Supreme Court overturns order to reduce employee compensation

In 2004, the Minister for Employment, Claus Hjort Frederiksen, issued an administrative order that reduced employee compensation in cases where no statements of employment particulars had been issued or where they were not correct or adequate. However, a judgement delivered by the Danish Supreme Court in May 2006 ruled that the minister’s action was in violation of current legislation.

Order overturned

The decision by the Danish Minister for Employment, Claus Hjort Frederiksen of the Liberal Party, to reduce the amount of employee compensation in 2004 for lack of or incorrect statements of employment particulars (employment contracts) was against the law. This was the ruling of the Danish Supreme Court (Højesteret) in its judgement of 16 May 2006. It appears that it was also illegal when the minister decided, at the same time, that the new amounts of compensation should apply to all pending cases; the minister had thus introduced legislation with retrospective effect.

In 2004, Minister Frederiksen issued two orders that reduced the level of compensation to employees with no or inadequate statements of employment particulars from between DKK 5,000 (€670) and DKK 10,000 (€1,340) to a compensation level of only DKK 1,000 (€134) – and with retroactive effect in relation to any cases that had not yet been decided. However, the judgement of the Supreme Court clearly states that the minister lacked statutory authority to implement such changes and that the two orders issued were in violation of the Act on employment particulars (in Danish) and its underlying intentions. Thus, the level of compensation now reverts to what it was before 2004.

The act on employment particulars contains provisions that implement the European Council Directive 91/533/EEC of 14 October 1991 on an employer’s obligation to inform employees of the conditions applicable to the contract or employment relationship.

Trade union reaction

Vice-president of the Union of Commercial and Clerical Employees in Denmark (Handels- og Kontorfunktionærernes Forbund, HK), Mette Kindberg, is happy with the Supreme Court judgement. She declared: ‘This case clearly demonstrates that the minister overstepped his authority when he issued the two orders. He only listened to the arguments voiced by the Confederation of Danish Employers (Dansk Arbejdsgiverforening, DA) and completely ignored the positions of the trade unions.’ HK was of the opinion that the minister was ‘skating on very thin ice’ when he issued the two orders.

Both HK and the United Federation of Danish Workers (Fagligt Fælles Forbund, 3F) will now examine how many of their members have been paid the lower level of compensation and will review the cases. However, they should not expect the assistance of the minister when it comes to identifying old cases. Minister Frederiksen explained: ‘It must be up to the individual employee to consider whether he/she wishes to have the case reviewed.’ HK currently has 161 cases that it is considering putting forward for re-examination.

Employers seek to amend legislation

DA is far from enthusiastic about the Supreme Court judgement and the confederation is now proposing an amendment of the act with a view to maintaining the present level of compensation of DKK 1,000 (€134) that has been overruled by the Supreme Court. According to the Head of the Employment Law Division of DA, Flemming Dreesen: ‘When the Supreme Court found that the legislation did not give the minister the required powers to issue the order, the natural consequence must be to amend the legislation to ensure that he will have the necessary authority. To put the clock back and reintroduce the exorbitant levels of compensation for insignificant deficiencies in statements of employment particulars would be tantamount to trivialising genuine problems that may, of course, arise between employers and employees.’

Minister Frederiksen considers that a level of compensation in the order of DKK 5,000–10,000 (€670–1,340) is far too high, maintaining that ‘fines of that amount are complete nonsense in cases where it is just a matter of the name of the street being misspelled or the house number not being indicated’. He added: ‘There was a disproportion between the amount of the fine and the seriousness of the offence, and my intention was to redress the imbalance.’ He also emphasised that he thought his actions were within the framework of the law.

The positions of the minister and DA are supported by Danish Commerce and Service (Dansk Handel og Service, DHS). This organisation fears a further increase in the already large number of cases for compensation; in their view, many employees see the act as a type of money-spinner and demand financial compensation for a mere triviality.

Trade union concerns over proposed political lobbying

DA will try to persuade the minister to bring this legislation before the Danish parliament for revision. This has led to a reprimand from HK: the organisation considers that by approaching the politicians with a demand for new legislation, DA is in fact undermining the Danish collective bargaining model. A characteristic feature of this model is that it is left up to the social partners to solve any problems in the labour market without intervention from the political system (DK0605049I). If DA proceeds with its plan, HK will contact its central organisation, the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO), requesting it to convince DA to reconsider its position.

Carsten Jørgensen, FAOS

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