
Danish employment law is based on a 'flexicurity' model. According to this model, employers have substantial flexibility to make staff adjustments (management of headcount, changing employment terms and conditions, etc.) and there is a high degree of job mobility, but this is balanced by comprehensive social security (unemployment benefits) and an active labour market policy that involves several measures to counter unemployment.
The employment relationship is governed by a combination of statutory rules applicable to all employee categories, special rules for certain employee categories and a number of general unwritten principles.
Some significant employment issues are governed by statutory rules applicable to all employees (e.g., holiday, working environment, employment contract requirements, personal data protection and discrimination), whereas other significant issues are not (e.g., minimum salary, normal working hours and overtime pay).
Employees are roughly divided into three categories: white-collar workers (salaried employees), blue-collar workers and chief executive officers (CEOs).
The employment relationships of white-collar employees are mainly governed by the Salaried Employees Act, which addresses minimum notice periods, protection against unfair dismissal, restrictive covenants and pay during sick absence. No particular law applies solely to manual workers, but in practice their terms and conditions are predominantly governed by collective agreements negotiated with relevant trade unions. With a few exceptions, CEOs are not covered by statutory employment laws and their terms and conditions of employment are generally subject to freedom of contract.
The labour market is regulated by collective agreements to a great extent. These agreements typically govern the terms and conditions of employees within a field or sector, such as the industrial sector or the financial sector, as opposed to the terms and conditions of employees who are members of a particular union.
A collective agreement is applicable to the extent that the employer is a member of an employer organisation that is a party to, or covered by, the collective agreement in question, or has acceded to the collective agreement by way of an agreement with the relevant union or unions. An employee's membership of a union does not in itself imply that the employer is bound by any of the collective agreements applicable to that union.
Danish employees are unionised to a fairly wide extent (in recent years, between 60 per cent and 70 per cent), which is mainly attributable to the Danish labour market tradition.
Employment-related disputes that are not settled by way of negotiation are ultimately settled by the ordinary Danish courts, which consist of (in hierarchical order) several city courts, two high courts (as well as the Maritime and Commercial Court) and the Supreme Court, assuming that dispute resolution by way of arbitration has not been agreed. Before reaching the courts system, certain types of disputes are tried by special tribunals, such as the Equal Treatment Tribunal. Disputes within the collective agreement system are normally settled by way of industrial arbitration or by the Labour Court.
Apart from the above-mentioned dispute resolution system, employment law rules and principles are enforced by several government bodies within their respective areas of competence.
Year in review
The headline topic in 2021 has been parental leave. According to EU legislation from 2019,2 all Member States must ensure a minimum of nine weeks is earmarked for parental leave for each parent by 2022, which requires a reform of the current Danish parental leave system. Parliament is due to introduce a bill during spring 2022 to comply with this Directive. The new rules will most likely include that, as of 2 August 2022, each parent is granted 24 weeks of leave following the birth of a child. Of these 24 weeks, 11 are earmarked specifically for each parent, meaning that neither parent can transfer his or her 11 earmarked weeks to the other. Therefore, if one parent does not use all 11 earmarked weeks, those not taken will be lost. The non-earmarked parental leave can be taken concurrently or separately depending on how the parents wish to plan the leave. This new model represents a significant departure from the model currently in place, as the mother is no longer able to take all parental leave. Proponents say that apportioning leave to each parent promotes equality, whereas critics say it interferes with private decisions about childcare.
On 24 June 2021, Denmark passed its new Whistle-blower Protection Act. All employers with more than 249 employees were required to set up a whistle-blower hotline no later than 17 December 2021, whereas the deadline for employers with between 50 and 249 employees expires on 17 December 2023. The Act outlines considerable protection for all whistle-blowers, including confidentiality of identity and protection against retaliation.
The covid-19 pandemic is still a very hot topic in Danish employment law. However, the main topics are no longer redundancies or workforce adjustments, as the market seems to have settled and Denmark is currently experiencing market growth and a lack of workforce. Instead, the social debate is concentrated on some of the spillover effects from the pandemic – especially the possibility to perform work from home. A lot of Danish companies have found – and continue to find – that employees are working with a high level of efficiency from home. Several companies have implemented permanent remote working policies, and this has contributed to a more flexible working life in many lines of business, although it has often also created difficult challenges.
In recent years, including 2021, Denmark has consistently been ranked by the World Bank3 as one of the top five best countries in which to do business.
On 7 January 2021, the Board for Equal Treatment gave its ruling in a case regarding dismissal of a pregnant employee. The employee was doing a flexible job (for individuals with a reduced capacity to work) and had a 10-hour working week. In addition to the salary received from the employer, the municipality provided a subsidy paid directly to the employee. The Board found the dismissal unjustified. The compensation was to be calculated based on the employer's payroll cost without taking into account the size of the public subsidy or other benefits the employee might have received in addition to the salary. With this ruling, the Board changed its previous practice in terms of calculating compensation.
