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The Employment Law ReviewThe Employment Law Review
Law Business Research
Sixth Edition
Editor
Erika C Collins
The Employment Law Review
The Employment Law ReviewReproduced with permission from Law Business Research Ltd.
This article was first published in The Employment Law Review - Edition 6(published in February 2015 – editor Erika C Collins).
For further information please [email protected]
The Employment Law Review
Sixth Edition
EditorErika C Collins
Law Business Research Ltd
THE MERGERS AND ACQUISITIONS REVIEW
THE RESTRUCTURING REVIEW
THE PRIVATE COMPETITION ENFORCEMENT REVIEW
THE DISPUTE RESOLUTION REVIEW
THE EMPLOYMENT LAW REVIEW
THE PUBLIC COMPETITION ENFORCEMENT REVIEW
THE BANKING REGULATION REVIEW
THE INTERNATIONAL ARBITRATION REVIEW
THE MERGER CONTROL REVIEW
THE TECHNOLOGY, MEDIA AND TELECOMMUNICATIONS REVIEW
THE INWARD INVESTMENT AND INTERNATIONAL TAXATION REVIEW
THE CORPORATE GOVERNANCE REVIEW
THE CORPORATE IMMIGRATION REVIEW
THE INTERNATIONAL INVESTIGATIONS REVIEW
THE PROJECTS AND CONSTRUCTION REVIEW
THE INTERNATIONAL CAPITAL MARKETS REVIEW
THE REAL ESTATE LAW REVIEW
THE PRIVATE EQUITY REVIEW
THE ENERGY REGULATION AND MARKETS REVIEW
THE INTELLECTUAL PROPERTY REVIEW
THE ASSET MANAGEMENT REVIEW
THE LAW REVIEWS
www.TheLawReviews.co.uk
THE PRIVATE WEALTH AND PRIVATE CLIENT REVIEW
THE MINING LAW REVIEW
THE EXECUTIVE REMUNERATION REVIEW
THE ANTI-BRIBERY AND ANTI-CORRUPTION REVIEW
THE CARTELS AND LENIENCY REVIEW
THE TAX DISPUTES AND LITIGATION REVIEW
THE LIFE SCIENCES LAW REVIEW
THE INSURANCE AND REINSURANCE LAW REVIEW
THE GOVERNMENT PROCUREMENT REVIEW
THE DOMINANCE AND MONOPOLIES REVIEW
THE AVIATION LAW REVIEW
THE FOREIGN INVESTMENT REGULATION REVIEW
THE ASSET TRACING AND RECOVERY REVIEW
THE INTERNATIONAL INSOLVENCY REVIEW
THE OIL AND GAS LAW REVIEW
THE FRANCHISE LAW REVIEW
THE PRODUCT REGULATION AND LIABILITY REVIEW
THE SHIPPING LAW REVIEW
THE ACQUISITION AND LEVERAGED FINANCE REVIEW
THE PRIVACY, DATA PROTECTION AND CYBERSECURITY LAW REVIEW
PUBLISHER Gideon Roberton
BUSINESS DEVELOPMENT MANAGER Nick Barette
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Published in the United Kingdom by Law Business Research Ltd, London
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The information provided in this publication is general and may not apply in a specific situation, nor does it necessarily represent the views of authors’ firms or their clients.
