At a glance: termination of employment in Denmark

Termination of employment

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

In Denmark, no general fairness or cause requirement applies to individual dismissals. However, if the employee is salaried (white-collar employee), and he or she has been employed for at least 12 months, the employee is protected by the Danish Salaried Employees Act and, thus, the dismissal must be reasonably justified by the conduct of the employee or the circumstances of the employer. Similar provisions are found in most collective agreements.

‘Cause’ is not a defined concept. ‘Circumstances of the employer’ often means economic or operational reasons. If, for example, the employer can prove a need for cutbacks, the dismissals will usually be considered reasonably justified. But when carrying out the dismissals, the employer must ensure that the selection criteria are not arbitrary, discriminatory or both (eg, based on age, gender, religious beliefs or any of the other protected criteria).

Similarly, ‘conduct of the employee’ means that dismissals based on excessive sickness absence, underperformance, etc, will usually be considered reasonably justified. In most cases, however, it will be a requirement that one or more written warnings have been given before the dismissal to allow the employee to remedy the situation and, thus, avoid dismissal.

Salaried employees (white-collar employees) are entitled to compensation for unfair dismissal if they have been continuously employed by the same employer for at least one year before the date of the notice. For other employees (blue-collar employees), collective agreements will usually – directly or indirectly – impose a fairness test concerning dismissals if the employee in question has been continuously employed for a specified period.

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

Employees are usually entitled to notice of termination unless they are summarily dismissed for gross misconduct. Under the Danish Salaried Employees Act, salaried employees are entitled to a notice period of between one and six months depending on their length of service. If a probationary period of up to three months has been agreed upon, the notice period may be reduced to two weeks. Further, collective agreements usually contain provisions governing notice periods. Case law has established that non-salaried employees (blue-collar employees) whose employment is not governed by a collective agreement are entitled to reasonable notice depending on their length of service.

Employers are normally entitled to pay out the employee’s pay during the notice period as a lump sum, and it is up to the employer to decide whether to require the employee to work during the notice period. If the employee is entitled to holiday pay, any untaken holidays must be paid into the holiday administration scheme (except holiday transferred from a previous holiday period, which must be paid out to the employee) at the end of the notice period.

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

Employers are entitled to dismiss employees with immediate effect for gross misconduct, such as unexplained absence, theft, engagement in competitive actions, disloyalty, inappropriate behaviour, insubordination, etc.

If dismissing a salaried employee (white-collar employee) for gross misconduct, the employer will be entitled to damages for any loss incurred. However, such damages are not very common as the burden of proof is on the employer. In the event of unexplained absence or desertion, the employer is, as a minimum, entitled to damages equalling half a month’s pay in the absence of special circumstances.

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

There is no such general legislation in Denmark. However, salaried employees (white-collar employees) are entitled to redundancy pay if they have been continuously employed with the same employer for at least 12 years. In such a case, the severance pay – which is payable in addition to the salary during the notice period – will amount to one month’s pay. After 17 years of service, the amount is three months’ pay.

For other employees (blue-collar employees), several collective agreements contain somewhat similar provisions.

Are there any procedural requirements for dismissing an employee?

Such procedural requirements apply only to public employers or if provided in a collective agreement.

No prior approval from a government agency is required by law.

In what circumstances are employees protected from dismissal?

Some categories of employees enjoy special dismissal protection. These employee categories include union representatives (under most collective agreements), health and safety representatives (under the Danish Working Environment Act) and employee board members (under the Danish Companies Act).

Also, dismissal protection is given under various anti-discrimination acts, including:

• the Danish Act on Equal Treatment of Men and Women;
• the Danish Equal Pay Act;
• the Danish Act on Leave for National Service;
• the Danish Anti-Discrimination Act (covering age, race, colour, political opinion, sexual orientation, gender identity, gender expression or gender characteristics, national, social or ethnic origin, religion or belief, and disability);
• the Danish Freedom of Association Act;
• the Danish Part-Time Employment Act; and
• the Danish Act on Employees’ Rights on Transfer of Undertakings.

Further, some collective agreements may provide for dismissal protection in cases of sickness.

As of 17 December 2021, employees who have made a report to their employer’s internal -blowing channel (if such a channel has been established under the Danish Act on the Protection of Whistleblowers) enjoy protection against retaliation, including dismissal.

Are there special rules for mass terminations or collective dismissals?

The Danish Collective Redundancies Act applies if an undertaking plans to dismiss a certain number of employees, depending on the size of the undertaking.

The provisions apply if the employer proposes to dismiss the following number or percentage of employees within a 30-day period:

• 10 or more employees, in an organisation with 20 to 100 employees;
• 10 per cent or more of all employees, in an organisation with 100 to 300 employees; or
• 30 or more employees, in an organisation with more than 300 employees.

Under the Act or similar collective agreements, or both, employers must consult with employee representatives before actually deciding to carry out collective dismissals.

The employees must be given all relevant information, and the employer must notify the relevant regional employment council.

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

Under the Danish Administration of Justice Act, common claims, including labour and employment claims, are allowed to be submitted as class actions under certain conditions. These rules aim to collect similar claims on behalf of some individuals to make the process quicker, more efficient and more economical for the plaintiffs.

A class action will only be allowed by a court if it is deemed the best way to try the claims, and a list of mandatory criteria are met. Thus, in practice, a class action involves an assessment on a case-by-case basis and greater discretion for the court. An employee can always choose to assert a claim on an individual basis as well.

In Denmark, class actions in the area of labour and employment law are very uncommon.

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

Employers are not allowed to impose a mandatory retirement age. Any agreements on mandatory retirement ages in individual contracts (both existing and new) are void. Nevertheless, a mandatory retirement age set in collective agreements concluded before 28 December 2004 will still be valid if the retirement age is reasonably justified by a legitimate aim and is an appropriate and necessary means of achieving that aim.