23 January 2014
eNews
Supreme Court decision
on the extent to which
severance pay should be
paid
Employment Newsletter: The Danish Supreme Court has recently considered
the issue of severance pay in a case involving 15 combined claims.
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Background: Under section 2 a of the Danish Salaried
Employees Act (funktionærloven), salaried employees who
have been continuously employed for 12, 15 or 18 years
are entitled to receive severance pay
(fratrædelsesgodtgørelse) (of respectively one, two or three
months’ salary) if their employment is terminated by the
employer. However, an employee is not entitled to
severance pay if, the employee had joined a pension
scheme to which the employer made contributions and from
which the employee was entitled to draw a pension at the
time of the termination of the employee’s employment.
Back in 2010 section 2 a was considered by the ECJ in the
case Ingeniørforeningen i Danmark acting on behalf of Ole
Andersen v Region Syddanmark C-499/08. The ECJ ruled
that section 2 a, which granted a severance pay to
employees terminated from employment after long service
but excluded those who were entitled to an early retirement
pension, breached the Equal Treatment Framework
Directive (2000/78/EC) (the “Equal Treatment Directive”).
The ECJ considered that the Danish legislation went
beyond what was necessary to achieve its social policy
objectives and so was not justified.
The Danish courts have now had an opportunity to interpret
section 2 a in light of the ECJ’s decision.
Supreme Court Decision in the 15 Combined Cases
If you have any questions or would like
further information in relation to this topic,
please contact the partners or associates
below or your usual Bech-Bruun contact.
Morten Ulrich
Partner
Employment and labour law
[email protected]
Mette Klingsten
Partner
Employment and labour
[email protected]
The cases concerned a number of City and District
Councils and a technical and vocational college. All cases
emanated from the ECJ’s 12 October 2010 decision in the
Ole Andersen case.
The overriding question was whether the terminated
employees were entitled to severance pay under section 2
a, even though they were entitled to draw a pension from a
scheme to which their employer had made contributions.
In a previous judgement by the Danish High Court (Eastern
Division) issued on 24 April 2013 the High Court had
emphasised that a deciding factor was whether the
employees in question had actually sought to pursue – or
obtained – other employment and thereby pursued their
vocational career.
The Supreme Court upheld the High Court’s judgement of
23 April 2013 and made the following remarks:
“Based on a proportional assessment of Article 6 of the
Equal Treatment Directive we do not find that we have
grounds for stating that employees must be given a right to
receive severance pay in circumstances where the
employees give up their pension without intending to
pursue a vocational career, for example, due to long-term
illness. In connection with this it is noted that the Directive
does not prohibit any differential treatment which arises
when people who, by way of example, cannot pursue a
vocational career due to illness and are precluded from the
right to receive severance pay if they, at the date of their
termination, are entitled to receive a pension which the
employer has paid into.
(…)
The consideration of the cases before us must therefore be
based upon a concrete evidential assessment of whether
the employees in question can be considered as having
temporarily given up their pension with the aim of pursuing
a vocational career. We do not have sufficient grounds for
changing the High Court’s evidential assessment of the
individual cases and we therefore uphold the High Court’s
decision concerning the right to receive severance pay”.
A determining factor is therefore whether the employee
actually remains on the labour market after the termination.
As regards the cases where the individuals had a right to
receive severance pay, because they had remained on the
labour market, there was an additional question of the
extent to which they were due compensation under the
Danish Employment Non Discrimination Act
(forskelsbehandlingsloven). The Supreme Court held that
no compensation was payable by the employers. The
Supreme Court noted that the Ole Andersen decision had
resulted in the employers having to consider the state of the
law in the cases before them and that any breaches which
may have occurred were not of sufficient severity so as to
justify the payment of compensation.
Bech Bruun’s Comment
The Supreme Court’s decision means that the extent to
which severance pay is payable will depend on a concrete
assessment of the facts in each individual case.
Source
Supreme Court judgement of 17 January 2014 and the
High Court (Eastern Division) judgement of 24 April 2013.
This newsletter is for guidance purposes only an should not be regarded
as a substitute for taking legal advice. We recommend that you seek
independent legal advice with respect to particular legal issues. BechBruun accepts no responsibility or liability for any losses incurred in
connection with any decision made or action or inaction on the part of any
party, in reliance upon any information in this newsletter.