Legal advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of February 2015,
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i
The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:
ACKNOWLEDGEMENTS
ALI BUDIARDJO, NUGROHO, REKSODIPUTRO
ALRUD LAW FIRM
ARIAS, FÁBREGA & FÁBREGA
ATTORNEYS AT LAW BORENIUS
BAYKANIDEA LAW OFFICES
BOEKEL DE NERÉE
CASTEGNARO
CONSORTIUM RODRÍGUEZ, ARCHILA, CASTELLANOS, SOLARES & AGUILAR, SC
CONSORTIUM TABOADA & ASSOCIATES
DAI-ICHI FUYO LAW OFFICE
DELOITTE ADVOKATFIRMA AS
DENTONS
ENSAFRICA
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FERRAIUOLI LLC
GEORGE Z GEORGIOU & ASSOCIATES LLC
GIANNI, ORIGONI, GRIPPO, CAPPELLI & PARTNERS
GONZALEZ CALVILLO, SC
HAMILTON ADVOKATBYRÅ KB
Acknowledgements
ii
HERBERT SMITH FREEHILLS
KIRK LARSEN & ASCANIUS
KOCHHAR & CO
KYRIAKIDES GEORGOPOULOS LAW FIRM
LAW FIRM ŠAFAR & PARTNERS, LTD
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MATTOS FILHO, VEIGA FILHO, MARREY JR E QUIROGA ADVOGADOS
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SÉRVULO & ASSOCIADOS – SOCIEDADE DE ADVOGADOS, RL
SHERRARD KUZZ LLP
SIGUION REYNA, MONTECILLO & ONGSIAKO LAW OFFICE
SKRINE
SOŁTYSIŃSKI KAWECKI & SZLĘZAK
SBM LEGAL
TILLEKE & GIBBINS
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URENDA, RENCORET, ORREGO Y DÖRR
VAN OLMEN & WYNANT
VANGARD
WALDER WYSS LTD
YOON & YANG LLC
iii
Editor’s Preface ...................................................................................................ixErika C Collins
Chapter 1 EMPLOYMENT ISSUES IN CROSS-BORDER M&A TRANSACTIONS ............................................................1Erika C Collins and Michelle A Gyves
Chapter 2 GLOBAL DIVERSITY AND INTERNATIONAL EMPLOYMENT .........................................................................9Erika C Collins
Chapter 3 SOCIAL MEDIA AND INTERNATIONAL EMPLOYMENT .......................................................................17Erika C Collins and Jon L Dueltgen
Chapter 4 AUSTRALIA .............................................................................26Miles Bastick, Shivchand Jhinku and Kelly Xiao
Chapter 5 BELGIUM ................................................................................43Chris Van Olmen
Chapter 6 BRAZIL.....................................................................................59Vilma Toshie Kutomi
Chapter 7 CANADA ..................................................................................82Erin R Kuzz and Leah Simon
Chapter 8 CHILE ......................................................................................99Sebastián Merino von Bernath and Roberto Lewin V
Chapter 9 CHINA ...................................................................................114Erika C Collins and Ying Li
CONTENTS
iv
Contents
Chapter 10 CYPRUS .................................................................................133George Z Georgiou, Anna Praxitelous and Natasa Aplikiotou
Chapter 11 DENMARK ............................................................................149Tommy Angermair
Chapter 12 FRANCE .................................................................................165Yasmine Tarasewicz and Paul Romatet
Chapter 13 GERMANY .............................................................................181Thomas Griebe and Jan-Ove Becker
Chapter 14 GIBRALTAR ...........................................................................202Alan Buchanan and Joseph Gomez
Chapter 15 GREECE .................................................................................216Effie G Mitsopoulou and Ioanna C Kyriazi
Chapter 16 GUATEMALA ........................................................................233Lionel Francisco Aguilar Salguero
Chapter 17 HONG KONG .......................................................................240Jeremy Leifer
Chapter 18 INDIA .....................................................................................252Manishi Pathak
Chapter 19 INDONESIA ..........................................................................270Nafis Adwani and Indra Setiawan
Chapter 20 IRELAND ...............................................................................286Bryan Dunne and Bláthnaid Evans
Chapter 21 ITALY ......................................................................................306Raffaella Betti Berutto
Chapter 22 JAPAN .....................................................................................320Shione Kinoshita, Shiho Azuma, Yuki Minato, Hideaki Saito, Ryo Miyashita, Keisuke Tomida and Tomoaki Ikeda
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Contents
Chapter 23 KOREA ...................................................................................333Kwon Hoe Kim, Don K Mun and Young Min Kim
Chapter 24 LATVIA ..................................................................................346Ivo Maskalans
Chapter 25 LUXEMBOURG ....................................................................362Guy Castegnaro, Ariane Claverie, Céline Defay, Christophe Domingos, Laurence Chatenier and Lorraine Chéry
Chapter 26 MALAYSIA .............................................................................385Siva Kumar Kanagasabai and Selvamalar Alagaratnam
Chapter 27 MEXICO ................................................................................405Miguel Valle, Jorge Mondragón and Rafael Vallejo
Chapter 28 NETHERLANDS ...................................................................424Eugenie Nunes and Afra Pepping
Chapter 29 NEW ZEALAND ...................................................................448Bridget Smith and Tim Oldfield
Chapter 30 NICARAGUA .........................................................................461Bertha Xiomara Ortega Castillo
Chapter 31 NIGERIA ................................................................................471Olawale Adebambo, Folabi Kuti and Ifedayo Iroche
Chapter 32 NORWAY ...............................................................................488Gro Forsdal Helvik
Chapter 33 PANAMA ................................................................................500Vivian Holness
Chapter 34 PERU ......................................................................................512José Burgos C
Chapter 35 PHILIPPINES .........................................................................526Rolando Mario G Villonco, Rafael H E Khan and Carmina Marie R Panlilio
