Practice Area Articles
Denmark
February 05, 2024
By Paul Hastings Professional
Back to International Employment Law
KEY DEVELOPMENTS FOR 2024
New rules on registration of working hours
A draft bill introducing new rules on the registration of working hours is expected to enter into force on 1 July 2024. The purpose of the rules is to ensure compliance with the applicable rules on working time. Therefore, companies must begin to register the working time of their employees. Besides some general requirements, the system must give employees access to their data and ensure a retention period of five years. Some groups may be exempt from the new rules. In addition to exemptions that may apply in a collective agreement, employees who cannot determine their working hours in advance due to the nature of their work and who can determine their own working time may be exempt. Special conditions apply, and the Danish Working Environment Authority may decline to accept an exemption to the rules. When an exemption applies, it must be confirmed in writing.
New rules on parental leave
New rules on parental leave for social parents and close family members entered into force on 1 January 2024. The purpose of the rules is to give LGBT+ families and solo parents better leave options as an added layer to the parental leave rules that entered into force in 2022. According to the new rules, legal parents will have access to transfer leave to social parents or close family members, depending on the circumstances.
The ‘legal parents’ are the child’s mother, father, or co-mother. ‘Social parents’ or ‘close family members’ are defined as: a legal parent’s spouse or cohabiting partner with an expected parent-like relationship with the child; known donor with an expected parent-like relationship with the child; known donor’s spouse or cohabiting partner with an expected parent-like relationship with the child; or parents and siblings over the age of 18. This also applies if the legal parent is deceased. Special rules apply to solo parents, where a birthing parent who is a solo parent can transfer up to 27 weeks, and a father or co-mother who is a solo parent can transfer a maximum of 35 weeks. In addition, new rules for parents of twins will enter into force on 1 May 2024.
Public holidays
The Great Prayer Day (the fourth Friday after Easter) will be abolished as a public holiday in 2024. Consequently, agreements giving employees paid time off or special add-ons on that day will no longer apply. Instead, the day will be treated as a normal working day, and as compensation, monthly paid employees will receive a fixed supplement corresponding to 0.45% of their annual salary. The supplement is accrued on a monthly basis from 1 January 2024. Companies must either pay it out in May or in August, which is the same as the holiday supplement under the Danish Holiday Act, or pay it along with the salary on a monthly basis. If the employee’s employment terminates during the year, a prorated amount must be paid to the employee.
KEY DEVELOPMENTS FOR 2023
New rules on working conditions
Denmark is currently in the process of implementing the EU Directive on Transparent and Predictable Working Conditions. The implementation deadline has been passed, and the new rules are expected to enter into force on 1 July 2023.
The new rules are increasing the scope of application and introducing a two-fold level of protection in the form of new minimum information obligations and new material rights for employees. New minimum information obligations will relate to categories such as working time, probation time, education, social security contributions, etc. New rights will relate to probation time, sideline employment, working time, education, etc. The new rules will introduce standards for employees hired from 1 July 2023 and additional rights for existing employees. Among other things, existing employees can request the missing information about their employment.
Companies must, therefore, update existing standard contracts, prepare additional information for existing employees, and renew policies as required. Companies must also keep the new scope and rights in mind in the day-to-day business, as a breach of the rules may, illustratively, lead to claims for compensation.
New rules to prevent sexual harassment at the workplace
There is still a focus on measures to prevent sexual harassment in the workplace in Denmark. The most recent measure is a new draft bill introducing new initiatives against sexual harassment at the workplace from 1 January 2023.
Among other things, the new initiatives include clearer guidelines on the company’s responsibility, higher levels of compensation in serious cases, guidelines for the courts to determine compensation levels, etc. Mostly, the coming rules will clarify the company’s responsibility rather than introduce new requirements. Companies can benefit from the new rules by taking a closer look at existing policies to clarify and, if necessary, update existing wording.
Companies are responsible for securing a harassment-free work environment to prevent harassment and sexual harassment. Going forward, from 1 January 2023, companies can expect higher claims for compensation in case of non-compliance.
Initiatives to address the labor shortage
Denmark has been experiencing a substantial labor shortage, and companies in many industries are missing personnel. The Danish government is, therefore, focusing on measures relating to facilitating international recruitment with a new agreement on changes.
Consequently, initiatives to decrease labor shortage have been introduced, including focus on the recruitment of foreign employees. More specifically, one measure includes lowering the salary limit for foreign employees who apply for a work permit through the so-called “Pay Limit Scheme” from 448,000 DKK to 375,000 DKK. This threshold would be lowered for a limited period of three years. Another measure includes extending the validity period for work permits by an additional year. Moreover, the so-called “Positive List” will be expanded with additional professions.
