The mandatory nature of the salaried employees act did not preclude an agreement concerning immediate resignation

The Western High Court has ruled that it was not contrary to the mandatory nature of the Salaried Employees Act or section 36 of the Contracts Act that an employee had concluded a severance agreement concerning resignation without notice.

The case concerned a severance agreement which had been concluded in connection with the employee’s spouse, who was the former sole owner and CEO, selling the last shares and resigning. According to the severance agreement, the employee was to resign immediately without salary, pension, etc. in the notice period and was represented by a lawyer.

According to section 21 of the Salaried Employees Act, the provisions of this Act are mandatory meaning that the rules cannot be derogated from to the detriment of the employee. However, in a few cases, the Supreme Court has found that the mandatory nature of the Act cannot preclude severance agreements being made that derogate from the provisions on termination of the Act. According to this practice, it is not considered termination of the employment within the meaning of the Act when the parties conclude a severance agreement.

The Western High Court referred to the Supreme Court’s practice and ruled that the severance agreement was not contrary to the Salaried Employees Act.

THE SEVERANCE AGREEMENT WAS (ALSO) NOT CONSIDERED UNFAIR

The Western High Court was also to decide whether the severance agreement could be set aside as being unfair under section 36 of the Contracts Act.

The employee claimed that the severance agreement was invalid as she had not obtained a financial gain from the agreement, and that it would therefore be unfair to enforce it.

The Western High Court took into account that, due to the joint property with the former owner, the employee had a significant financial interest in the valuation and the sale of the shares in question. Combined with the fact that the employee had been advised and represented by a lawyer prior to the conclusion of the severance agreement, the Western High Court found that the severance agreement was not to be set aside as invalid under section 36 of the Contracts Act.

LEGAL ASSISTANCE IMPORTANT WHEN DECIDING ON THE MANDATORY NATURE

Combined with case law, the ruling demonstrates that the provisions of the Salaried Employees Act concerning mandatory nature do not preclude that a severance agreement may be concluded that derogates from the provisions of the Act. This is particularly clear if the employee was assisted by a lawyer in connection with the conclusion of the severance agreement.

Horten conducted the case on behalf of the employer, and any question may be directed to partner Marianne Lage.

contacts

Marianne Lage

Partner