Contents
vi
Chapter 36 POLAND ................................................................................540Roch Pałubicki and Karolina Nowotna
Chapter 37 PORTUGAL ...........................................................................555Magda Sousa Gomes
Chapter 38 PUERTO RICO ......................................................................572Katherine González-Valentín, María Judith (Nani) Marchand-Sánchez, Rafael I Rodríguez-Nevares, Luis O Rodríguez-López and Tatiana Leal-González
Chapter 39 RUSSIA ...................................................................................586Irina Anyukhina
Chapter 40 SAUDI ARABIA .....................................................................608Amgad T Husein, John M B Balouziyeh and Jonathan G Burns
Chapter 41 SLOVENIA .............................................................................623Vesna Šafar and Martin Šafar
Chapter 42 SOUTH AFRICA ...................................................................641Stuart Harrison, Brian Patterson and Zahida Ebrahim
Chapter 43 SPAIN .....................................................................................658Iñigo Sagardoy de Simón and Gisella Alvarado Caycho
Chapter 44 SWEDEN ...............................................................................677Erik Danhard
Chapter 45 SWITZERLAND ....................................................................690Ueli Sommer
Chapter 46 TURKEY .................................................................................705Serbülent Baykan and Hande Erdoğan
Chapter 47 UKRAINE ...............................................................................719Svitlana Kheda
Chapter 48 UNITED ARAB EMIRATES..................................................733Ibrahim Elsadig
Contents
vii
Chapter 49 UNITED KINGDOM ...........................................................743Daniel Ornstein and Peta-Anne Barrow
Chapter 50 UNITED STATES ..................................................................757Allan S Bloom and Carolyn M Dellatore
Chapter 51 VIETNAM ..............................................................................771Michael K Lee, Annika Svanberg and Doan Ngoc Tran
Appendix 1 ABOUT THE AUTHORS .....................................................785
Appendix 2 CONTRIBUTING LAW FIRMS' CONTACT DETAILS .....819
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EDITOR’S PREFACE
It is hard to believe that we are now on our sixth edition of The Employment Law Review. When we published the first edition of this book six years ago, I noted my belief that a book of this sort was long overdue given the importance to multinational corporations of understanding and complying with the laws of the various jurisdictions in which they operate. It has given me great pleasure to see the past editions of this book used over the last several years for just this purpose – as a tool to aid practitioners and human resources professionals in identifying issues that may present challenges to their clients and companies. The various editions of this book have highlighted changes in the laws of many jurisdictions over the past few years, making even clearer the need for a consolidated and up-to-date reference guide of this sort.
Global diversity and inclusion initiatives remained a hot topic in 2014. Many companies have unrolled initiatives regarding ‘unconscious’ bias, which is addressed in the first general interest chapter on global diversity. Looking abroad, recent legal developments regarding gender and transgender recognition will affect multinational corporations both in terms of law and policy, as underscored by recent legal developments out of India.
Our second general interest chapter tracks another active year of mergers and acquisitions after a brief decline following the financial crisis. This chapter, which addresses employment issues in cross-border corporate transactions, along with the relevant country-specific chapters, will aid practitioners and human resources professionals in conducting due diligence and providing other employment-related support in connection with cross-border M&A deals.
The third general interest chapter covers the increasing trend of clients considering or revising company’s social media and mobile device management policies. In particular, there is an increase in the number of organisations that are moving toward ‘bring your own device’ programmes and this chapter addresses issues for consideration by multinational employers in rolling out policies of this sort. ‘Bring your own device’ issues remain a topic of concern because more and more jurisdictions have passed or are beginning to consider passing privacy legislation that places significant restrictions
Editor’s Preface
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on the processing of employee personal data. This chapter introduces practice pointers regarding monitoring of employee social media use at work as well as some steps to consider before making an employment decision based on information found on social media.
In addition to these three general-interest chapters, the sixth edition of The Employment Law Review includes 48 country-specific chapters. This edition has once again been the product of excellent collaboration. I wish to thank our publisher, particularly Gideon Roberton, Katherine Jablonowska, Adam Myers, Eve Ryle-Hodges and Shani Bans, for their hard work and continued support. I also wish to thank all of our contributors, as well as my associates, Jon Dueltgen and Courtney Bowman, for their efforts to bring this edition to fruition.
Erika C CollinsProskauer Rose LLPNew YorkFebruary 2015
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Chapter 11
DENMARK
Tommy Angermair1
I INTRODUCTION
Danish employment law is based on the ‘flexicurity’ model. According to this model employers have substantial flexibility to make staff adjustments (headcount management, 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 countermeasures to unemployment.2
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 (regarding holiday, working environment, employment contract requirements, personal data protection, discrimination), whereas other significant issues are not (minimum salary, normal working hours, overtime pay, etc.).
