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HR Legal

Lost sick pay reimbursement could not be set off against salary

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Legal news
calendar 28 November 2019
globus Denmark

Pursuant to the Danish Supreme Court, employers can set off lost sick pay reimbursement against an employee’s salary when there is basis for liability. However, this was not the case when an employee had forgotten to complete an information form from her municipality and, as a consequence, had lost her entitlement to sick pay.

The case concerned a social worker in a municipality who was on sick leave due to stress. The employee was subject to the Danish Salaried Employees Act and was, therefore, entitled to receive her salary as usual during sick leave. Concurrently, the employer was entitled to reimbursement from the municipality corresponding to the amount of sick pay the employee would otherwise have been entitled to.

However, the employer was refused sick pay reimbursement because the entitlement to sick pay ceases if the employee without reasonable cause refrains from participating in the follow-up of the municipality. Consequently, as the entitlement to sick pay reimbursement is derived from the employee, the employer lost the right to reimbursement during a period corresponding to approximately one month.

As a direct consequence of the loss, the employer decided to set the lost amount off against the employee’s salary. The decision reflected the employer’s opinion that the employee could be held liable because she had failed to comply with the follow-up requirements of the municipality. The employee disagreed and maintained the fact that she had an unconditional right to receive her full salary as usual during sick leave in accordance with the Danish Salaried Employees Act.

Before the Supreme Court, the question was, therefore, if the employee could be held liable towards the employer for the lost amount of sick pay and if so, whether the employer was entitled to set off the loss against the employee’s salary.

No set off without basis for liability

Like the Danish Eastern High Court, the Supreme Court initially established that neither the Salaried Employees Act nor the Danish Sickness Benefit Act regulated the question. The answer had to be determined pursuant to the established rules on damages and contracts.

The Supreme Court then proceeded to determine that following the employee’s duty of loyalty towards her employer, she was required to fulfill the requirements of the municipality and, thereby, to ensure the employer was entitled to sick pay reimbursement. Because the employer had suffered a loss caused by her failure to submit the information form in due time, the Supreme Court confirmed that in principle the employer was entitled to claim damages if reasonable considering the employee’s position and the circumstances of the case. As part of its assessment the Supreme Court emphasised that it was necessary to consider whether the employee had been aware of her obligation towards the municipality, her as well as the employer’s ability to bear the loss, and lastly if the employer had offered guidance and assistance in order for her to satisfy the requirements of the municipality under the Sickness Benefit Act.

Pursuant to the Supreme Court, the employee had not been aware of her obligation towards the municipality and as soon as she became aware, she filled out the information form. At the same time, the Supreme Court noted that the employer had not offered any guidance or assistance on its side to ensure the employee was able to remedy the mistake.

On this basis, the Supreme Court ruled that the employed was not entitled to claim damages and, consequently, could not set off the loss against the employee’s salary. On a final note, the Supreme Court added that if there had been reasonable cause, the employer would have been entitled to set off the amount against the employee’s salary.

IUNO's opinion

The ruling of the Supreme Court demonstrates that companies in specific circumstances may be entitled to set off the loss of sick pay reimbursement against an employee’s salary if the employee in an unreasonable manner has failed to fulfill the requirements under the Sickness Benefit Act.

IUNO recommends that companies apply a proactive approach to employees on sick leave and actively make an effort to ensure that sick employees can return to work, including assisting the employees with fulfilling the various requirements under the Sickness Benefit Act. It is equally important that companies are aware of the different requirements which apply in case of subsequent termination due to sickness to ensure that the possibility to terminate the employee is not lost, in the event the attempted return of the employee should fail. 

The case concerned a social worker in a municipality who was on sick leave due to stress. The employee was subject to the Danish Salaried Employees Act and was, therefore, entitled to receive her salary as usual during sick leave. Concurrently, the employer was entitled to reimbursement from the municipality corresponding to the amount of sick pay the employee would otherwise have been entitled to.

However, the employer was refused sick pay reimbursement because the entitlement to sick pay ceases if the employee without reasonable cause refrains from participating in the follow-up of the municipality. Consequently, as the entitlement to sick pay reimbursement is derived from the employee, the employer lost the right to reimbursement during a period corresponding to approximately one month.

As a direct consequence of the loss, the employer decided to set the lost amount off against the employee’s salary. The decision reflected the employer’s opinion that the employee could be held liable because she had failed to comply with the follow-up requirements of the municipality. The employee disagreed and maintained the fact that she had an unconditional right to receive her full salary as usual during sick leave in accordance with the Danish Salaried Employees Act.

Before the Supreme Court, the question was, therefore, if the employee could be held liable towards the employer for the lost amount of sick pay and if so, whether the employer was entitled to set off the loss against the employee’s salary.

No set off without basis for liability

Like the Danish Eastern High Court, the Supreme Court initially established that neither the Salaried Employees Act nor the Danish Sickness Benefit Act regulated the question. The answer had to be determined pursuant to the established rules on damages and contracts.

The Supreme Court then proceeded to determine that following the employee’s duty of loyalty towards her employer, she was required to fulfill the requirements of the municipality and, thereby, to ensure the employer was entitled to sick pay reimbursement. Because the employer had suffered a loss caused by her failure to submit the information form in due time, the Supreme Court confirmed that in principle the employer was entitled to claim damages if reasonable considering the employee’s position and the circumstances of the case. As part of its assessment the Supreme Court emphasised that it was necessary to consider whether the employee had been aware of her obligation towards the municipality, her as well as the employer’s ability to bear the loss, and lastly if the employer had offered guidance and assistance in order for her to satisfy the requirements of the municipality under the Sickness Benefit Act.

Pursuant to the Supreme Court, the employee had not been aware of her obligation towards the municipality and as soon as she became aware, she filled out the information form. At the same time, the Supreme Court noted that the employer had not offered any guidance or assistance on its side to ensure the employee was able to remedy the mistake.

On this basis, the Supreme Court ruled that the employed was not entitled to claim damages and, consequently, could not set off the loss against the employee’s salary. On a final note, the Supreme Court added that if there had been reasonable cause, the employer would have been entitled to set off the amount against the employee’s salary.

IUNO's opinion

The ruling of the Supreme Court demonstrates that companies in specific circumstances may be entitled to set off the loss of sick pay reimbursement against an employee’s salary if the employee in an unreasonable manner has failed to fulfill the requirements under the Sickness Benefit Act.

IUNO recommends that companies apply a proactive approach to employees on sick leave and actively make an effort to ensure that sick employees can return to work, including assisting the employees with fulfilling the various requirements under the Sickness Benefit Act. It is equally important that companies are aware of the different requirements which apply in case of subsequent termination due to sickness to ensure that the possibility to terminate the employee is not lost, in the event the attempted return of the employee should fail. 

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Anders

Etgen Reitz

Partner

Søren

Hessellund Klausen

Partner

Kirsten

Astrup

Associate

Flora

Hua Ting Chieng

Associate

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