Compensation for insufficient contract of employment did not include inventions

On 14 October 2011, the High Court ruled in a case concerning an employee, who had been terminated, claiming compensation for three inventions that the employee had made as part of the employment. 

The High Court also decided whether a contract of employment was insufficient when providing terms contrary to mandatory rules notwithstanding the terms reflecting the actual conditions.

Background

The case concerned an employee, who was employed within development, first as development engineer and later as head of development. During the employment, the employee made three inventions which were assigned to the employer without the employee receiving any compensation. After the effective date of termination, the employee claimed compensation for the three inventions.

The employee also claimed compensation under the Contract of Employment Act referring to the fact that the contract of employment was insufficient. It appeared from the contract of employment that the employee was not entitled to compensation in connection with the making of inventions. This provision is contrary to the Danish Act on Employee Inventions according to which it is not possible to agree in advance that the employee is not entitled to compensation. In addition, the parties had agreed that the employee's claim for bonus was to lapse if the employee resigned before the date of the bonus payment, which is contrary to section 17a of the Salaried Employees Act.

The Act on Employee Inventions

It is provided by the Act on Employee Inventions that if an employer wants to acquire the right to an invention, the employee is entitled to reasonable compensation irrespective of the parties having agreed otherwise. However, this does not apply if the value of the invention does not exceed what the employee may be assumed to perform taking his employment conditions into consideration.

Findings

In accordance with the City Court, the High Court found that two of the three inventions - both being patentable - were of such a nature that compensation was relevant. However, the High Court found that the tasks of the employee were to come up with new ideas and solutions and, consequently, there was thus an element of inventions in relation to the employee's job content. For this reason, there were stricter requirements as to when the employee was to be considered entitled to compensation for inventions made during the employment than compared to what normally applied.

As regards the third invention, neither the City Court nor the High Court found that the invention was of such a nature that it entitled the employee to compensation under the Act on Employee Inventions. Importance was attached, inter alia, to the fact that a patent had been applied for on this invention, however, unsuccessfully.

Consequences

The ruling contributes to the assessment as to when the value of an invention lies within or beyond what may reasonably be expected from an employee as being part of the usual tasks under the Act on Employee Inventions. It may be concluded from the ruling that stricter requirements are made for the value of an invention when the job content involves some kind of product development.

The Contract of Employment Act

Findings

In contrast to the City Court, the High Court found that an employment term is contrary to mandatory legislation if it in itself constitutes an insufficiency.

The High Court fixed compensation at DKK 10,000 taking into account that, as a minimum, the requirement concerning compensation in relation to inventions had had specific importance to the employee and had given rise to a dispute.

Consequences

The ruling establishes that a contract of employment is considered insufficient if a term therein is contrary to mandatory legislation notwithstanding that the term reflects the actual circumstances applicable to the employment.

The ruling indicates a compensation level for violation of the Contract of Employment Certificate Act similar to the Supreme Court ruling of 17 December 2010. It appears from the Supreme Court grounds that compensation in a situation where the insufficiency had led to a specific dispute or the risk thereof may be fixed at up to DKK 10,000 depending on the nature of the situation. The compensation is in line with the Western High Court's ruling of 29 September 2011 where compensation was fixed at DKK 10,000 as the insufficiency had also led to a specific dispute.

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Signe Rydahl Werming

Attorney