The initiatives aim to help companies obtain the necessary workforce and respond to calls for changes from employer organizations. However, efforts to recruit foreign employees have met resistance and criticism from trade unions in fear that the efforts may pressure salary levels. Therefore, only a fixed number of employees can benefit from the relaxed version of the Pay Limit Scheme. Companies experiencing a labor shortage can consider whether the new measures can address this issue and whether the new rules can strengthen the position for existing employees.
KEY DEVELOPMENTS FOR 2022
Implementation of EU work-life balance directive
The new EU work-life balance directive came into force as of 2 August 2022 and introduces a new model on leave for parents after childbirth. No changes have been made to the number of weeks of maternity/paternity/parental benefits to which parents are entitled after childbirth (i.e. 24 weeks each). However, significant changes have been made in the distribution of the weeks.
Under the new rules:
- the mother will be entitled to: (i) 4 weeks' maternity leave before the expected date of birth; (ii) 2 weeks mandatory leave after the birth; (iii) a further 8 weeks of leave for maternity leave (which can be transferred to the father/co-mother in whole or in part); and (iv) 14 weeks' parental leave (of which 9 weeks of leave are earmarked, and the remaining 5 weeks can either be taken by the mother, postponed or transferred to the father/co-mother); and
- the father or co-mother will be entitled to: (i) 2 weeks mandatory leave after the birth; and (ii) 22 weeks' parental leave (of which 9 weeks of leave are earmarked, and the remaining the 13 weeks can be transferred to the child's mother). A father or co-mother can also postpone 5 weeks of leave (which must be taken before the child turns 9 years of age).
The new rules create a better basis for giving female and male employees equal rights in the workplace when it comes to taking leave in connection with childbirth. Employers will need to take appropriate action to implement the new rules. Companies should therefore review current policies for leave in connection with childbirth and decide how to implement the new changes without discriminating against male and/or female employees.
Implementation of EU directive on predictable and transparent working conditions
The new EU directive on predictable and transparent working conditions was supposed to have been implemented by 1 August 2022 but is now expected to enter into force on 1 January 2023.
The purpose of the directive is to ensure security and predictability in the labour market and thereby give employees a number of minimum rights. The directive also seeks to meet the conditions of today’s labour market and ensure fair treatment, especially for employees working within new and innovative work forms.
The coming rules will entail several new requirements to Danish employment contracts. New minimum requirements relating to working conditions have also been introduced as companies now have a duty to inform their employees of their working conditions. The incoming rules will, among other things, distinguish between predictable and unpredictable work patterns to accommodate different forms of work in the labour market.
These will allow certain employees more flexibility in terms of performing work for other companies, provided that such work is carried out outside of their work schedule.
Companies must prepare for these changes as soon as possible and may, among other things, need to prepare new procedures for employment contracts and, depending on the circumstances, update contract templates.
Implementation of new Act on the Protection of Whistleblowers
Denmark has passed a new Act on the Protection of Whistleblowers as part of the implementation process of the EU whistleblower directive. All companies with 50 employees or more must have established a whistleblower scheme. The deadline relating to the same for larger companies was 17 December 2021 and for smaller and medium sized companies (with between 50 and 249 employees) is 17 December 2023.
The scope of the Danish rules are slightly different and broader than the EU rules, as they currently allow employers to establish a joint whistleblower scheme for the entire group rather than for each individual entity, although this is subject to input at an EU level. Further the rules also contain a broader scope in terms of what matters can be reported. As a result, reports of serious breaches of law and other serious matters can also be made.
Many companies in Denmark currently have or are in the process of establishing their internal whistleblower schemes to ensure compliance with the new rules. If they have not done so already, companies should start preparing to implement such a scheme as soon as possible, to ensure compliance with the new rules.
KEY DEVELOPMENTS FOR 2021
Implementation of the EU Directive for posted workers
In Denmark, a draft bill for the implementation of the revised EU directive for posted workers was due to enter into force on 1 January 2021.
Pursuant to the draft bill, significant changes will be introduced to posted workers' conditions by amending the current Act. This includes, first and foremost, that the list of "hard core" conditions will be expanded to include accommodation and allowances or reimbursement of expenses to cover travel, accommodation, and food as well as an appropriate advance for such expenses. The new draft bill proposes to introduce a new maximum time period whereby employees posted for longer than 12 months (with a possibility of prolongation to 18 months) will be entitled to additional protection as they will be covered by additional working conditions. Prolongation can be made by notifying RUT on the day the employee has been posted for 12 months, at the latest. In this context, companies must be aware that these time periods cannot be circumvented by replacing one posted worker with another to perform the same work at the same place, as the posting will be calculated as one collective period. Moreover, the wording "minimum wage" was changed to "pay" to increase equal treatment for posted workers. To ensure that companies are aware of what should be considered as "pay," more detailed information will be published on workplacedenmark.dk.