On 29 March 2021, the Supreme Court gave a ruling regarding restrictive covenants. According to the Restrictive Covenants Act, a non-compete clause is invalid if an employer dismisses an employee without cause. This rule applies to both employees and CEOs; however, the issue was whether the rule applies to non-compete clauses in shareholder agreements as well. The Court found that the starting point remains that no special rules apply regarding the lapse of non-compete clauses included in shareholder agreements despite the Restrictive Covenants Act.
On 10 August 2021, the Supreme Court gave its ruling regarding a summary dismissal of an employee. The employer dismissed the employee without notice shortly after the employee for the second time had refused to participate in an interview for the purpose of preparing a fitness for work statement. Absence from such interviews may result in the employer losing the right to reimbursement of sickness benefits. The Court found that the employer had reacted proportionately when summarily dismissing the employee, as the employee had been informed about the consequence of not participating in such interviews.
Basics of entering an employment relationship
i Employment relationship
Pursuant to the Employment Contract Act, employers are required to provide employees with a written employment contract within one month of the commencement of employment, provided the employment is for more than one month and the employee's weekly working hours are at least eight hours on average.
Certain minimum information that is always required is mentioned explicitly in the Act, such as the name and address of the employer and employee, the place of work, the employee's right to holiday, rules on notice periods, and salary, supplements and time of payment. In addition, the employer must provide a description of other material terms and conditions, such as special benefits (e.g., company car, newspapers and telephone), the right to participate in an incentive compensation scheme, restrictive covenants and special employee policies (e.g., regarding IT, expenses or smoking). Typically, these terms (except for the special policies) are reflected in the employment contract, but it is permitted to provide a description of the terms in one or more other documents, such as an employee handbook. If so, that document must be referenced in the employment contract.
The Act provides that in the event of an employer's violation of the Act, the employer will be liable to pay compensation to the employee of up to 13 weeks' salary (20 weeks' salary if there are aggravating circumstances). The compensation level was further determined in the Supreme Court ruling of 17 December 2010, according to which the typical compensation level ranges from zero to 25,000 kroner. Generally, any such compensation claims are only initiated in connection with a non-amicable termination of employment.
With regard to amendments to employment terms, the decisive criterion is whether the amendments are materially detrimental to the employee (i.e., material changes).
Non-material changes can be implemented unilaterally by the employer without notice or consent by virtue of the employer's right of management, but normally notice is given.
Material changes implemented by the employer require consent or a notice equal to the employee's individual notice of termination (or longer), regardless of any contractual wording stipulating the contrary (which is often seen in Anglo-American contracts). Material changes imposed without consent will not become effective until after the expiry of the notice period. Any such changes will entitle the employee to consider himself or herself dismissed with effect from the expiry of the notice period, in which case the normal rules on termination will apply.
If material changes are implemented without sufficient notice or consent, the employee may potentially claim constructive dismissal and terminate the employment without notice.
Fixed-term employment contracts are permissible. However, the Act on Fixed-Term Employment provides for certain restrictions, including a prohibition against discriminatory treatment of fixed-term employees with regard to employment terms. Also, according to the Act, fixed-term employment contracts can only be renewed once, unless there are objective reasons to do otherwise.
Under the Holiday Act, all categories of employees are entitled to 25 days' holiday per holiday year, which runs from 1 September to 31 August. Employees are entitled to 2.08 paid holidays per month and can take the holiday in the same holiday year or no later than 31 December the following year. The employer is required to pay a holiday supplement equal to 1 per cent of the employee's total remuneration. When the employment relationship ends, the employer is required to pay compensation in lieu of unused paid holiday to the Danish Labour Market Holiday Fund.
Salaried employees are entitled to full pay during sick leave, whereas blue-collar workers have no such right, unless otherwise stipulated in a collective agreement.
Taxes are deducted at source and the employer is required to report and withhold income taxes from the salary payments made to employees.
ii Probationary periods
For salaried employees, probationary periods of up to three months are allowed. During the probationary period, which must be explicitly agreed, the employment can be terminated with 14 days' notice by the employer and without notice by the employee, assuming the notice period expires during the probationary period. It is possible to agree on a mutual 14-day notice period, which is very common. The only significance of the probationary period is that the employment can be terminated with a shorter notice period than the normal minimum notice of termination (see Section XIII.ii).
There are no statutory rules applicable to blue-collar workers or CEOs and consequently there is no maximum probationary period, unless the employee is covered by a collective agreement providing for a maximum period.
iii Establishing a presence
A foreign employer can hire employees in Denmark without setting up a business in Denmark, but the employer must be registered with the Danish Business Authority.
An employer that is not officially registered in Denmark can engage an independent contractor. If a foreign employer has hired one or more employees to work habitually in Denmark, the employer will, as a rule of thumb, be deemed to have a permanent establishment in Denmark, assuming the employees have, and habitually exercise, a general authority to conclude contracts in Denmark on behalf of the employer. The main consequence of having a permanent establishment in Denmark is that the income and costs allocated to the permanent establishment will be subject to Danish taxation. A foreign employer temporarily providing services via employees present in Denmark must report certain information for the Register of Foreign Service Providers (the RUT). Lack of reporting can result in a fine of up to 10,000 kroner.
