Denmark: Early Pension Entitlement Can Limit Severance Pay, Supreme Court Rules

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By Marcus Hoy

Dec. 16—Denmark's Supreme Court ruled Dec. 6 that employees who qualify for early company pensions can be denied severance pay upon being made redundant. The court rejected an April 19, 2016, ruling from the European Court of Justice that the Danish rules breached a general EU legal principle prohibiting age discrimination. The Danish judgment (15/2014) means that affected former employees are now barred from suing companies for unpaid severance.

Discrimination Charged

At the time of the original 2009 complaint, Denmark's Salaried Employees Act stated that employees who had worked for a company for 12 or 17 years were entitled to a payment equal to one or three months' salary, respectively, on termination of employment. Pursuant to the former Section 2a (3) of the act, however, the right to this payment lapsed if the employee qualified for a company pension before reaching the age of 50. Under Danish law, the relevant section of the Salaried Employees Act took precedence over the EU's Employment Equality Framework Directive (2000/78/EC).

The complaint was filed by a group of employees who believed that this rule constituted discrimination on grounds of age. Regardless of the Danish law, the complainants held, the general anti-age discrimination principle contained in the EU's Charter of Fundamental Rights should still have applied. The Supreme Court referred this question to the ECJ, which on April 19 found that the principle should apply directly to agreements between private parties in all EU member nations. While the Salaried Employees Act is still in force, the relevant section has been amended to comply with the ECJ opinion.

Non-Specific Principles

The case was then sent back to the Danish Supreme Court, which was expected to reach a decision that fell in line with the ECJ's ruling. On Dec. 6, however, a majority found that the practice could not be deemed illegal. In the Danish court's view, the Accession Act, which allowed Denmark to join the EU, does not allow for such national legislation to be set aside in favor of non-specific principles of EU law. Thus, all claims for backdated severance pay in this context should be disallowed.

In a Dec. 14 statement, attorney Maria Schmiegelow of the Horten legal firm told Bloomberg BNA that the ruling's relevance outside Denmark is unclear.

“It is uncertain whether it will have wider relevance in Europe as the case is very specific” Schmiegelow said. “The main question was whether an unwritten EU principle should take precedence over national law in disputes between private parties. In most cases, national courts will be able to interpret national legislation in accordance with fundamental EU principles. However, in this case it was not possible for the court to do so.”

‘Legal Certainty'

“The main reason that the Supreme Court did not want to give the EU principle precedence over national law was legal certainty,” Schmiegelow said. “This implies that private parties should be able to rely on clear and unambiguous Danish legislation, even if it is not in accordance with EU principles. If a similar case should arise in another EU nation, the outcome would probably depend on an interpretation of the Accession Act of that nation.”

“There is no option to appeal the Danish Supreme Court ruling, but we are waiting to see if the European Commission will bring infringement proceedings against Denmark,” Schmiegelow said.

While the ruling raised interesting questions regarding constitutional law, attorney Lise Hoy Falsner of the Plesner legal firm said it was unlikely to have an immediate broader impact on the HR field in Denmark.

“This is the first time the Danish Supreme Court has not considered it possible to comply with an ECJ judgment,” Falsner said. “To my knowledge, there are no similar pending cases in the HR area in Denmark. It is possible that other countries' courts will be inspired by this judgment, but basically its only legal value is in Denmark.”

To contact the reporter on this story: Marcus Hoy in Copenhagen at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For More Information

The Dec. 6 Supreme Court ruling is available in Danish here.

For more information on Danish HR law and regulation, see the Denmark primer.

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