The deadline for implementation was 30 July 2020. The rules will have retroactive effect and so, postings from 30 July 2020 and onwards will count in the collective posting period, if the posted employee carries out the same tasks at the same place when the rules enter into force.
New tripartite agreement extends the temporary division of labour scheme for 2021
The Danish Government and the social partners agreed to extend and supplement the temporary division of labour scheme, which was originally established as a substitute to the salary compensation scheme to prevent layoffs as a result of Coronavirus.
To initiate division of labour, companies must notify all affected employees. Following announcement, employees have 24 hours to inform the company if they want to participate in the scheme. Failure to respond will result in automatic inclusion. When applying the scheme, working hours can be reduced with minimum 20% and maximum 50% (or 80% for companies covered by a collective agreement) of the agreed working time, calculated over a four-week period. It requires at least two employees to establish a temporary division of labour in a company, department, or production unit.
Terminated employees can be required to continue working in a company or department covered by the scheme but working hours must be reduced so that the hours correspond to the division of labour scheme, and the employees must receive full pay. Companies could make use of the scheme throughout 2021, irrespective of whether the scheme has already been used in 2020.
New Act allows companies to test employees for COVID-19
The Danish Parliament recently adopted a new Act that will enable companies to test employees for COVID-19 and to receive the test result. With the new Act, former options to require employees to be tested for COVID-19 are thereby significantly expanded.
Before companies consider issuing requirements for testing, it is important to be aware that the Act contains several requirements and procedures. First of all, companies can only require employees to be tested for COVID-19 if it is objectively justified in order to limit the spread of the virus, including working environment considerations or significant operational considerations. Accordingly, testing could be considered as objectively justified if the reason is based on requirements from customers of the company's products that special precautions must have been taken against COVID-19. On the other hand, testing would not necessarily be considered as objectively justified if the employee is not in contact with humans or animals during the working day.
Besides testing having to be objectively justified, companies must also satisfy some additional requirements, including compliance with information and consultation requirements in accordance with applicable legislation and collective bargaining agreements. Further, companies must also provide employees with written information, ensure that testing is performed during working hours to the extent possible, as well as ensure that testing is carried out in a safe manner.
The new rules provided for an exceptional access to test for COVID-19 until 1 July 2021. The Act does not enable companies to require testing for antibodies to COVID-19 or other diseases and health information.
KEY DEVELOPMENTS FOR 2020
New changes to the Holiday Act
From 1 September 2020, employees can take paid leave in the same year as they accrue it, in accordance with the new Danish Holiday Act. However, a transition period began from 1 January 2019, which affects how the holiday is accrued and taken until 1 September 2020. Amongst others, the transition period includes holiday accrued from 1 September 2019 to 31 August 2020, and is frozen in a new special fund until the employee leaves the labour market, in order to prevent employees from accruing double the amount of holiday in the transition period. However, due to the COVID-19 pandemic, three out of five weeks of frozen holiday must be paid out no later than October 2020.
Changes to parental leave
The new EU directive on work-life balance recently came into force and introduces various new rules that significantly change the existing framework in Denmark. Pursuant to the new rules, fathers will obtain the right to at least 10 working days' of paternity leave around the time of the birth of their child, compensated at the level of sick pay as a minimum. Secondly, each parent will have an individual right to four months of parental leave, of which two months is offered exclusively to that parent and must be paid and will be non-transferable to the other parent. Under the previous law, parents could freely share paid parental leave between them. This often resulted in female employees taking all of the paid parental leave. Denmark and the other member states have three years to adopt the laws and administrative provisions necessary to comply with the directive. However, parental leave reflecting the new rules can already be seen in several collective bargaining agreements.
Revision of the Posting of Workers Directive
The revised Posted Workers Directive aims to enhance working conditions, combat social dumping, ensure equal pay, avoid the exploitation of cheap foreign labour and ensure fair competition. One of the main changes under the directive is that posted workers will only be subject to certain minimum labour rules in the host member state to the extent that they are in favour of the posted workers, for a period of up to 12 months (although it is possible to extend this to 18 months). If the period exceeds 12 (or 18) months, all mandatory labour rules of the host member state will apply (with the exception of the rules relating to termination), including those relating to non-competition clauses and supplementary occupational retirement pension schemes. Denmark and other member states have until 30 July 2020 to implement the directive.