Employees are roughly divided into three categories: white-collar workers (salaried employees), blue-collar workers and 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.
1 Tommy Angermair is an attorney at Kirk Larsen & Ascanius. 2 Notwithstanding the shortcomings of the flexicurity model, it is a crucial element of the EU’s
European Employment Strategy, which is meant to contribute to the 75 per cent employment target set forth in the Europe 2020 Strategy (http://ec.europa.eu/europe2020/index_en.htm).
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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. The collective 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 certain 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 the union in question.
Danish employees are unionised to a fairly wide extent, which is mainly attributable to the Danish labour market tradition, however, union membership has declined substantially in recent years.
Employment-related disputes that are not settled by way of negotiation are ultimately settled by the ordinary Danish courts, which consist (in hierarchical order) of 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 Danish Labour Court.
Apart from the above-mentioned dispute resolution system, employment law rules and principles are enforced by several government bodies within their respective competence areas.
II YEAR IN REVIEW
The business and financial climate has improved substantially in the course of 2014 and the outlook for the coming years is increasingly positive. In fact, the Danish business climate has recently been named the best country for business in 2014 by Forbes.
Among signs of improvement in 2014 stock prices and consumer confidence have increased substantially and the unemployment rate has once again decreased significantly from 6.9 to 6.4 per cent.
Irrespective of the positive signs in the Danish economy the effects of the financial crisis are still felt. The number of bankruptcies is still unusually high. Most notably the major company OW Bunker Holding A/S went bankrupt on 7 November 2014 just seven months after being listed on the Danish stock exchange (NASDAQ OMX Copenhagen).
Furthermore, the trend of importing workforce from low-cost countries, in particular eastern European countries, to reduce operational costs has continued.
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The hottest topic in Danish employment law has been the protection of disabled employees against discrimination following recent case law from the European Court of Justice (ECJ),3 which has introduced a very wide and vague legal definition of disability.
Other hot topics were the upcoming EU General Data Protection Regulation and new rules on remuneration of risk takers within the financial sector, which implemented the EU CRD IV directive.
III SIGNIFICANT CASES
On 18 December 2014 the ECJ gave its highly anticipated preliminary ruling (C354/13) in a Danish court case regarding an employee’s discriminatory dismissal claim on the basis of his obesity. The ECJ ruled that EU law does not set forth a general prohibition against discrimination due to obesity but that a severely obese employee will potentially be considered disabled and therefore protected against discrimination due to his or her obesity.
In November 2014 the Danish National Board of Industrial Injuries awarded a female parking guard damages worth 3 million Danish kroner for having been sexually harassed by her superior. It is a landmark decision considering that the awarded amount significantly exceeds the normal damages level in industrial injury cases and that it was awarded for a psychological industrial injury.
Further to the introduction of the wide and vague legal definition of disability by the recent case law from the ECJ the Danish Equal Treatment Board found (in May 2014) that an allergy to a certain substance commonly found in certain types of paper and ink was to be considered a disability in the sense of the Danish Anti-Discrimination Act. However, the Equal Treatment Board also found that the disabled employee had failed to demonstrate circumstances indicating that the dismissal had been based on the disability and ruled against the disabled employee’s discriminatory dismissal claim.
IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP
i Employment relationship
Pursuant to the Danish Act on Employment Contracts, employees are required to have a written employment contract, assuming that their average weekly working hours amount to at least eight hours on average.
Under the Act, employers are required to inform their employees in writing of all the material terms and conditions of employment within one month after the commencement of the employment.
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 paid holiday; rules on notice periods; as well as salary, supplements and time of payment.
3 Including, among others, the preliminary rulings in the Ring and Werge cases C-335/11 and C-337/11.
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In addition, the employer must provide a description of other material terms and conditions, such as special benefits (company car, newspaper, telephone, etc.); the employee’s right to paid holiday; right to participate in incentive compensation scheme; restrictive covenants; and special employee policies (e.g., IT policy, expenses policy or smoking policy).
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 the employer’s violation of the Act the employer will be liable to pay compensation to the employee equal to 13 weeks’ salary (20 weeks’ salary if aggravating circumstances exist). 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 Danish kroner. Typically, any such compensation claims are only initiated in connection with a non-amicable termination of employment.
In terms of amendments to employment terms it is decisive whether or not the amendments are materially detrimental to the employee (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 it is most common that a short 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 him or herself terminated effective upon expiry of the notice, 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 as such. However, the Act on Fixed-Term Employment provides for certain restrictions, including a prohibition against discriminatory treatment of fixed-term employees as regards employment terms. Also according to the Act, fixed-term employment contracts can only be renewed once, unless objective reasons exist.
ii Probationary periods
For salaried employees, probationary periods lasting 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
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probationary period is that the employment can be terminated with a shorter notice than the normal minimum notice of termination, see Section XII.iii, infra.
