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Termination of Employment Contracts in Denmark

1. Grounds for Termination

As a principle, both parties to an employment contract may terminate the employment agreement at any time, subject to either the statutory or contractual notice period, without the need to fulfil any statutory grounds for termination. The employer issuing the termination must, however, provide a written explanation of the termination upon the employee’s request.

2. Collective Dismissals

The Danish Act on Collective Redundancies obligates the employer to inform and negotiate with the employees (or the employees’ representatives) when the number of employees to be made redundant over a period of 30 days is expected to reach the following thresholds:

  • at least ten employees in businesses employing more than 20 and less than 100 employees;
  • at least ten per cent of the employees in businesses employing at least 100 and less than 300 employees; or
  • at least 30 employees in businesses employing at least 300 employees.

Redundancies governed by the Act must be notified to the Regional Employment Council.

The Act on Collective Redundancies provides detailed regulation on the negotiation procedure and the deadlines for notifying the Regional Employment Council and the employees concerned. Non-compliance with the Act may result in fines and/or compensation.

3. Individual Dismissals

Danish labour market practice requires that an employee who is dismissed receive a notice letter stating the dismissal terms. At a starting point, the employee cannot reject the fact that he/she is being dismissed, and no unions or public authorities can prevent the dismissal from being carried out. However, under certain collective bargaining agreements, a number of employees enjoy special projection, such as shop stewards, safety stewards and a few other categories of employees, and they cannot be dismissed unless a special negotiation has taken place prior to the issuing of the notice letter.

In order for the notice letter to take legal effect, the notice letter must be received by the employee, and the employer must be in a position to prove that the employee has received the notice letter. Typically, this involves that the notice letter is sent as registered mail and/or by courier.

a. Is severance pay required?

A white-collar employee, referring to a salaried employee who is dismissed without just cause and who has been employed for at least one year at the time of dismissal, is entitled to severance pay. The maximum amount payable is the salary payable for 50 per cent of the statutory notice period. However, if the employee is above 30 years of age, the potential severance pay is increased to an amount equalling 3 months salary. If the employee has been employed for at least 10 years, the severance pay may be increased to a maximum of 4 months salary. The amount payable is further increased to 6 months salary if the employee has been employed for at least 15 years.

A blue-collar employee who is dismissed without just cause, may, based on collective agreement, be entitled to a severance pay; however, this depends on the rules of the collective agreement in question.

4. Separation Agreements

The entering into separation agreements is not mandatory under Danish law, but typically for members of the management team or for key employees it is a usual tool to use to replace an ordinary dismissal in order for all terms to be agreed between the parties. Basically, entering into a separation agreement under Danish law is a matter of agreement between the parties; however, mandatory Danish legislation must be fulfilled.

a. Is a Separation Agreement required or considered best practice?

Entering into a separation agreement is not required, but is considered good practice when entered with members of the management group and key employees.

b. What are the standard provisions of a Separation Agreement?

A standard separation agreement typically involves agreement on compensation and benefits during the notice period, the duty to work during the notice period and agreement on communication regarding the separation. Typically, outplacement assistance for the employee in question is a part of the terms as well. A separation agreement will always involve terms that ensure that the employee cannot raise further claims against the employer when the separation agreement has been finalized and fulfilled by both parties.

c. Does the age of the employee make a difference?

The age of the employee will not make a difference.

d. Are there additional provisions to consider?

Additional provisions to consider will be if the employee must carry out a certain task before the employee is released from his/her duties, which again typically will involve the payment of an extraordinary retention bonus.

5. Remedies for employee seeking to challenge wrongful termination

In case of wrongful termination of employment, the termination can be challenged by the employee and may lead to the payment of a severance pay, see above.

For more information, please contact L&E Global.
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