Foreign employers must comply with all employer obligations under Danish law with regard to workplaces subject to Danish law, including the obligation to pay certain social contributions and to provide certain benefits to employees.
The level of social security payments required from the employer is low (roughly 15,000 kroner per employee per year), compared with other European countries.
In general, the law permits that two types of restrictive covenants are concluded, namely non-compete covenants and covenants for the non-solicitation of customers and other business contacts. In the absence of any such clauses, the employer has no substantial protection against the post-employment activities of former employees in Danish law, except for the general protection of trade secrets in the Trade Secrets Act.
A Restrictive Covenants Act was adopted with effect from 1 January 2016. The Act was a significant departure from the previous rules, which still apply to a certain extent to restrictive covenants agreed before 1 January 2016.
i Covenants agreed on or after 1 January 2016
The two above-mentioned types of restrictive covenants are covered by the Restrictive Covenants Act. A third type – non-solicitation of employee – is also covered by the Act; however, the scope for this type of clause is very limited, as it is only allowed in connection with business transfers.
The Act applies to all types of employees, including salaried employees, blue-collar workers and CEOs. However, in practice, it is not common for blue-collar workers to be covered by restrictive covenants, and the courts are likely to deem them unreasonable and, therefore, set them aside in whole or in part.
For a non-compete covenant to be valid, the employee must hold a very particularly trusted position. This requirement does not apply to non-solicitation of customers. Both types of restrictive covenants can apply for up to 12 months; however, a combined non-compete and non-solicitation of customers covenant can apply only for a maximum of six months.
The validity of a non-compete or non-solicitation of customers covenant is conditional on the conclusion of a written agreement stipulating, inter alia, the extent of the covenant and the right for the employee to receive compensation. The required compensation amounts to at least 60 per cent of total remuneration (as at the expiry of the notice period) during the period from the end of employment until expiry of the covenant, if a non-compete or a non-solicitation of customers covenant applies for between seven and 12 months, or a combined non-compete and non-solicitation of customers covenant is agreed. The mandatory minimum level of compensation is 40 per cent if a non-compete or a non-solicitation of customers covenant applies for up to six months.
If the employee finds suitable alternative employment during the term of the covenant, the employer will be entitled, to a certain extent, to offset the income from that employment. The minimum level of compensation to which an employee is entitled is either (1) 16 per cent of the employee's remuneration effective from the third month after the date of termination, if a non-compete or a non-solicitation of customers covenant applies for up to six months, or (2) 24 per cent of the employee's remuneration effective from the third month after the date of termination, if a non-compete or a non-solicitation of customers covenant applies for between seven and 12 months or a combined non-compete and non-solicitation of customers covenant is agreed.
A non-solicitation of customers covenant can cover any customer, supplier or other business contact with whom the employee has had a business relationship in the course of the 12 months preceding the notice of termination and who explicitly appears on a list provided to the employee in connection with the employee or the company giving notice of termination.
ii Covenants agreed before 1 January 2016
The key differences from the rules applicable to clauses agreed on or after 1 January 2016 are as follows.
The Salaried Employees Act covers non-compete and non-solicitation of customer covenants. The Act on Job Clauses covered non-solicitation of employee clauses; however, any such clauses agreed before 1 January 2016 became null and void as of 1 January 2021.
No specific rules apply for blue-collar workers and CEOs, apart from the requirements in the Contracts Act that the covenants must be on reasonable terms and that a non-compete covenant will lapse automatically if a worker's employment is terminated by the employer and that the worker has not given reasonable justification for having breached the terms of his or her employment contract. However, in practice, it is not common for blue-collar workers to be covered by restrictive covenants, and the courts are likely to deem them unreasonable and therefore set them aside.
The validity criteria for non-compete and non-solicitation of customers covenants are not as strict; for example, for a non-compete covenant to be valid, the employee must hold a particularly trusted position but not a very particular trusted position. Furthermore, non-solicitation clauses cover customers, suppliers or other business partners with whom (1) the employer has had a business relationship during the 18 months preceding the date of the notice of termination, and (2) the employee has had personal contact or who appears on a list provided to the employee before the termination.
There is no maximum duration for restrictive covenants; however, best practice is for them to be valid for more than 12 months.
The minimum level of compensation to which an employee is entitled is 50 per cent of the total remuneration (as at the expiry of the notice period) during the period from the end of the employment until the expiry of the covenant. If the employee finds suitable alternative employment during the term of the covenant, the employer will be entitled, to a certain extent, to offset the income from that employment.
i Working time
The normal working hours are not determined by law and are therefore subject to freedom of contract as a general rule. The same applies to an employee's obligation to work overtime.
