DA calls for change in employment contracts legislation

In January 2003, a Danish court ruled that all changes in the employment relationship must be incorporated into the employment contract, including in cases where the employee was recruited before the adoption of the 1993 Act on Employment Contracts (which made written contracts obligatory). This ruling deprives employers of legal protection, according to the Danish Employers' Confederation (DA), which is now seeking to have the Act amended.

At the end of January 2002, the Danish Employers’ Confederation (Dansk Arbejdsgiverforening, DA) expressed its dissatisfaction with a judgment concerning employment contracts issued by the Eastern Division of the Danish High Court (Østre Landsret). According to DA, employers are deprived of any legal protection if all changes in the employment relationship have to be incorporated into the contract of employment, including in cases where the employee was recruited before the adoption of the Act on Employment Contracts 10 years ago (which made written contracts obligatory for all workers for the first time). This is the situation after the Court recently found against an employer for not having incorporated a change in a bonus scheme into an employment contract, although the employee had no right to an employment contract in the opinion of DA, as the person had been recruited before the Act on Employment Contracts came into force on 1 July 1993.

DA believes that this judgment will have far-reaching concequences for virtually all Danish employers, which may now be punished if they fail to have even minor changes written into employment contracts. In practice, claims DA, employers will now have no legal protection. Employers have no duty to draw up a written employment contract for a person recruited before the adoption of the Act, and DA finds that the judgment is an error and that the consequence will be major administrative burdens for employers. According to the judgment, all employees should have the same rights in this area, whether they were recruited before or after the entry into force of the Act on Employment Contracts.

The case concerned a manager who, after having been dismissed, was dissatisfied about not having been informed that the company's bonus scheme had been changed. In its judgment, the Eastern Division of the High Court ruled that the employer had a duty to inform the employee about the changed rules for the calculation of bonuses, even if the employment relationship had been entered into before 1 July 1993.

The Act on Employment Contracts was adopted to implement the 1991 EU Directive (91/533/EEC)on an employer's obligation to inform employees of the conditions applicable to the contract or employment relationship, and the judgment is a good example of how EU legislation is having an increasing influence on the regulation of the legal relationship between employers and employees, says a Danish lawyer who is an expert in employment law. This is especially due to the fact that the Danish courts use basic EU legal interpretation principles when they have to interpret the scope of Danish legislation based on Community law. 'Traditional thinking' in relation to, for instance, employment contracts, part-time contracts, discrimination due to gender, age, ethnic origin etc may thus be a costly affair for many employers, warns the lawyer. Many enterprises do not even live up to the formal requirements laid down in the Act on Employment Contracts in relation to employees recruited after 1 July 1993 - and with the new judgment by the High Court, which puts employees recruited both before and after that date on an equal footing when it comes to changes in the employment relationship, the lawyer expects an increase in the number of cases brought before the courts.

DA will now contact the Minister of Employment and call for the Act to be clarified through a legislative amendment.