Denmark

    1.1 In what circumstances does the employee transfer law apply?

    Employee transfer law applies to any transfer of an undertaking where the entity transferred is within the EEA and where the employees affected are subject to Danish law.

    The legislation applies regardless of the activities of the entity and regardless of whether it is a private or public undertaking so long as it is pursuing an economic activity.

    The legislation may apply even where there is no change of ownership. The decisive factor is whether there is a transfer of de facto managerial authority from a legal person or entity to another as a result of a legal transfer or merger.

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    Author: Norrbom Vinding

    Date: September 2016

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    When assessing whether a situation qualifies as a transfer, it is necessary to distinguish between a change of ownership and a change of employer. A full or partial change of ownership does not equate to the transfer of an undertaking. For example, a transfer of shares does not qualify as the transfer of an undertaking.

    Leasing or rental agreements, mergers and acquisitions may qualify as transfers of undertakings even if they take place within the same group of companies.

    The reorganisation of public administrative authorities or transfers of government or administrative functions between public administrative authorities are not considered transfers of undertakings.

    (b) Outsourcing

    Employee transfer law applies to outsourcing, including outsourcing of public activities.

    The decisive factor is whether the outsourced activity in itself constitutes an economic entity which retains its identity after transfer. For example, if the main part of the outsourced activity consists of manpower, such as cleaning services, it is crucial that the transferee takes over a significant proportion of the employees assigned to the task in terms of numbers and skills.

    The following types of outsourcing have been deemed transfers of undertakings: outsourcing of cleaning services, security services, catering services, ambulance services, bus services and the maintenance of roads. 

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    Author: Norrbom Vinding

    Date: September 2016

    1.3 In outline, what are the implications of the employee transfer law?

    If employee transfer law applies:

    • employees assigned to the undertaking transfer from the transferor to the transferee on their existing (i.e. pre-transfer) terms of employment;
    • collective agreements transfer, unless the transferee notifies the relevant trade union(s) within the timeframes set out in law;
    • the transferor must inform the employee representatives or, if none, the employees themselves about the circumstances of the transfer within reasonable time before the transfer;
    • employee representatives retain their legal position and function irrespective of the transfer;
    • employee entitlements arising under collective agreements and pay terms and working conditions laid down or approved by a public authority or in individual agreements transfer to the transferee;
    • the transfer is not in itself a valid reason for dismissing employees unless economic, technical or organisational reasons entail changes in the workforce.
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    Author: Norrbom Vinding

    Date: September 2016

    2.1 Who transfers?

    The protection afforded by the employee transfer rules covers ‘employees’. Whether a person is an employee will depend on whether there is an employment contract subordinating the employee to the managerial authority of the employer and whether the employee is obliged to perform the work and cannot pass his or her responsibilities on to anyone else. How the income is taxed is also relevant. The protection does not generally cover managing directors or self-employed individuals.

    Employees whose employment relationship has been finally terminated, including the release from the duty to work before the transfer, are generally not transferred.

    Where only part of an undertaking is transferred, it is the employees belonging to that part of the undertaking who are transferred. As a guideline, employees can be said to belong if they spend 50 per cent or more of their time working in that part of the undertaking.

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    Author: Norrbom Vinding

    Date: September 2016

    2.2 Can employees object to transferring?

    According to Danish law, employees are entitled to object to a transfer by handing in their resignation, but objecting to work for the new employer – even in the notice period – may constitute a material breach of the employment contract. However, if the employee has such a strong personal relationship with the employer that the transfer of the identity of the employer as such constitutes a significant change in employment terms, the employee assumes the same legal position as a dismissed employee. This might be the situation if the employer is a family member.

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    Author: Norrbom Vinding

    Date: September 2016

    2.3 What happens to terms of employment contracts?

    From the date of the transfer, the transferee will become a party to the employment contract and thus take over all rights and obligations under the employment contract. The employment will continue unaffected by the transfer, unless changes are introduced in accordance with the relevant procedure.

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    Author: Norrbom Vinding

    Date: September 2016

    2.4 What about other employee benefits?

    All rights and obligations transfer with the employee so, for example, past employment with the transferor is regarded as continuous employment with the transferee.

    Since all rights and obligations transfer, employee benefits will be considered as being part of the employment conditions, which must remain unaffected by the transfer. However, if the transferee is unable to provide certain benefits, for example free housing, the entitlement to that benefit will not transfer but the employees are likely to be entitled to compensation instead.

