Section 2a of the Act
Under section 2a, an employee being dismissed after 12, 15 or 18 years of employment is entitled to severance pay of one, two or three months' salary. The purpose of the severance pay is to ease the transition to a new job for employees who have been employed with the same company for many years.
Under section 2a (3) and (4) of the Act, this entitlement to severance pay is lost if the employee "receives" state pension or "is entitled to" pension under a pension scheme agreed with the employer if the employee joined this scheme before turning 50.
Ole Andersen ruling from 2010
In October 2010, the European Court of Justice found that section 2a (3) of the Act, which had previously been construed in such a way that an employee - irrespective of whether the employee specifically used the possibility of receiving retirement pension - is not entitled to severance pay, is far too extensive compared to the underlying directive and contrary to EU legislation.
The Western High Court found that refusal to pay compensation under section 2a of the Act solely referring to the fact that the employee could receive retirement pension from the employer constituted discrimination due to age, but the Court found that the employee was not entitled to compensation.
Eastern High Court rulings
The Eastern High Court heard a number of cases simultaneously which all had the common theme that the employees had been dismissed and were entitled to retirement pension from the employer, but had expressed at wish not to leave the labour market.
In relation to severance pay under section 2a (1) of the Act, cf. (3), the High Court generally stated that the consequence of the Ole Andersen ruling was that the Danish authorities must construe the provision in accordance with the ruling and take into account that section 2a (3) of the Act - by not allowing payment of severance pay to an employee, who nevertheless intends to waive such pension for the purpose of pursuing his business career even though he is entitled to retirement pension from his employer - will interfere too extensively with the legitimate interests of this group of employees.
The Court then assessed the 14 cases as to whether the employees had applied for other work after the dismissal thereby pursuing their business careers. In those cases where the Court found that the employees had pursued their business careers, the employees were awarded severance pay under section 2a of the Act. In the other cases, the Court found for the employers.
In connection with the assessments, it was not sufficient that the employee in question had applied for a job or had only applied for very few jobs prior to the retirement. In one case, the Court found in favour of the employer as the employee - at the same time as he had been entitled to post-service salary - had not applied for more than two jobs after the retirement.
As regards the more detailed circumstances, it may be concluded that the employees applying for and receiving post-service salary immediately after their retirement and not having had or actively applying for work were not entitled to compensation under section 2a of the Act. Also, employees reported sick at the time of retirement and employees transferred to post-service salary after a sick report without applying for other work did not receive severance pay.
However, the Eastern High Court awarded severance pay under section 2a of the Act to those employees who could document having applied for other work for a period after the retirement.
One employee had been dismissed for retirement at the end of October 2010. After the dismissal, she applied for other work, however, unsuccessfully. From November 2010 to January 2011, she applied for and obtained work - although to a very limited extent - through a temp agency. As at 1 January 2011, she was employed as an on-call temp at an old people's home, and until 1 December 2011, she worked for 637 hours and almost the same hours the next year. She had thereby pursued her business career after the retirement. The fact that she chose post-service salary as at 1 November 2010 could not lead to a different result.
In another case, the employee registered with the Employment Service, and from 13 June to 10 August 2011, she applied for 11 jobs, and during the 4½ months when she was without a job, she applied for a total of 20-30 jobs. She was also awarded severance pay under section 2a of the Act as the High Court found that she had pursued her business career after the retirement.
The High Court also awarded severance pay under section 2a of the Act to an employee who had been dismissed due to sickness. After an operation and extensive rehabilitation, he was referred for a work aptitude test with a private company and was awarded a job on flexible terms. The High Court found that he had pursued his business career.
Compensation under the Non-Discrimination Act
The employees had also claimed compensation for violation of the Non-Discrimination Act, but the Eastern High Court found in favour of the employers in this respect.
The High Court stated that, according to the legislative history behind section 7 of the Non-Discrimination Act, awarding of compensation for violation of e.g. section 2 of the Non-Discrimination Act depends first of all on the gravity of the violation. In this respect, the reason for the violation should be taken into consideration as well as the infringement inflicted on the person in question. The High Court referred to the Supreme Court ruling of UfR 2011, p.417 concerning the SAS cabin crew's lacking pension payments after the age of 60.
The High Court further stated that, as the cases were to decide on a dubious question of construction as to the importance and scope of the Ole Andersen ruling in factually different cases, the fact that some employers did not pay severance pay already when they were met with claims for severance pay or did not do so until later could not be found to be of such severity that there is basis for compensation under the Non-Discrimination Act.
The High Court therefore found in favour of the claims concerning compensation under the Non-Discrimination Act.
The Eastern High Court rulings provide an adequate guideline as to future decisions on similar questions, but they also imply that it should be specifically decided in each case whether to pay compensation. As it is usual to make such decision at a time when it is unclear whether the employee will in fact stay on the labour market, this decision is difficult in practice. It is our assessment that the Act still needs modification.
It is uncertain whether the rulings will be appealed against.
The content of this Newsletter is not, and should not replace, legal advice.