The Western High Court has ruled that employers not paying compensation under section 2a of the Salaried Employees Act prior to October 2010, because the employees were entitled to pension under a scheme agreed with the employer, are to pay compensation under the Non-Discrimination Act.

Section 2a of the Salaried Employees Act

Under section 2a, an employee dismissed after having been employed for 12, 15 or 18 years is entitled to a severance pay of one, two or three months' salary. The purpose of the severance pay is to ease the transition to new employment for employees who have been employed with the same company for many years.

Under section 2a (3) and (4), this entitlement to severance pay lapses if the employee is entitled to state pension or is entitled to retirement pension from the employer if the employee joined the scheme before reaching the age of 50.

In the specific case, a 65-year old employee, who had been dismissed, claimed that he did not wish to use his entitlement to retirement pension, but wished to continue working, and he therefore claimed being entitled to severance pay.

The question concerning unequal treatment was referred to the European Court of Justice, ruling on 14 October 2010 that section 2a (3) of the Salaried Employees Act, which has so far been construed with the result that the employee – irrespective of whether the employee chooses to receive retirement pension – is not entitled to severance pay, is too extensive compared to the underlying directive of protection and thereby contrary to EU law.

The findings of the High Court

The High Court found that the refusal to pay compensation under section 2a of the Salaried Employees Act solely with reference to the fact that the employee was entitled to retirement pension from the employer constituted age discrimination.

However, the High Court found that the employee was not entitled to compensation, inter alia, based on the below:

  • That the employer refused payment of severance pay based on long-term case law, including Supreme Court case law;
  • That the legislator in connection with the implementation of the prohibition against age discrimination found no reason to amend section 2a of the Salaried Employees Act;
  • That there was doubt about the construction of the EU law relevant to the case justifying the preliminary reference to the European Court of Justice; and
  • That the payment of the severance pay was effected immediately after the ruling of the European Court of Justice.

The content of this Newsletter is not, and should not replace, legal advice.

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