No statutory rules applicable to blue-collar workers or CEOs exist 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.
However, assuming an employer which has activities in Denmark, such as one or more employees exploring business opportunities, does not have a registered legal entity in Denmark, such as an affiliate or a subsidiary, the employer must be registered through a person domiciled in Denmark or a company with a place of business in Denmark.
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.
The foreign employer must comply with all employer obligations under Danish law with regard to the employments subject to Danish law, including the obligation to pay certain social contributions and to provide certain benefits to the employees.
Compared with other European countries the level of social security payments required from the employer is low (roughly 10,000 Danish kroner per employee per year).
All categories of employees are entitled to 25 days’ holidays per holiday year according to the Holiday Act. The right to paid holiday is accrued in each calendar year (2.08 paid days per month of employment) but holidays are taken in the holiday year running from 1 May in the year following the accrual year to 30 April in the next year. During the employment the employer is required to pay a holiday supplement equal to 1 per cent of the employee’s total remuneration, which is paid when the holiday is taken. At the end of employment the employer is required to pay compensation in lieu of untaken paid holidays to the Danish Labour Market Holiday Fund (at least 12.5 per cent of the total remuneration in the calendar year during which the employment ends). Subsequently, the employee can withdraw the compensation when he or she takes the outstanding holiday (i.e., typically with a new employer).
Salaried employees are entitled to full pay during sick absence as opposed to blue-collar workers who – in the absence of a collective agreement – have no such right.
Taxes are deducted at source and the employer is required to report and withhold income taxes in the salary payments made to the employee.
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V RESTRICTIVE COVENANTS
Generally speaking, the law permits that three types of restrictive covenants are concluded, namely: non-compete covenants, covenants for the non-solicitation of customers and other business contacts (non-solicitation of customers) and non-solicitation of employees. 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 Marketing Practices Act.
Restrictive covenants are governed by mandatory rules in the Salaried Employees Act, the Act on Job Clauses and the Contract Act.
The Salaried Employees Act, which only applies to salaried employees covers non-competition and non-solicitation-of-customers covenants, whereas the Act on Job Clauses is applicable to salaried employees and blue-collar workers and covers non-solicitation-of-employees clauses. The Contract Act applies to all contracts and therefore all types of restrictive covenants.
In terms of blue-collar workers and CEOs, no specific rules apply to non-competition and non-solicitation-of-customers covenants, apart from the requirements in the Danish Contract Act that the said covenants must be on reasonable terms (not excessive) and that a non-competition covenant will lapse automatically if the employment is terminated by the employer and the worker has not given reasonable cause for the termination (or due to the employer’s material breach). However, in practical terms Danish courts will in many cases be likely to deem restrictive covenants agreed with blue-collar workers unreasonable and therefore set them aside in whole or in part.
In order for a non-competition covenant agreed with a salaried employee to be valid, the employee must hold a particularly trusted position pursuant to the Salaried Employees Act. The said requirement does not apply to other types of restrictive covenants.
The validity of a non-competition or non-solicitation-of-customers covenant is conditional upon the conclusion of a written agreement stipulating the extent of the covenant and a right for the employee to receive compensation equal to at least 50 per cent of the employees’ total remuneration (as at the expiry of the notice period) during the period from the end of employment and 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 set off the income from the said employment. If the employee becomes self-employed the employee will – as a general rule – forfeit the right to receive compensation as from the start of the self-employment.
A non-solicitation of customers covenant can be extended to cover any customer or other business contact (e.g., a supplier or prospective customer) with which (1) the employer has had commercial contact in the course of the 18 months preceding the notice of termination; and (2) the employee has personally had contact; or which appears on a list provided to the employee before termination has been given.
Covenants on non-solicitation of employees (job clauses) are subject to special rules in the Act on Job Clauses. It is an express condition that the limitations of the employees’ job opportunities as well as an entitlement to compensation during the limitation period equal to at least 50 per cent of the employee’s total compensation are reflected in a written agreement with the employee whose job opportunities are limited.
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If the requirements in the Act are not complied with the job clause will entirely be null and void, regardless of any severability clause.
According to a Supreme Court ruling from 2011, the Act on Job Clauses does not apply to a job clause that prohibits a manager from initiating that one or more employees reporting to the manager leaves his or her employment. Thus, any such clause will only be subject to the general requirements in the Contract Act.