According to best practice (and most collective agreements), the normal working hours are 37 hours per week, inclusive or exclusive of a 30-minute lunch break. However, it is set forth in the Act on Working Time (which implemented Directive 93/104/EC concerning certain aspect of the organisation of working time) that the average week must not exceed 48 hours, including overtime, within a four-week reference period.
Under the Working Environment Act, employees must have at least one day off that must be directly linked to a rest period of one day within each seven-day period. The Act also provides the general rule that working hours must be arranged so that employees have a rest period of at least 11 consecutive hours within each 24-hour period.
These rules and principles also apply to night work.
The law does not require overtime compensation and consequently it is common within the private sector that employees are required to work overtime without separate remuneration, according to their employment contracts.
Most collective agreements require paid overtime or time off in lieu and, considering that most blue-collar workers are covered by collective agreements, the practical main rule is that most blue-collar workers are entitled to overtime compensation.
In terms of living and working in Denmark, the decisive factors are the employee's nationality and qualifications.
If the person is a citizen of the European Union or European Economic Area (EEA), or is a Swiss citizen, neither a visa nor a work permit is required, but the applicant will need a registration certificate from the Danish Agency for International Recruitment and Integration (SIRI) to reside in Denmark for more than three months. A registration certificate simply confirms the rights already held by the person in question according to the EU regulations on free movement of persons and services.
Citizens from a number of non-EU and non-EEA countries, such as the United States and the United Kingdom (as of 1 January 2021), are not required to obtain a visa to enter Denmark, but all non-EU and non-EEA or Swiss citizens must have a work permit to work in Denmark. In certain cases, however, certain limited work-related activities may be performed while legally staying in Denmark. UK citizens working in Denmark before 1 January 2021 are allowed remain in Denmark beyond 31 December 2020 without a work permit subject to certain conditions laid down in the EU–UK Withdrawal Agreement.
A number of schemes, such as the Fast-Track, Pay Limit and Positive Lists, have been introduced to make it easier for highly qualified professionals to obtain a work permit and thereby gain access to the Danish labour market. The Fast-Track scheme makes it quicker and easier for certified companies to recruit foreign employees with special qualifications to work in Denmark. This means that highly qualified employees can have a quick and flexible job start in the certified company. An employee can use the Pay Limit scheme if the annual salary is at least 448,000 kroner, and the Positive Lists can be used if the employee's job is listed on SIRI's website as a profession that is currently experiencing a shortage of qualified professionals.
The employer is not required to register the number of foreign nationals it employs. However, if a foreign employer posts employees to work in Denmark (while remaining in employment with a foreign employer), certain information must be registered with the Danish authorities. Generally, there is no limit on the number of foreign employees a workplace or company may have.
The employer obligations to withhold or report on tax mainly depend on the employee's tax status in Denmark (subject to unlimited or limited taxation), the employee's salary and whether the employer is Danish or foreign.
Foreign workers subject to Danish employment law are protected by those laws to the same extent as Danish employees.
Danish law prohibits discrimination against employees by employers and this fundamental principle is reflected in a number of statutes and substantial case law. Internal disciplinary rules are not required by law, but it is generally recommended to prepare, implement and enforce written rules on discipline and appropriate conduct, and other key workplace-related matters.
Typically, these rules are part of an employee handbook or similar document that covers numerous workplace-related matters, such as use of the employer's IT facilities, paid and unpaid leave, and sick absence. As a general rule, neither the employees nor any government authority or other third party is required to approve or agree to such rules.
The employer is free to decide on the process for implementing the rules. It is common that rules are simply posted on the employer's intranet and that the employment contract includes a reference to the location of the rules. Any new policies or policy changes resulting in material changes to the detriment of individual employees (e.g., a bonus scheme being abolished) must take place in accordance with the general principles for implementing material changes (see Section IV.i).
The rules must be prepared in a language that employees can be reasonably expected to understand. If the normal working language is English, it will typically be sufficient to issue the rules in English. However, to reduce the risk of disputes on the basis of (alleged) language barriers or misunderstandings, it is advisable to prepare a Danish translation of the key rules.
To comply with the Employment Contract Act, the employment contract must include a reference to any company rules, including material terms and conditions.
Pursuant to the Act on Entitlement to Leave and Benefits in the Event of Childbirth, employees are entitled to pregnancy, maternity, paternity and parental leave from the beginning of the employment relationship.
A pregnant employee is entitled to pregnancy leave starting four weeks before the expected date of childbirth. After the birth, female employees are entitled to 14 weeks' maternity leave, of which the first two weeks after the birth are compulsory. The father or the co-mother is entitled to two consecutive weeks' leave after the birth or, subject to agreement with the employer, within the first 14 weeks of the birth. Each parent has an individual right to 32 weeks' parental leave after the child is 14 weeks old. However, the father or co-mother is entitled to begin the parental leave within the first 14 weeks of the birth. An employee can choose to extend the parental leave by eight or 14 weeks.