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    Author: Norrbom Vinding

    Date: September 2016

    2.5 What happens to pension rights?

    Pension contributions are considered part of the employees’ remuneration and the employees’ rights to pension contributions will thus transfer. In addition, the transferee must pay any outstanding contributions even if they accrued before the transfer.

    Therefore, the transferee must make sure that any outstanding contributions are paid by the transferor before the transfer.

    Nevertheless, the transferee will not be liable for employees’ entitlements to benefits from a pension scheme. However, this exception is of limited practical importance, as most Danish employment pension schemes are ‘defined contribution’ schemes and employers are obliged to secure pension guarantees with pension funds/insurance companies under the supervision and control of the Danish Financial Supervisory Authority (Finanstilsynet).

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    Author: Norrbom Vinding

    Date: September 2016

    2.6 What liabilities transfer?

    Only liabilities arising directly from a) a collective agreement; b) terms relating to pay and working conditions laid down or approved by a public authority; and c) an individual agreement concerning pay and working conditions, will transfer to the transferee. Claims for compensation for industrial injuries, for example, or criminal liability will not transfer and will remain the responsibility of the transferor.

    In respect of claims for compensation under protective labour market legislation, the transferee will not be liable for any such claims made before the transfer. However, it is likely that the transferee would be liable to pay compensation for defective employment contracts.

    The transferee does not take over the transferor’s rights and obligations under the employment contracts of the employees whose employment relationship was finally terminated at the date of the transfer.

    It should be noted that case law on the transfer of liability under protective labour market legislation is sparse and not yet settled.

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    Author: Norrbom Vinding

    Date: September 2016

    2.7 Do collective agreements transfer?

    Generally, the obligation to be bound by collective agreements will transfer. If the transferee does not wish to become party to those agreement(s), it must notify the trade unions within five weeks of becoming aware of it or three weeks after transfer, whichever is the later. If the transferee fails to meet the timeframes, it will be bound.

    If the transferee does not wish to become a party to the collective agreement(s), the employees’ individual rights under the collective agreement(s) will still apply. To release itself from those rights, it must give notice ending at the same time as the collective agreement expires.

    The transferee may make non-fundamental changes any time, but for significant changes, it must give contractual notice to employees. They may then consider themselves dismissed. If the changes conflict with the transferor’s collective agreement or provide less favourable terms, they can only be implemented when the agreement ends.

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    Author: Norrbom Vinding

    Date: September 2016

    2.8 How does the transferee obtain information on transferring employees?

    There are no mandatory requirements for information to be given to the transferee. Information about transferring employees will normally be obtained by the transferee from the transferor, e.g. in a negotiated agreement.

    When processing data on the transferring employees, the data protection rules must be observed. This means that the disclosure of employees’ sensitive personal data will require the employees’ explicit consent.

    The processing of non-sensitive personal data can generally take place without the employees’ consent as part of a due diligence investigation provided this is necessary for the legitimate interests of the data controller or the third party to whom the data are disclosed, and these interests are not overridden by the interests of the data subject.

    The transferor is free to disclose anonymised information about the employees or examples of standard employment agreements.

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    Author: Norrbom Vinding

    Date: September 2016

    3.1 Can employers make changes to employment contracts?

    By virtue of their managerial authority, both the transferor and transferee are entitled to introduce non-fundamental changes to employment terms. With respect to significant changes, the employer must give contractual notice to the relevant employees and allow them the option of considering themselves dismissed. As notifying significant changes involves a risk that the employee will decide to consider him/herself dismissed, the significant change(s) must be reasonably justified by economic, technical or organisational reasons.

    Although the question of what changes qualify as significant changes is decided on a case-by-case basis, various general standards apply. Changes involving a decrease in income or a limitation of authority, for example, are always considered significant.

    Changes resulting in less favourable terms for employees compared with the terms of the collective agreement can be introduced only after the collective agreement has expired, and the employer must give contractual notice if the changes are significant. This also applies where the transferee has notified the trade union that it does not wish to become party to the collective agreement.

    Terms offered in employees’ contracts by the transferor and transferee can be harmonised by the transferee to the extent that this does not interfere with protected rights.

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    Author: Norrbom Vinding

    Date: September 2016

    3.2 When can employers safely dismiss employees before or after a transfer?

    The transfer of an undertaking is not in itself a valid reason for dismissing employees, but the employees affected by the transfer can be dismissed if the dismissals are for economic, technical or organisational reasons entailing changes in the workforce.

    In the absence of any of these reasons, the employees can claim protection against unfair dismissal.