VI WAGES
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 the employee’s obligation to work overtime.
According to best practice (and most collective agreements) the normal working hours are 37 hours per week. However, it is set forth in the Act on Working Time (which implemented EC Directive 93/104) that the average weekly working hours must not exceed 48 hours, including overtime, within a four-week reference period.
Under the Working Environment Act, employees must have at least one weekly day off which must be directly linked to a daily rest period within each seven-day period. The Act also provides the general rule that working hours must be arranged so that employees have a daily rest period of at least 11 consecutive hours in a 24-hour period.
The above-mentioned rules and principles also apply to night work.
ii Overtime
The law does not require overtime compensation and consequently it is most 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.
VII FOREIGN WORKERS
In terms of living and working in Denmark the decisive factors are the employee’s nationality and qualifications.
If the person is an EU/EEA or a Swiss citizen, neither a visa nor a work permit is required, but the applicant will need a registration certificate from the Regional State Administration in order 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/EEA or Swiss countries, such as the USA, are not required to obtain a visa to enter Denmark, but all non-EU/EEA or Swiss citizens must have a work permit in order to work in Denmark. In certain cases, however, certain limited work-related activities may be performed while legally staying in Denmark.
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A number of schemes 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 employer is not required as such to register the number of foreign employees. 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. 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 depends on the employee’s tax status in Denmark (subject to unlimited or limited taxation), their salary and the 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.
VIII GLOBAL POLICIES
Danish law generally prohibits discrimination against employees by employers and this fundamental principle is reflected in a number of acts and substantial case law. Internal discipline rules are not required by law but it is generally recommended to prepare, implement and enforce written rules on discipline and appropriate conduct as well as rules on other key workplace-related subjects.
Typically, such rules are part of an employee handbook or similar that covers numerous workplace-related subjects, such as use of employer IT facilities, paid and unpaid leave and sick absence.
As a general rule, neither the employees nor any government authority or other third party are 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. (It is important to note that any new policies or policy changes resulting in material changes to the detriment of individual employees (e.g., the abolishment of a bonus scheme) must take place in accordance with the general principles for implementing material changes, see Section IV.i, supra.)
It is recommended to use a process that allows the employer to establish documentation setting out that the rules have been duly implemented (i.e., introduced and made easily available to the employees) in order to promote enforceability of the rules.
The rules (as well as any other document setting out employment terms and conditions) must be prepared in a language the 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. But 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.
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IX TRANSLATION
Employment documents are generally not required to be prepared in Danish.Employment documents must be prepared in a language the 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. But 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 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 the employment documents in a language which the employees can be reasonably expected to understand, the employment document 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, supra).
There are no specific formalities for translation.
X EMPLOYEE REPRESENTATION
Rules on employee representation are set out in the employment law and company law frameworks.
The employer’s obligation to inform and consult the employees follows from either the Act on Informing and Consulting Employees (implementing EC Directive 2002/14), which covers any employer with at least 35 employees where the employer is not party to any collective agreement, or a collective agreement pursuant to which the employer has set up a works council and consult with the works council in relation to certain workplace-related subjects.
Under the said Act the works council must, inter alia, be consulted with regard to 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 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 employees’ 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.
However, it is emphasised 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 employs at least 35 employees is required to inform and consult employees about all employer-related matters of significant importance to the employees.
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In the context of business transfers and collective redundancies, special rules on information and consultation apply.
XI DATA PROTECTION
i Requirements for registration
The rules governing processing of personal data are set forth in the Act on Processing of Personal Data (the Act), which implemented EC Directive 95/46.
There is no general obligation for companies operating in Denmark to register with the Danish authorities in relation to their processing of personal data.
However, certain types of personal data processing are subject to a duty of registration with or approval from the Data Protection Agency (DPA) before the commencement of processing.
Certain fundamental requirements applicable to all processing of personal data are provided in the Act. In particular, the Act requires that the processing of personal data is conducted for a explicit and legitimate purpose, only to the extent required by the said purpose, and that further processing must not take place in a manner incompatible with these purposes.
Another fundamental employer requirement is the requirement to provide certain information to the employees (or other data subjects, if relevant) in connection with the employer’s collection of employee personal data (whether from the employee or a third party). The mandatory information is (1) the identity of the data controller; (2) the purpose of the data processing; as well as (3) 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., the types of data collected, the recipients, if any, and any transfers outside the EEA).
These fundamental requirements must be satisfied regardless of any employee consent.
Under the Act an employer is – as a general rule – permitted to process personal employee data to a usual and reasonable extent in connection with the employer’s HR administration without obtaining employee consent or DPA notification or authorisation.
