Reasons for dismissal
Terms of dismissal
Employment protection acts
At times it may be necessary to dismiss one or more employees. This update looks at a number of issues which employers should consider when making dismissals.
It is much easier to dismiss an employee fairly in Denmark than in other European countries; however, employers should closely consider the consequences of a dismissal prior to acting, as it can be an expensive mistake to ignore the potential costs involved if the employee chooses to pursue the matter. Furthermore, it is necessary to consider not only the financial, but also the practical aspects of spending time on a minor matter that could have been avoided through timely care. With this in mind, in many cases legal action is avoided by including an ex gratia offer in the termination agreement (eg, an offer to release the employee of his or her duties).
Reasons for dismissal
There may be many reasons why an employer feels compelled to dismiss an employee - notwithstanding the repercussions of the financial crisis, which are still being felt in Denmark.
A dismissal may be the result of the employee's situation or the company's situation. In each case it must be assessed whether the dismissal is fair. In this regard, first it is important to clarify the employee's status. The terms of employment and dismissal may vary significantly depending on whether the person to be dismissed is, among other things, a manager, a salaried employee or a third type of employee, just as individual agreements may be included in the employment contract.
For salaried employees, a rule specifies that the dismissal of an employee who at the time of being served the notice has been employed for more than one year must be reasonably justified on the grounds of the company's situation or the employee's situation; otherwise, it may trigger a compensation claim for up to six months' salary, depending on the employee's seniority. Conversely, as a general rule, the dismissal of a salaried employee who at the time of being served the notice has been employed for less than one year will not constitute a risk. However, this rule will be modified if the employee is covered by special employment protection acts.
With respect to dismissals based on the company's situation (eg, due to staff reductions or restructuring), the company usually has discretion in terms of assessing which employees are to be dismissed.
With respect to dismissals based on the employee's situation, a prior warning is generally required, unless the employee's conduct in itself justifies a dismissal - or perhaps even a summary dismissal. However, in practice, the latter presupposes gross misconduct (eg, competing actions, disloyalty or theft).
Absence due to illness constitutes legal absence. However, employees who are absent due to illness are not normally protected against dismissal. In some cases a dismissal based on the fact that the employee is absent due to illness may be considered fair. As with any other employee, a dismissal based on absence due to illness must be justified. The fairness of the dismissal is based on a concrete assessment of the case, where, among other things, importance is attached to:
- whether the employee is considered likely to recover from his or her illness;
- the information that the employer has received on the possibility of a resumption of work;
- the risk of a relapse;
- the effect that the illness has had on the operation of the company; and
- the pattern of the illness.
Terms of dismissal
Once the decision to dismiss an employee has been made, the employer must ensure that the employee is given a term of notice, as well as any severance benefits that he or she is entitled to under the Salaried Employees Act, a collective agreement or individual agreements.
It is up to the employer to decide whether the employee is to continue working wholly or partly during the notice period, or whether the employee is to be released from duty (garden leave). A release from duty implies that the employee will no longer have to report for work. An employee released from duty is both entitled and obliged to seek other employment during the release period - although not with a competing company. If the employee obtains new employment during the release period, the total income from the new employment will be offset against the salary from the old employer. However, the employer is obliged to pay the employee a minimum of three months' salary during the release period ('minimum compensation').
Moreover, the employer ought to consider how much accrued holiday the employee is to take during the notice period. In connection with a release from duty, the employee is considered to have taken accrued holiday to the greatest possible extent in compliance with the rules on notification under the Holiday Act. However, a legislative proposal has recently been made to amend the Holiday Act. If the bill is passed, it will no longer be possible to consider the employee to have taken accrued holiday to the greatest possible extent if the employee has been unable to take the holiday (eg, because of new employment).
In addition, the employer ought to consider whether the employee is to keep any of his or her employee benefits during the notice period, as well as whether any restrictive covenants (eg, a non-solicitation clause) are to be terminated. Non-compete clauses do not apply if the company terminates the employment or dismisses the employee summarily without the employee having provided just cause for such dismissal.
Employment protection acts
In practice, employers should be aware of a number of pitfalls in connection with dismissals. These are mainly related to the applicable employment protection acts, many of which are based on EU directives. Employees are generally covered by these acts in the event of, among other things, pregnancy or disability. The protection may apply as early as the date on which the employee was hired.
In general, employees covered by the applicable employment protection acts can be dismissed, but the dismissal may not be based on the factor that constitutes the basis for protection.
If an employee is covered by an employment protection act, it is extremely important that the company secures evidence of the cause and necessity of the dismissal and the criteria for why this particular employee is to be dismissed. The reason for this is that several of the relevant acts imply that the employer must satisfy the burden of proof that the dismissal was not based on the criterion for protection.
If a dismissal is contrary to a protection act, it will typically trigger a compensation claim ranging from between six and 12 months' salary, in addition to the salary earned during the notice period.
The Equal Treatment Act and the Act on the Prohibition of Differential Treatment are most frequently applied to dismissals. The Equal Treatment Act prohibits unfair differential treatment of men and women, regardless of whether it occurs on a direct or indirect basis. Moreover, it follows directly from the act that employers are prohibited from dismissing an employee who has demanded to employ his or her right to absence or who has been absent in accordance with the Act on Benefits in the Event of Illness and Childbirth or due to pregnancy, maternity/paternity leave or adoption. Furthermore, employees undergoing fertility treatment are protected by the Equal Treatment Act. This act has given rise to a string of legal cases. In practice, it is extremely difficult for an employee to satisfy the burden of proof that the dismissal was not based on the pregnancy or associated leave.
Pursuant to the Act on the Prohibition of Differential Treatment, employers are prohibited from discriminating against employees, directly or indirectly, on the grounds of race, skin colour, religion, political views, sexual orientation, age, disability or national, social or ethnic origin. In practice, the disability criterion in particular raises certain challenges for employers if it is unclear whether the employee in fact has a disability, which in principle can be determined by the courts only if a dispute arises in this regard.
Other protection acts include the Companies Act on employee representation, the Equal Pay Act, the Act on Part-Time Work and the Act on Freedom of Association.
For further information on this topic please contact Tina Reissmann or Claus Mikkelsen at Plesner by telephone (+45 33 12 11 33), fax (+45 33 12 00 14) or email ([email protected] or [email protected]).