It is expected that as from 2 August 2022, each parent will be granted 24 weeks of leave following the birth of a child, of which 11 weeks is specifically earmarked for each parent. Thus, according to this new model, the mother will be entitled to 11 weeks' maternity leave instead of the current 14 weeks. The father or the co-mother will be entitled to 11 weeks instead of the current two weeks. The non-earmarked parental leave (13 + 13 weeks) can be held concurrently or separately depending on how the parents wish to plan the leave. The bill is due to be introduced during spring 2022. We do not expect any change in terms of the right to salary or benefits from the government, as described below.
A pregnant salaried employee is entitled to half her salary (including benefits and bonus) from the employer from four weeks immediately before the expected date of birth until 14 weeks after childbirth. In the absence of a collective agreement, blue-collar workers have no right to salary from the employer during pregnancy, maternity, paternity or parental leave. However, it is customary for employers to pay full salary during pregnancy, paternity and maternity leave. Furthermore, it is fairly common for employers to pay full salary during parental leave to both men and women to a certain extent. As a clear starting point, the employee is entitled to maternity benefit from the government (a maximum of 4,460 kroner per week (2021) before tax) during pregnancy, maternity and paternity leave, if the employee does not receive any salary from the employer while taking leave. Moreover, if parents are not entitled to salary from the employer while taking leave, they are jointly entitled to maternity benefit for 32 weeks.
Employers are entitled to (partial) reimbursement from the government of salaries paid to employees during pregnancy, maternity, paternity and parental leave. However, this entitlement only applies if an employee would have been entitled to parent-related or adoption-related benefit had he or she not been receiving a salary.
Pregnant employees and employees on paternity, maternity or parental leave have a special protection against dismissal according to the Equal Opportunities Act. In the event of a dismissal, the employer must be able to show that the dismissal was neither in whole nor in part based on pregnancy or paternity, maternity or parental leave (see Section XIII.i).
Employment documents are generally not required to be prepared in Danish but must be prepared in a language that employees can be reasonably expected to understand. If the normal working language is English, it will typically be sufficient to issue the rules in English. However, to reduce the risk of disputes on the basis of (alleged) language barriers or misunderstandings, it is recommended to prepare a Danish translation of the key documents, such as the employment contract and bonus scheme or other incentive compensation plans.
An important exception is the requirement in the Stock Option Act to deliver a written employer statement in Danish to each participant, assuming the employer has put certain types of share-based incentive compensation programmes in place.
If an employer fails to provide employment documents in a language that the employees can be reasonably expected to understand, the documents in question will potentially be rendered partially or wholly unenforceable in court. Furthermore, the employer may be liable to pay compensation for violating the Employment Contract Act (see Section IV.i).
There are no specific formalities for translation, when required.
Rules on employee representation are set out in the employment law and company law frameworks. Danish employment laws contain several provisions for employees' rights to be represented in different situations. As an example, if a public or private limited company has employed a minimum of 35 people, on average, within the past three years, employees of that company have a right to employee board representation. Companies with more than nine employees must establish a health and safety committee constituted of a representative of the employer or management of the company, certain managers or middle managers and employee representatives (working environment representatives).
Apart from employee representation rights in specific contexts, the employer's obligation to inform and consult its employees follows from either the Act on Informing and Consulting Employees (implementing Directive 2002/14/EC establishing a general framework for informing and consulting employees in the European Community), which covers any employer with at least 35 employees that is not party to any collective agreement, or a collective agreement pursuant to which the employer has set up a works council and consults the works council in relation to certain workplace-related matters.
Under the above Act, the works council must be consulted with regard to, inter alia, the employer's financial situation, the latest and future developments, and any significant changes in the organisation of the work and working conditions. The employer is free to decide on the election process, the timing, method and contents of the information and consultation, but the employer must ensure an appropriate level of both.
Thus, consultation must occur at the relevant level of management and representation for the subject under discussion. Finally, consultation must be carried out in such a way as to enable the employee representatives to meet the employer and obtain a response, and to give the reasons for that response, to any opinion they might formulate with a view to reaching an agreement on decisions within the scope of the employer's powers.
It should be emphasised, however, that the employer is not required to follow the proposals from the employee representatives.
Rules on employee representation in public or private limited companies are set out in the company law legislation. A Danish employer that has at least 35 employees is required to inform and consult employees about all employer-related matters of significant importance to the employees.
In the context of business transfers and collective redundancies, special rules apply in respect of information and consultation.
i Requirements for registration
The rules governing the processing of personal data are set forth in the Regulation (EU) 2016/679 (the General Data Protection Regulation (GDPR)) and the supplementary Danish statute, the Data Protection Act (DPA), both of which were adopted in May 2018.
There is no general obligation for companies operating in Denmark to register with the Danish authorities in relation to their processing of personal data regarding employees, applicants and others (data subjects).
Certain fundamental requirements applicable to all processing of personal data are provided in the GDPR and the DPA. In particular, the GDPR requires that the processing of personal data is conducted for an explicit and legitimate purpose and only to the extent required for that purpose.
