Salaried Employees Act

The most important statute in Danish employment law is the Salaried Employees Act. Usually, the act applies to employees who are subject to instructions from management. A similar criterion applies to a number of other employment law statutes.

The fact that an employee falls within the scope of the Salaried Employees Act affects various aspects of his or her employment, including unfair dismissal, termination indemnity, seniority-based severance allowance and the receipt of salary during sick leave.

Legal Status of Managers

Usually, general managers who are registered with the Danish Commerce and Companies Agency do not fall within the scope of the act. Other managers (including sales managers and finance officers who are not registered with the agency as managers) are regarded as salaried employees. The decisive criterion is not the individual's job description or job title, but rather the de facto responsibility and authority granted to him or her. If a manager is registered with the agency and/or takes an active role in the company’s management (eg, reporting regularly to the board of directors), then he or she will normally be considered to fall outside the scope of the act.

Managers in multinational companies

The matrix structure of multinational company groups has proved problematic in terms of the application of the act. In such companies it is not unusual for a registered general manager not to have overall financial responsibility, nor to have responsibility for human resource, IT and other functions, which instead are carried out at a Nordic or European level. As the Danish manager of a Danish subsidiary of a multinational recently said of his position: "I am the caretaker in Denmark."

The role of general managers is, at times, so restricted that they must obtain prior approval for small financial dealings. In light of this, Danish employment lawyers believe that a number of registered general managers in multinational companies are at considerable risk of being deemed subject to the Salaried Employees Act. Recently, the Danish High Court addressed this very subject.

Facts

An individual was employed as a sales manager in a Danish company that was owned by a multinational company. However, he was the highest ranking person for the company in Denmark and was reponsible for day-to-day management. His employment contract stated that he was not subject to the Salaried Employees Act or the Holiday Act.

When a dispute arose regarding the termination of the manager's employment contract, he filed a claim for holiday allowance pursuant to the Holiday Act, claiming to be an employee thereunder.

Judgment

The court stated that the extent to which a general manager in a Danish limited company falls outside the scope of the Holiday Act (and the Salaried Employees Act) depends on whether he is subject to instructions, and whether he (i) performs services for and is instructed by a superior, or (ii) has an independent role such that no such instruction is possible.

The manager in question was deemed not to be subject to the Holiday Act or the Salaried Employees Act. The court considered the fact that he was not formally registered as a general manager in the Danish company and that he was regularly instructed by a regional sales manager. However, the following factors were held to be decisive:

  • his overall status and working conditions;
  • the fact that his instructing regional sales director was responsible not only for Denmark but for five countries; and
  • his receipt of significant bonuses in relation to Danish company sales.

Comment

The decision marks an important change in domestic case law and is quite remarkable in its narrow application of the concept of a salaried employee.

The argument that a general manager of a Danish subsidiary is subject to various restrictions and is not registered as a company manager may no longer be decisive. The courts will evaluate a manager's role and responsibilities on a case-by-case basis. In particular, importance will be attached to whether he or she is ultimately responsible for the company’s activities in Denmark.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.