A Supreme Court ruling of 17 January 2014 has established that an employee still wishing to pursue a business career must be paid compensation under section 2 a of the Salaried Employees Act irrespective of whether the employee is entitled to receive retirement pension.

THE SUPREME COURT PROPOSES AN AMENDMENT TO LEGISLATION

Like the Eastern High Court, the Supreme Court establishes that, until more detailed guidelines have been laid down as to the situations in which an employee may be considered having temporarily waived retirement pension for the purpose of pursuing a business career, a specific assessment must be made in each situation. However, the Supreme Court rejects laying down such guidelines referring to the fact that this would raise political questions on the general restriction of the right to severance pay. The Supreme Court states: "For obvious reasons, such restrictions should be introduced by the legislature".

SECTION 2A OF THE SALARIED EMPLOYEES ACT

Under section 2a of the Act, 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 older employees who have been employed with the same company for many years. 

Under section 2a (2) and (3) of the Act, this entitlement to severance pay is lost if the employee "receives" state pension or "is entitled to" retirement pension under a pension scheme agreed with the employer if the employee joined the scheme before turning 50.

THE REASON FOR THE SUPREME COURT RULINGS

The Supreme Court has ruled in two cases appealed against from the Eastern and Western High Courts.

The Eastern High Court case concerned 14 employees who had all been dismissed at a time when they were entitled to retirement pension from the employer with the consequence that they were not entitled to severance pay under section 2 a of the Act. The employees brought action against their former employer claiming severance pay under section 2 a (1) of the Act and compensation for violation of the Non-Discrimination Act.

The Eastern High Court found that section 2 a (3) of the Act should be construed in accordance with the Ole Andersen ruling, and a reference to the fact that the employees had the opportunity to receive retirement pension was therefore not sufficient to refuse severance pay. 

The Eastern High Court then made a specific assessment as to whether each employee had temporary waived retirement pension after the dismissal to pursue a business career. The employees who had sufficiently tried to obtain a new job were awarded severance pay, while the employees who had not sufficiently tried to keep in contact with the labour market were not entitled to severance pay.

Further, the Court found that there were no reasons for awarding compensation in relation to discrimination due to age under the Non-Discrimination Act as this was a dubious question of interpretation on the scope of the Ole Andersen ruling, and the employer's reluctance to pay severance pay did not constitute such gross violation that it justified awarding of compensation.

The Western High Court ruling assessed the question concerning discrimination due to age. Region Syddanmark had refused to pay severance pay to two employees who had been dismissed at an age when they were entitled to retirement pension. The two employees brought action against the employer, and after having produced documentation that they had been available for work, the employer accepted to pay severance pay. Before the High Court, the employer was ordered to pay DKK 10,000 as compensation under the Non-Discrimination Act taking into consideration that the nature of the violation was not that gross.

For more information on the Eastern High Court ruling and the Ole Andersen ruling, please see our Newsletter of 30 April 2013. 

GROUNDS AND CONCLUSION OF THE SUPREME COURT

The Supreme Court affirmed the Eastern High Court ruling and found no reason to set aside the high court's assessment. 

The Supreme Court stated that, based on the Employment Equality Directive, the Ole Andersen ruling, the legislative history behind the Salaried Employees Act and other legislation, the courts may not lay down general, firm guidelines as to the situations in which an employee is to be considered having temporarily waived retirement pension for the purpose of pursing a business career. According to the Supreme Court, this is a political question, and the restriction should be made by the legislature. 

One out of nine judges dissented stating a sharper opinion on the construction of section 2a of the Act. The dissenting judge stated that it is not possible by way of construction to harmonize the ruling with the Ole Andersen ruling. Further, the judge stated that "the Ole Andersen ruling has created significant regulatory uncertainty as to which extent the limitation rule in section 2 a (3) may be considered consistent with EU law". A more detailed clarification should be made by the legislature. 

Further, the Supreme Court affirms the High Court's opinion that the violation of the prohibition against age discrimination of the Non-Discrimination Act was not of such gross nature that the employer could be ordered to pay compensation.

In line with this, the Supreme Court changed the Western High Court ruling. The Supreme Court states that the employer reacted quickly after having received documentation that the employees were available for work. There was therefore no reason for ordering the employer to pay compensation, and the Court therefore ruled in favour of the employer. 

COMMENTS

The Supreme Court majority sends the question as to when a business career is pursued on to the legislature recommending reconsideration of section 2 a. The dissenting judge takes it further by stating that it is a necessity in order for the rule to comply with EU law. 

There is - undoubtedly - a need to adjust the Salaried Employees Act as a practice now exists for employers to make a specific assessment of the circumstances after a dismissal. This is untenable as the employer cannot assess at the time of the dismissal whether the employee in question will subsequently pursue a business career. 

It will be interesting to see how the government will react to the Supreme Court's request. Until an amendment of the Act, if any, the access to severance pay under section 2 (3) of the Salaried Employees Act depends on a specific assessment of whether the employee has pursued his business career, which unfortunately implies that salaried employees dismissed late in life may have difficulties understanding their legal position.

The Supreme Court has been tolerant in relation to the employers' violation of the Non-Discrimination Act in these cases. The reason for this is that it has been considered unfair to burden the employers with the risk of a questionable question of interpretation. It is noted, however, that the more clear the legal position becomes, the less excusable the employers' violations are going to be.  In the future, employers may therefore not refuse to pay severance pay without risking to pay compensation under the Non-Discrimination Act. This presumably requires that the employers make a fair well-informed assessment of whether the employees have sufficiently tried to pursue their business careers.

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

contacts

Jonas Enkegaard

Partner

Marianne Lage

Partner