KEY DEVELOPMENTS FOR 2019
New holiday Act to come into force
Pursuant to the new Danish Holiday Act, from 1 September 2020, employees will be able to take paid leave in the same year that they accrue it. However, a transitional period began on 1 January 2019. During the transitional period, holiday accrued from 1 September 2019 to 31 August 2020 will be frozen in a new special “fund” until the employee leaves the labour market. This is to prevent employees from accruing double holiday. The new Act includes deadlines on the determination, reporting and payment of the amount into the new special “fund”, so companies will need to start preparing for the new system.
Increased focus on prohibition against sexual harassment on the workplace
Amendments to the Danish Equal Treatment Act came into force on 1 January 2019. The Act now expressly includes a prohibition against sexual harassment which was previously forbidden under case law. The courts can no longer focus on the culture of the workplace when assessing whether sexual harassment has occurred. The Act is likely to improve a harassed employee’s chances of succeeding in a claim against the employer.
New changes to the Stock Option Act
Amendments to the Danish Stock Option Act came into force on 1 January 2019. The amendments introduce substantial changes to the Act, including an increased freedom of contract in stock option plans. Previously, under the Act “good leavers” could maintain options and warrants, which have been granted, but not yet exercised, while “bad leavers” do not. “Good leavers” also had the right to a proportional share of the grant if they had been employed at the end of the fiscal year or at the time of the grant. The amendments provides that parties can agree that “good leavers” will forfeit the right to options and warrants, which have been granted but not yet exercised. The amendments also includes regulation regarding the repurchase of stock and shares which are subject to the Act.
It should be noted that the amendments were passed unchanged with only a few clarifications in the explanatory notes, so there may still be some situations or circumstances where the law is unclear.
KEY DEVELOPMENTS FOR 2018
New Holiday Act
A new bill on The Danish Holiday Act Committee has been proposed. The main change is to introduce “concurrent holiday”, whereby all employees can take paid leave in the same year as they accrue it.
Leave will accrue from 1 September to 31 August (the holiday year). Employees will be entitled to take the leave during the period of 16 months from 1 September in the same year to 31 December in the subsequent year (the “leave period”).
Cases on Discrimination
As a result of the European Court of Justice’s judgment in Ring and Werge cases (C-335/11 and C-337/11) and cases before the national courts, the definition of disability has been broadened significantly. Companies with employees on long-term sickness should therefore carefully consider if the employee should be treated as having a disability.
Focus on Gender Inequality
The Minister of equality has recently launched a campaign which aims to make men aware of their right to take paternity and parental leave and to create a culture where paternity and parental leave are accepted. Paternity and parental leave have also been a focus area for the unions in the negotiation of collective bargaining agreements.
KEY DEVELOPMENTS FOR 2017
New Holiday Act
The EU commission has found the Danish Holiday Act is in violation of EU law. It is expected that the government will completely change the Act and the system governing holiday.
Data Protection Regulation
The Data Protection Regulation is expected to take up much attention during 2017 and 2018 for companies trying to prepare their compliance efforts Due to the high penalties under the Regulation, many companies need to take this much more seriously. For example, U.S. companies who have been more concerned about the SEC than the Danish Data Protection Agency (“DPA”), when doing internal investigations, whistleblower-hotlines, etc.
Even for those companies who have been compliant with current law, there are some new processes to implement such as reporting breaches within 72 hours, the use of consent and the requirement for DPA approvals, etc.
Making work more attractive
The Government is working on ways to make it more attractive to work. For example, there are plans to lower the income tax for top earners and efforts to lower unemployment benefits. There is also a new regime, which will make it easier to employ refugees on more basic terms of employment.
KEY DEVELOPMENTS FOR 2016
No automatic retirement
It is no longer possible to agree that the employee will automatically have to resign when the employee turns 70 years of age as this was deemed inconsistent with the general prohibition of age discrimination. In the future, a termination must be justified with the usual legal reasons such as the circumstances of the company or the conduct of the employee.
New rules on restrictive covenants
The law applies to employment agreements concluded on 1 January 2016 or thereafter and has introduced extensive changes to the previous system including reducing the employers’ ability to use non-compete and non-solicitation clauses. Furthermore, the new rules specify the maximum length of and minimum compensation paid for the restricted term.
A new law on the rules on taxation of share-based incentive plans for employees came into force in July 2016
There is a more favourable taxation of stocks received under employee stock purchase plans and rights to take up new shares in relation to share-based payment plans. If conditions are met, the employee will not be taxed at grant but instead when exercising. Furthermore, the tax will be calculated as taxation of shares instead of taxation of personal income.
New rules on reporting requirement for equal pay
The new law entered into force on 15 February 2016, and states that only companies with at least 35 employees, of which there are at least 10 of each sex, within the same work function shall report regarding equal pay.
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