Another fundamental employer requirement is to provide certain information to data subjects in connection with the employer's collection of personal data regarding data subjects. The mandatory information is set forth in the GDPR (Articles 13 and 14) and includes (1) the identity of the data controller, (2) the purpose of the data processing, (3) the types of personal data collected and processed, and (4) any further information that is necessary, having regard to the specific circumstances in which the personal data is collected, to enable the data subject to safeguard his or her interests (e.g., retention periods, the recipients, if any, and information regarding any transfers outside the EEA, including which appropriate safeguards have been provided).
All fundamental requirements must be satisfied regardless of whether consent is obtained from the data subject.
Under the GDPR, an employer is permitted – as a general rule – to process personal employee data, without obtaining employee consent, to a normal and reasonable extent in connection with the employer's administration of personnel.
Access levels to personal data must be limited to ensure that any access is given for a legitimate business purpose, namely on a need-to-know basis.
The employer is required by the GDPR to implement appropriate technical and organisational security measures to protect data against accidental or unlawful destruction, loss or alteration, and against unauthorised disclosure, abuse or other processing in violation of the provisions laid down in the GDPR.
Infringement of data protection law may result in a number of different sanctions, such as agency orders, fines and an obligation to indemnify any damage suffered by the data subject (and others, if relevant) as a result of the infringement, along with criticism from the Danish Data Protection Authority (DDPA). As the maximum fine has been increased very significantly (the higher of 4 per cent of annual group turnover or €20 million), any company should be aware of the financial risks associated with GDPR violations. Furthermore, infringement will most likely result in significant negative press coverage and bad will. In April and June 2019, respectively, the DDPA announced that the first two companies had been reported to the police for GDPR violations, with proposed fines of 1.2 million kroner and 1.5 million kroner, respectively. If a police report results in an indictment by the prosecution (as clearly expected), then the case will be tried in criminal court proceedings. For constitutional reasons, the DDPA is not authorised to issue administrative fines.
ii Cross-border data transfers
Any processing of personal data must be conducted in accordance with the fundamental requirements of the GDPR, including cross-border transfers. Cross-border transfers within the EEA are subject to the normal rules in the GDPR regarding disclosure of personal data. There is no requirement to register the transfer with the DPA, unless the transfer is based on the derogation provisions in Article 49 of the GDPR.
Transfers of personal data outside the EEA are subject to special rules. The GDPR restricts transfers of data outside the EEA, unless the recipient is located in a geographical area approved by the European Commission, or if the data controller or processor has provided appropriate safeguards for protecting the personal data in question. According to Chapter 5 of the GDPR, the following three approaches are possible:
- Adequacy decisions: the European Commission is empowered to designate a country or a territory as providing an adequate level of data protection. The European Commission makes its decisions based on factors such as the rule of law and respect for human rights. It is important to note that the EU–US Privacy Shield decision was invalidated by the EU Court of Justice on 16 July 2020.4 Transfers to international organisations established in the United States, such as Microsoft, Google and Amazon, are no longer allowed, unless the parties can establish appropriate safeguards in accordance with Article 46 of the GDPR.
- Establishment of appropriate safeguards: the GDPR permits cross-border transfers of data, if the data controller or processor has provided the safeguards stated in Article 46 of the GDPR. This could be binding corporate rules defining an intra-company policy, which establish appropriate safeguards. Appropriate safeguards can also be provided with the agreement of the European Commission's standard contractual clauses, which have standard formats for data transfers.
- Specific derogations: Article 49 of the GDPR includes specific approaches that permit data transfers in the event of failing to use the mechanisms described in points (a) and (b), above. For example, a data transfer may, under certain circumstances, take place with the data subject's consent.
iii Sensitive data
Generally, the legal basis for the processing of personal data depends on the type of data being processed – mainly, whether the data should be considered sensitive or not. The GDPR introduces the term 'special categories of personal data' in Article 9 (sensitive personal data). This category comprises genetic, biometric and health data as well as personal data revealing racial and ethnic origin, political opinions, religious or ideological convictions, or trade union membership. According to the GDPR, the processing of special categories of personal data requires consent from the data subject or other legal grounds specifically mentioned in the GDPR, but according to the DPA, the processing of special categories of personal data may take place (1) when the processing is necessary for the purpose of observing and respecting employment law obligations and the rights of the employer or the data subject as laid down by other laws or collective agreements, or (2) when the processing is necessary to enable the employer or a third party to pursue a legitimate interest that arises from other laws or collective agreements, provided the interests or fundamental rights or freedom of the data subject are not overridden.
