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Labor and employment law challenges in business transformations

Denmark

Workforce restructuring

The key practical issues in workforce restructuring include:

  • Legal justification
  • Works council and employee representatives’ process
  • Labor administration process
  • Costs and timing
  • Litigation risk

Applicable legislation

Collective dismissals in Denmark are governed by the Danish Collective Dismissals Act (Masseafskedigelsesloven). This Act is applicable if the dismissals are made within a period of 30 days, with the following threshold:

  • At least 10 or more employees in companies with 20-100 employees
  • At least 10% of the employees in companies with 101-300 employees
  • At least 30 or more employees in companies with more than 300 employees

Required legal justification

Any contemplated termination of employments due to the lack of work/restructuring will normally constitute a lawful redundancy reason under Danish employment law.

Termination due to organizational changes will as a rule of thumb be considered unlawful if the employer makes new hires at the same time — employing new employees within the same job functions.

Works council/unions or other employee consultation requirements

Consultation requirements with works council/unions

Pursuant to the Danish Collective Dismissals Act, strict formal information and consultation rules apply, including certain time limits in relation to mandatory information letters to be forwarded to the local labor board and to the works council.

Before commencement of the information and consultation process, the employer is obligated to issue an information letter to the works council (or employee representatives elected by the employees if no work council has been established) containing all relevant information including the following:

  • Reason for the contemplated redundancies
  • Total number of employees
  • Number of employees contemplated to be dismissed
  • Proposed time period for implementation of contemplated dismissals
  • Information on the category and job functions of the employees contemplated to be dismissed
  • Description of the redundancy criteria
  • Information on any mandatory severance payments applicable to the employees
  • Information on the time and place of the negotiation meetings

Under such information process the employer should hear input from the works council/employee representatives on the contemplated dismissals, redundancy criteria and any mandatory and/or offered severance terms and conditions (release of duties, severance payments, holiday entitlements, renouncement of set-off rights in case of new employment, etc.). However, the works council/employee representatives have no veto rights during such information and consultation process.

No mandatory obligation exists to reach an agreement with the works council/employee representatives and the contemplated dismissals may therefore be implemented despite any disagreement with the works council.

Consultation requirements with other employee representatives

No specific consultation requirements with other employee representatives exist.

Consultation requirements with employees

No specific consultation requirements with employees exist, unless the terms and conditions of the employment contract between the employee and the employer require it.

Approval/notification of the labor authorities or other government authorities

If redundancies cannot be avoided after negotiations with the works council/employee representatives, the employer must notify the local labor board of the dismissals, which cannot take effect until 30 days (8 weeks if there are at least 50% dismissals in a business employing at least 100 employees) after such notification.

The local labor board should be provided with a copy of the letters and documentation delivered to the employee representatives/works council (for more information, see “Consultation requirements with works council/unions”).

Employee selection criteria

The employer is at its sole discretion entitled to choose which employees will be dismissed provided that none of the impacted employees are afforded special protection against their dismissal. The selection criteria must be fair and objective and based on the employees skills, performance or seniority or on other just grounds. Further, the selection process must not be based on the protected characteristics (e.g., age, sex, disability, pregnancy) of the Danish anti-discrimination law.

Actions required to limit the negative impact and social plan

In Denmark, no mandatory actions are required to limit the negative impact and/or to implement any social plan.

Internal alternative employment/redeployment
The employer has the obligation to seek reorganizing of an employee who may be made redundant if he or she could be offered a similar vacant job position with the employer´s other departments, etc.

There are no rehiring obligations for the terminated employees when implementing a reduction in force/collective redundancy. Further, there are no legal barriers restricting hiring new employees after implementation of a collective dismissal. However, it is considered unlawful if the employer simultaneously hires new employees for a same/similar role while implementing the collective dismissal.

Other measures
No mandatory external measures are required; however, employers in Denmark often provide for a large range of external measures to limit the negative impact of the redundancies, including providing outplacement services to impacted employees.

Estimated timeline

Information and consultation with the works council/employee representatives shall take place in connection with the employer´s decision on the contemplated collective redundancy. The employer cannot finally decide on implementation of the collective redundancy before the information and consultation process has completed.

There are no mandatory rules on the specific timeline to be followed for information and consultation process with the works council/employee representatives; however, the employer is required to follow specific timeline for implementing the contemplated collective redundancy post notification to the local labor board (for more information, see “Consultation requirements with works council/unions”).

Estimated costs

Mandatory costs

The key components of mandatory HR legal costs are as follows:

  • Normal agreed remuneration and benefits throughout the agreed notice period
  • Possible seniority severance payments according to the employee´s seniority (typically between one and three months´ remuneration)

Customary additional costs

Employers in Denmark often provide for a large range of measures to limit the negative impact of the redundancies, including outplacement, which is one of the main customary additional HR costs to the employer.

Hiring restrictions post-redundancy

There are no legal barriers restricting hiring new employees after implementation of a collective dismissal. However, it is considered unlawful if the employer simultaneously with issuing the notice letters to the impacted employees hires new employees for a same/similar role.

Litigation risk

Interested parties

The following interested parties can bring lawsuits before the ordinary Danish courts or the Danish labor court (in case of breach of collective bargaining agreements (CBAs)) related to the redundancy process:

  • Works council/unions/employees: to challenge if the redundancies have been implemented against any applicable CBA and/or mandatory Danish legislation
  • Impacted employees: to challenge the selection criteria process and compliance with any anti-discrimination acts and other protective legislation

Litigation cannot stop or slow down the collective redundancy process.

Damages and other remedies

Challenges could lead to two types of civil remedies as well as criminal sanctions.

Damages for unfair dismissal

Severance payment could be awarded to employees based on the following conditions:

  • Absence of a legal justification
  • Failure to properly apply the selection criteria
  • Failure to comply with any protective anti-discrimination acts and other protective legislation

The amount of severance payment varies depending on employees’ age, years of service and salary. Salaried employees are typically awarded half of the employee’s notice period as a maximum severance payment.

There are no punitive damages in Denmark.

Reinstatement

Under certain circumstances, some employees enjoy special protection against dismissal according to collective bargaining agreements and applicable legislation (e.g., shop stewards, safety officers and board members elected by the employees). Such protected employees are under certain circumstances entitled to reinstatement within the company — and the employer cannot refuse the reinstatement (except in exceptional cases).

The employees could claim severance payment instead; in that case, employees may be awarded between one and nine months´ additional salaries.

Criminal sanctions

Failure to comply with certain legal requirements, in particular those attached to the works council process and information to the local labor board, would also expose the employer to criminal fines of between EUR1,000 and EUR50,000 for the legal entity. Huge fines will often be imposed in case of noncompliance with a collective bargaining agreement.

Country-specific issues

Denmark has no other specific issues.

Contact

Primary Contact for Denmark Labor and Employment Law

Julie Gerdes
Ernst & Young P/S
+4525293403

Global Labor and Employment Law Guide
Workforce restructuring
2016-07-01
Denmark
DK

Contacts