Procedures For Terminating the Agreement
Most often, the procedure for dismissal is not described in an employment agreement. Although there are no formal requirements to the procedure of the dismissal, the fact that the employer carries the burden of proof for the dismissal means that a dismissal in writing is recommended.
Instant dismissal without notice period is possible in the case of a very gross breach of contract by the employee. However, the basis for such dismissal is limited and even in such a situation, the employee enjoys certain basic rights.
As a main rule, an employee may always terminate an employment contract by giving due notice.
Termination On Notice
Either party may terminate the employment agreement with due notice. Statutory legislation and collective agreements on notice periods tend to override short contractual notice periods.
However, if a dismissal, even with proper notice, is deemed unjustified, the employer may be met with claims for compensation.
Termination By Reason Of The Employee's Age
Termination only or mainly due to age may be regarded as discrimination.
Automatic Termination In Cases Of Force Majeure
The usual consequence in Danish law of Force Majeure is suspension of obligations for a while. Force Majeure does normally not result in automatic termination.
In case of dismissals of a certain number of employees within 30 days, special regulation applies.
Termination By Parties’ Agreement
If the parties agree, they may agree on as short a notice as they like – and other conditions. In case the agreement is not beneficial for the employee, the employer is likely to carry the full burden of proof for a valid agreement.
Directors Or Other Senior Officers
Usually, CEOs are not covered by protective legislation or collective agreements which increases the significance of the agreed conditions in the CEO’s individual employment agreement.
Senior officers are protected by legislation and sometimes collective agreements.
Special Rules For Categories Of Employee
Generally, commercial and office employees enjoy a higher level of protection than other employees.
Furthermore, special regulation applies to certain groups of employees, such as shop stewards, union representatives, health and safety representatives, pregnant women, disabled persons, etc.
The coming EU-directive regarding protection of whistle-blowers is being implemented in Denmark.
For certain kinds of businesses, including banks, insurance companies, etc., whistle-blower protection is a requirement.
Specific Rules For Companies in Financial Difficulties
Employees are not automatically dismissed if a company is declared bankrupt or applies for liquidation or for reconstruction. Usually, if the court appoints a trustee or a liquidator, the appointed person shall within a short period decide on dismissal, change or continuation of the employment agreements.
If the employment agreement continues, the employer (bankruptcy estate, company under liquidation or company under reconstruction) is obliged to abide by the terms and conditions of the employment agreement (including, possible a collective agreement).
If an employer due to financial difficulties, prior to bankruptcy etc. is unable to pay wages to the employees, claims for wages to a certain degree may be covered by a national guarantee fund.
Special Rules For Garden Leave
Garden leave is a not a right for the employee as it is the employer’s decision whether to grant garden leave in connection to a dismissal.
When granting garden leave, it is worth seeking to reduce the amount of holiday accrued by the employee during the garden leave. The Danish Holiday Act includes some limitations as well as some useful provisions in this regard.
Restricting Future Activities
Non-competition clauses are thoroughly regulated by legislation, collective agreements and case law. Failure to comply with the restrictions result in invalid non-competition clauses.
In general, non-competition clauses are relatively expensive and are not binding if the employer terminates the employment agreement without the employee being at fault.
Severance payments are regulated by legislation, collective agreements and case law.
Objective severance payments only depend on the duration of the employment agreement, such as commercial and office workers being entitled to resp. 1 month’s or 3 months’ wages after 12 or 17 years of employment.
A claim for subjective severance payment arises in case of unfair dismissal but the claims are relatively small (often 1,5-3 months’ wages if employed less than 10 years) compared to most other EU-countries.
Special Tax Provisions And Severance Payments
All income from work in Denmark is subject to tax, including severance payments. Tax is regulated in detail in Denmark.
Benefits, however, such as free phone and internet, is taxed light compared to the value for the employee.
Allowances Payable To Employees After Termination
During the notice period, all usual payments and benefits shall be paid/available unless otherwise specifically agreed.
Accrued but not spent holiday shall be paid after expiry of the notice period.
Bonus and similar income is often to be paid pro rata, depending on the agreement in this regard.
Time Limits For Claims Following Termination
Claims based on employment agreements are time-barred after 5 years. Given the fact that case law tends to be very employee-friendly, it is less likely that a claim against an employer lapses due to failure to act in time.