Social security numbers are not special categories of data according to the GDPR, which means that this information is subject to the general processing rule in Article 6 of the GDPR. However, according to the DPA, the processing of social security numbers requires a special legal ground in accordance with Section 11 of the DPA or Article 9 of the GDPR (e.g., consent from the data subject or that the processing activity is required by law).5
According to Danish administrative practice, records regarding criminal background checks are categorised as information regarding criminal offences and subject to the processing rule in Article 10 of the GDPR, unless the record is clean, in which case the information is subject to the general processing rule in Article 6 of the GDPR. However, according to the DPA, the processing of information regarding criminal offences requires a special legal ground in accordance with Section 8 of the DPA or Article 9 of the GDPR (e.g., consent from the data subject).6
iv Background checks
Background checks are allowed in general, though some, such as credit checks and criminal records checks, are permitted only subject to special requirements.
Credit checks are allowed with regard to employees in a position of trust or applicants applying for such positions (e.g., financial controllers, finance managers, key account managers or others with a certain financial responsibility and access to funds). The sole fact that a position involves access to funds does not imply that the position is considered a position of trust. As a general rule, credit checks require the consent of the employee or applicant.
The employer is permitted to collect information revealing criminal actions only if that information is relevant to a position that an applicant has applied for or is being undertaken by an existing employee, such as a crime committed for the sake of enrichment where the position involves financial responsibility (e.g., managing director, chief financial officer or financial controller). Private employers do not have access to public criminal records. Generally, access to these records requires written consent by the applicant or employee in accordance with the Regulation on the Central Criminal Register.
Under the Salaried Employees Act, a dismissal must be reasonably justified by the circumstances of the employer or the employee (e.g., redundancy or poor performance, respectively), assuming the employee has been employed for at least one year (as at the date on which notice is given). Otherwise, it will be unfair.
In other words, employees who have been employed for less than one year are not protected against unfair dismissal. However, they will be protected against any discrimination from the start of the employment under anti-discrimination legislation.
In the event of an unfair dismissal, the employee will be entitled to compensation of between one and six months' total remuneration, depending on length of service and other factors.
As a general rule, a dismissal on grounds of redundancy will be deemed fair, provided that the employer can demonstrate that the redundant position has not been immediately refilled. In this situation, the employer (as a general rule) has discretion to select the employee who is redundant, and the employer is not required to use specific selection criteria. However, in terms of employees enjoying special protection against termination, the employer will typically need to justify having selected the protected employee instead of another employee and to demonstrate that no suitable alternative position was available at the time of termination.
A performance-based termination will generally not be considered fair unless the termination is based on a prior written warning.
According to Danish law, an employee may be dismissed because of sick leave provided that the sick leave is not in respect of pregnancy, disability or other circumstances affording the employee special protection against dismissal. In fact, pursuant to Section 5(2) of the Salaried Employees' Act, the employer may dismiss the employee because of sick leave amounting to at least 120 days during 12 consecutive months on the condition that the notice of dismissal is given immediately after the expiry of the 120 days of sick leave and while the employee is still absent.
In the absence of a collective agreement, there is no protection against unfair dismissal. Any collective agreement typically provides rules on compensation for unfair dismissal with regard to workers with at least nine months' continuous service (as at the date on which notice is given). The compensation may amount to up to 52 weeks' salary but will normally be fixed at a considerably lower amount.
Employees enjoying special protection against dismissal
Certain employee categories enjoy special protection against dismissal according to the law, including pregnant employees, employees on paternity, maternity or parental leave, employee-elected board members, employee-elected work environment representatives and union representatives.
Special protection does not rule out a lawful dismissal. However, in the event of dismissal, the employer must be able to show that it was neither in whole nor in part based on the conditions on which the special protection is based.
In the case of a termination in contravention of the rules affording special protection, the employer may be liable to pay significant compensation amounting to between three and 12 months' salary, as well as a penalty for violating the applicable collective labour agreements, if any. The compensation level is mainly dependent on the employee's period of continuous employment and the seriousness of the violation.
Moreover, special anti-discrimination legislation protects employees from dismissal on the basis of factors such as race, ethnic origin, age and disability. Employees who have been discriminated against may be awarded compensation of between six and 12 months' salary, based on the most recent case law.
The minimum notice required from the employer to terminate an employment relationship is dependent on the employee's length of continuous service, and is between one and six months, to expire at the end of a calendar month. The minimum notice required from the employee is one month, to expire at the end of a calendar month.
The minimum notice periods required to be given by the employer are as follows:
|Employment period||Notice period|
|Up to 5 months||1 month|
|Up to 2 years and 9 months||3 months|
|Up to 5 years and 8 months||4 months|
|Up to 8 years and 7 months||5 months|
|More than 8 years and 7 months||6 months|
According to Section 2(a) of the Salaried Employees Act, an employee with continuous service of 12 years or more (but fewer than 17 years) or 17 years or more is entitled to statutory severance pay amounting to one or three months' pay, respectively, if the employee is dismissed (provided the dismissal is not justified by material breach).
Typically, the worker will be covered by a collective labour agreement setting out minimum notice periods for both parties. The notice required from the employer typically depends on the length of the employee's continuous service with the employer.
Workers not covered by a collective agreement are not entitled to any particular minimum notice except for the notice agreed in their employment contract.