    There is no ‘safe’ time for an employer to carry out dismissals in the event of a transfer and a substantial burden of proof must be satisfied by the employer in order to justify any dismissals that have been carried out.

    If an employee is unfairly dismissed, the employee can claim compensation under Danish law or a collective agreement. According to the General Agreement, which acts as the framework for most collective agreements in the Danish private sector, employees are entitled to compensation of up to 52 weeks’ pay and to claim reinstatement. Under the law relating to salaried employees (though not blue-collar workers), those employees can claim up to six months’ pay depending on the length of their employment. Usually, an unfairly dismissed employee will be granted 2-4 months’ pay but this varies from case to case.

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    Author: Norrbom Vinding

    Date: September 2016

    4.1 Who must employers consult?

    The employer must inform the employee representatives or, if there are none, the affected employees themselves within a reasonable time before the transfer. Usually, there is no duty to consult with any trade union directly. Such a duty may, however, be contained in a collective agreement.

    In Denmark, employee representatives are appointed by employees in accordance with the provisions of collective agreements or by law. There are certain requirements regarding the number of employees employed and eligibility, but these differ depending on the collective agreement in question.

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    Author: Norrbom Vinding

    Date: September 2016

    4.2	What information must they provide?

    When informing the employee representatives or the affected employees, the employer must, as a minimum, provide the following information:

    • the actual or proposed date of the transfer;
    • the reason for the transfer;
    • the legal, economic and social implications of the transfer for the employees;
    • any envisaged measures which will affect the employees.
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    Author: Norrbom Vinding

    Date: September 2016

    4.3	What does consultation involve?

    If there will be measures that affect employees as a result of the transfer, the employer must consult employee representatives or the employees themselves to try to negotiate an agreement within a reasonable time before the transfer.

    However, such consultation/negotiations are only required in relation to significant changes to employment terms.

    There is no requirement to reach agreement with the employee representatives or the affected employees. In the absence of an agreement, the employer can proceed as planned as long as the actions it takes are not in breach of laws or applicable collective agreements.

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    Author: Norrbom Vinding

    Date: September 2016

    4.4	How long does consultation last?

    There are no statutory requirements regarding the length of the consultation. Usually, the consultation and negotiations can be finalised in a few days.

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    Author: Norrbom Vinding

    Date: September 2016

    4.5	What happens if an employer fails properly to inform or consult?

    If an employer fails to properly inform employees of a transfer, the employer may be liable jointly and severally with the transferee in respect of claims by employees until the employees have been properly informed. If found liable, the penalty may be a fine or other penalty, in accordance with the applicable collective agreements.

    In addition, the employer may be subject to a criminal fine (with no upper limit).However, the failure to inform or consult will have no impact on the effectiveness of the transfer itself.

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    Author: Norrbom Vinding

    Date: September 2016

    5.1	Identify up to three issues in this country of which employers should be aware?

    It is important to be aware of the rules on the transfer of collective agreements as the transferee will become a party to the applicable collective agreement(s) unless the union is notified within the timeframes set. If an employer unintentionally becomes a party to a collective agreement because the union was not duly notified, the employer can only be released from it by following the procedure prescribed in Danish collective labour law – and it is a highly complicated and lengthy procedure.

    It is also important to be aware of the rules on the introduction of changes to employment terms, especially those rules on significant changes described above.

    Finally, it is important to be aware that the Danish rules – as opposed to the rules in EU Directive 98/50/EC – can also apply to the transfer of an undertaking of a bankrupt employer.

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    Author: Norrbom Vinding

    Date: September 2016

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    Employee transfer law applies only if the employees are covered by Danish law in general. Thus, in the event of a cross-border transfer into or out of Denmark, it is important to consider the laws of each jurisdiction that applies to the employees when determining whether the transfer or part of it is governed by Danish law. The question of whether Danish law applies depends on the choice of law and Danish transfer law may apply either in connection with a transfer into or out of Denmark. It will always remain a condition for Danish law to apply that the entity to be transferred is located within the European Economic Area.

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    Author: Norrbom Vinding

    Date: September 2016

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    EU Directives 77/187/EEC and 98/50/EC were implemented into Danish law by Act No 111 of 21 March 1979 and subsequently amended by Act No 441 of 7 June 2001 and Consolidation Act No 710 of 20 August 2002 on Employees’ Rights in the event of Transfers of Undertakings.

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    Author: Norrbom Vinding

    Date: September 2016

     

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