Access levels to personal data must in principle be limited to ensure that any access is given for a legitimate business purpose, namely, on a need-to-know basis.
The data controller (typically the employer in the context of employee data) is required by the Act 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 this Act.
Infringement of data protection law may result in a number of different sanctions, such as criticism from the DPA, 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. In our experience, however, the most important sanction is the significant negative press coverage and bad will that such violations may create. The rulings of the DPA are usually published on the DPA’s website, which is monitored by the press to a certain extent.
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ii Cross-border data transfers
Any processing of personal data must be conducted in accordance with the fundamental requirements of the Act, including cross-border transfers.
Transfer of personal data outside the European Economic Area is subject to special rules.
As a general rule a transfer of non-sensitive personal data outside the European Economic Area, for instance to the US, requires the prior individual consent of the employee or prior notification of the DPA. In reality the former option is rarely practicable. Cross-border transfer within the European Economic Area is subject to the normal rules on transfer of personal data in the Act.
In order to satisfy the notification requirement, the transfer of personal data must be based on an agreement that is fully consistent with the EU model clauses (i.e., certain standard contractual clauses issued by the EU Commission).
Transferring sensitive personal data requires prior authorisation from the DPA.Certain types of transfers are exempt from the consent or notification requirement,
such as transfers to US companies registered on the Safe Harbor List.
iii Sensitive data
Generally, the legal basis for processing of personal data depends on the type of data being processed, mainly whether the data should be considered sensitive or not. As a general rule, processing of sensitive personal data requires prior employee consent and prior authorisation from the DPA. A few examples of sensitive personal data are: data about health (including abuse of stimulants, alcohol, etc.), race, religion, trade union membership, social security numbers, criminal records, significant social problems and any other strictly private or personal matters, such as the information that an employee has been summarily dismissed by an employer due to a material breach of his employment, that an employee is about to adopt or the result of a personality test.
iv Background checks
Background checks are allowed as a general rule. The legality of some types of background checks, such as credit checks and
criminal records checks is subject to special requirements.According to the practice of the DPA 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. The above applies in both cases where consent has been collected and not collected.
As a general rule credit checks do not require prior employee consent. If the employer systematically conducts credit checks of applicants or employees the employee must obtain a prior authorisation from the DPA.
It is only permitted for the employer to collect information revealing criminal actions if such information is relevant to position applied for by the applicant or undertaken by an existing employee; such as a crime committed for the sake of enrichment where case the position applied for involves financial responsibility (e.g., a managing
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director, chief financial officer or a financial controller). Applicant or employee consent is required as a general rule if the employer intends to collect information on criminal actions, pursuant to the Act. Private employers do not have access to the public criminal records. Generally, access to such records requires written applicant or employee consent according to the Regulation on the Central Criminal Register.
XII DISCONTINUING EMPLOYMENT
i Dismissal
Salaried employees Under the Salaried Employees Act, a dismissal must be reasonably justified by the circumstances of the employer or the employee (e.g., redundancy and poor performance, respectively), assuming the employee has been employed for at least one year (on the date 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. But they will be protected against any discrimination from the start of the employment under Danish 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 the other circumstances.
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 such scenario 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.
Blue-collar workersIn 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 (on the date 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 dismissalCertain employee categories enjoy special protection against dismissal according to the law, including, inter alia: pregnant employees; employees on paternity, maternity or parental leave; employee-elected board members; employee-elected work environment representatives; and union representatives.
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Special protection does not rule out a lawful dismissal, however, in the event of such dismissal the employer must be able to show that the dismissal was neither in whole or in part based on the conditions which the special protection is based upon.
In case of a termination in contravention of the rules affording special protection, the employer may be liable to pay significant compensation amounting to approximately three to 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 acts protect employees from dismissal on the basis of factors such as race, ethnic origin, age and disability. Discriminated-against employees may be awarded compensation of up to six to 12 months’ total compensation, based on recent case law.
ii Notice
Salaried employeesThe minimum notice for the employer’s termination of employment is dependent on the employee’s length of continuous service, namely, 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 from the employer are:
Employment period (up to) Notice period
5 months 1 month
2 years and 9 months 3 months
5 years and 8 months 4 months
8 years and 7 months 5 months
In excess of the above 6 months
After 12, 15 or 18 years’ continuous service the employee will be entitled to statutory severance pay amounting to one, two or three months’ total remuneration, respectively, if the employee is dismissed (and such dismissal is not justified by material breach).
Blue-collar workersTypically, 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 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 contracts.
Salaried employees and blue-collar workersThe employer is not required to provide a social plan, notify a government authority or other third party, unless otherwise set forth in the applicable collective agreement, if any.