Salaried employees and blue-collar workers
The employer is not required to provide a social plan and is not required to notify a government authority or other third party, unless otherwise set forth in the applicable collective agreement, if any. Some of the laws relating to employees enjoying special protection against unfair dismissal provide a right of reinstatement; however, in practice, a dismissed employee is never reinstated.
Until the expiry of the notice period, employees are entitled to receive their normal base salary, variable salary (commission, bonus, etc.) and their usual benefits, such as insurance and pensions. Employees are required to continue working for the employer under the usual conditions during the notice period, unless they are released from their duties or put on gardening leave, which the employer may choose at its discretion. If the employee is released from his or her duties, the employer may – to a limited extent – offset any income earned from another employer during the notice period against the current salary.
The parties may choose to conclude a severance agreement outlining the rights and obligations resulting from the termination. There are no particular formalities required. This approach is mainly taken by companies to mitigate specific legal risks, for company policy reasons, or both.
Payment in lieu of notice is generally inconsistent with the employment law framework and is typically not recommended for a number of reasons.
In the event of the employee's material breach of the employment agreement, the employer can terminate the employment relationship without notice, or with notice at the employer's discretion.
The principles and rules applicable to dismissals (see Sections XIII.i and XIII.ii) also apply to redundancies, with the exception of the special rules applicable to collective redundancies discussed hereunder.
The execution of collective redundancies must take place in accordance with the Act on Collective Redundancies (implementing Directive 98/59/EC on the approximation of the laws of the Member States relating to collective redundancies), which sets forth a specific mandatory information and consultation procedure before the final decision to proceed.
The Act applies where the number of redundancies within 30 days exceeds:
- 10 employees in undertakings with between 20 and 100 employees;
- 10 per cent of the employees in undertakings with between 100 and 300 employees; or
- 30 employees in undertakings with more than 300 employees.
Under the Act, the employer must, at the earliest possible time, notify the Regional Employment Council and initiate consultations with the employees or their representatives for the purpose of reaching an agreement to either avoid or limit redundancies, and to alleviate the effects, for example by reallocating or retraining the affected employees.
If the employer proceeds with the redundancies after consultation, it must notify the Regional Employment Council, and the redundancies will be effective no earlier than 30 days (or, in some cases, eight weeks) after that notification.
In the event that the mandatory procedure is not followed, the employer may be liable to pay compensation payments to the affected employees, and possibly a fine.
Special rules on collective redundancies are often set forth in collective agreements.
Transfer of business
The legal rights of employees in connection with a business transfer are governed by the Transfer of Undertakings Act (which implemented Council Directive 2001/23/EC on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses (the Acquired Rights Directive)).
In the event of a business transfer covered by the Transfer of Undertakings Act, the transferee will automatically assume the employment rights and obligations of the transferor in relation to the employees who are employed on the date of the takeover.
The transfer of rights and obligations applies to all terms and conditions regardless of whether the rights and obligations are based on the individual employment contract, a collective agreement or other grounds. The transfer applies only to employment relationships existing as at the date of the takeover.
As a result of the automatic transfer of employment, the transferee will become liable for all obligations (and the transferor will be released from its obligations), irrespective of whether the obligations pertain to the period before the transfer.
A business transfer does not in itself justify a dismissal of one or more employees. Dismissal resulting from a business transfer will be deemed fair only if justified by economic, technical or organisational reasons requiring changes in the workforce. For example, in a merger where, prior to the merger, both the transferor and the transferee have a chief financial officer (CFO), but following the merger only one CFO will be needed, the dismissal of either CFO will typically be regarded as fair.
Under the Transfer of Undertakings Act, the transferee can decide to renounce the collective agreements covering the employees of the acquired business by notifying the relevant unions within three weeks of the date of the takeover.
The hottest topic in 2022 will almost certainly be the implementation of Directive (EU) 2019/1158 regarding the right to parental leave. A bill is due to be introduced during spring 2022 and will most likely create a new social debate about the significant departure from the model currently in place. The new rules, which are due to take effect on 2 August 2022, will affect a lot of families.
Another hot topic in the coming year will probably be the new Whistle-blower Protection Act. Employers with at least 50 employees but fewer than 250 were required to set up a whistle-blower hotline no later than 17 December 2021. During the coming years, we expect to see case law regarding whistle-blower rights and potential challenges connected to these hotlines.
1 Tommy Angermair and Mette Neve are partners and Caroline Sylvester is an attorney at Clemens Law Firm. The authors acknowledge the valuable contributions of Helene Kjærgård Nielsen and Camilla Sand Fink in the preparation of this chapter.
2 Directive (EU) 2019/1158 of the European Parliament and of the Council of 20 June 2019 on work-life balance for parents and carers and repealing Council Directive 2010/18/EU.
4 European Court of Justice, C-311/18 (Schrems II).
5 See Data Protection Act, Part 3, 11.
6 ibid., at Part 3, 8.