From the turn of the year, an amendment of the Danish Equal Treatment Act entails that companies and employees can no longer agree on automatic termination of the employment relationship when the employees turn 70 years old. The new rules apply in relation to individual and collective agreements but in different ways.
The purpose of the Equal Treatment Act amendment is to ensure that employees are not discriminated against on the grounds of age. Accordingly, from 1 January 2016, everybody who can and wants to continue to work at the age of 70 shall have the opportunity to do so.
Terms from 1 January 2016
The amendment of the Act entails that provisions in individual agreements setting a mandatory retirement age will become null and void when the Act enters into force. Similar provisions in collective bargaining agreements will continue to be valid until they are replaced by new collective bargaining agreements or cease in other ways. Consequently, companies will no longer be able to continue or make new agreements on mandatory retirement.
Terminations must be reasoned in objective criteria
As a result of the new rules, companies can no longer automatically terminate employees older than 70. Instead, terminations must be reasonably justified by the employee's conduct or the business's circumstances.
If an employee's conduct justifies termination, the company must follow the same termination procedure as for every other employee. This means that companies must give the relevant employee a warning stating that the employee's conduct must be improved within a certain deadline and that if no such improvement occurs, it may have consequences for the employment relationship.
It is unclear whether the Act imposes a legal obligation on the employer to give special consideration to elderly employees who, for instance, find it more difficult to learn new technologies or work methods or who work slower because of their age.
Even though it is undoubtedly true that not all elderly employees have a reduced capacity for work, the fact that companies will no longer be able to set a mandatory retirement age may create a number of difficult situations for them.
If a termination is justified in circumstances pertaining to the employing company, e.g., restructurings or closure of positions, which also include elder employees, it is important that the affected employees are chosen from objective and impartial criteria that can be substantiated. In addition, the company shall aim at a statistical distribution within the different age groups.
Decisions from the Board of Equal Treatment shows that it is often considered as discrimination on the grounds of ageism if the oldest employees statistically are affected harder than the younger employees in relation to mass layoffs or restructurings.
iuno's opinion
Our recommendation is that companies update their individual employment contracts to make sure that they match the new requirements set out in the Equal Treatment Act. If a company maintains invalid terms on mandatory retirement age in its agreements, this will at least constitute a breach of the Danish Act on an Employer’s Obligation to Inform Employees of the Conditions Applicable to the Employment Relationship. Moreover, this may ultimately be expensive for the company, if an employee initiates legal action against the company raising a claim for compensation for discriminatory treatment.
Furthermore, companies are recommended to consider how they will handle older employees who do not perform in the future and how they will handle mass layoffs without directly or indirectly discriminating against their employees on the grounds of age.