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The law neither provides for a general rehire right in case of unfair dismissal nor a general duty to provide suitable alternative employment.
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, pensions, etc. 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 – as a general rule – offset any income earned from another employer during the notice period against the current salary.
The parties can choose to conclude a severance agreement outlining the rights and obligations resulting from the termination. There are no particular formalities required. Mainly such approach is taken by companies to mitigate specific legal risks, for company policy reasons, or both.
Payment in lieu of notice is generally inconsistent with the Danish 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, the employer can terminate the employment without notice or a notice at the employer’s discretion.
iii Redundancies
The principles and rules applicable to dismissals, see Section XII.i–iii, supra, also apply to redundancies with the exception of the special rules applicable to collective redundancies mentioned below.
The execution of collective redundancies must take place in accordance with the Act on Collective Redundancies (implementing Directive 98/59/EC), which sets forth a specific mandatory information and consultation procedure before the final decision to proceed.
The Act applies where redundancies within a 30-day period exceed: 10 employees in undertakings employing between 20 and 100 employees; 10 per cent of the employees in undertakings employing between 100 and 300 employees; or 30 employees in undertakings employing more than 300 employees.
Under the said 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, the employer must notify the Regional Employment Council; and the redundancies will be effective no earlier than 30 days (in some cases eight weeks) after such 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.
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XIII TRANSFER OF BUSINESS
The legal rights of employees in connection with a business transfer are governed by Transfer of Undertakings Act (which implemented the EU Acquired Rights Directives).
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 at the date of the takeover.
The transfer of rights and obligations applies to all terms and conditions regardless of whether they are based on the individual employment contract, a collective agreement or other grounds. The transfer only applies to employments existing 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 they pertain to the period before the transfer.
A business transfer does not in itself justify a dismissal of one or more employees. Dismissal due to a business transfer will only be deemed fair 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 has a 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 after the date of the takeover.
XIV OUTLOOK
Leading financial analysts expect that the signs of an improved financial and business climate will continue in 2015.
Furthermore, the Danish government has proposed several changes in key labour market legislation to be implemented in 2015 including: a radical changes in rules applicable to restrictive covenants (a maximum duration
of 12 months; entitlement to compensation irrespective of other income during restriction period; general prohibition against job clauses, etc.);
b simplification of rules on statutory severance pay based on length of service (new amounts); and
c abolishment of the access to agree automatic end of employment at the age of 70 years.
It is expected that an ‘international recruitment reform’ will take place in 2015. The reform involves 26 initiatives with the primary purpose of making it easier for
employers in Denmark to import highly skilled foreign workers from non-EU countries. Among those initiatives is a fast-track scheme for obtaining work permits; a lower salary threshold for being eligible under the Danish expat tax scheme; a simplification of administration and processing fee structures; wider access to leave Denmark and return without forfeiting the work permit as well as significantly higher penalties for violation
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of immigration rules. These initiatives, which have not yet been presented as bills, are expected to be fully implemented in 2015.
In the last few years it has become increasingly apparent that the case law of the ECJ has a substantial impact on Danish employment law, in particular in terms of protection against discrimination on the labour market. It appears that EU law and ECJ case law will become an even more dominant factor in Danish employment law in 2015 than it was in 2014.
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ABOUT THE AUTHORS
TOMMY ANGERMAIRKirk Larsen & AscaniusTommy Angermair is head of the employment and corporate immigration law department at Kirk Larsen & Ascanius. He has advised a variety of Danish, and in particular, multinational clients on complex employment law and immigration law matters for several years.
Among his specialties are CEO and executive matters, multi-jurisdictional employment matters (global mobility, international law, etc.), employee privacy (personal data protection, employee monitoring, background checks, etc.), employment law aspects of M&A transactions and various restructuring measures. He is also specialised in corporate immigration law (work permits, business visas for inbound personnel, advising high net worth individuals, etc.) Recently, Tommy has been one of the pioneers in Denmark of providing advice on employment law aspects of social media use in the workplace.
Moreover, he is an experienced lecturer and author of articles in various legal publications, newspapers and online media publications.
Tommy is a member of the Danish Association of Labour and Employment Laywers, the Danish Association for Labour Law, Visalaw International and the American Immigration Lawyers Association as an International Associate. Before joining Kirk Larsen & Ascanius, Tommy worked for several years in the employment law department of Denmark’s biggest law firm Kromann Reumert.
About the Authors
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KIRK LARSEN & ASCANIUS HC Andersens Boulevard 45,1553 Copenhagen VDenmarkTel: +45 27 10 34 39Fax: +45 75 45 46 [email protected]
