Employee or self-employed? The High Court of Western Denmark has ruled on this distinction

By Mia Boesen, Pia Skovgaard Hansen, Søren Pedersen


An employee could not be considered as an employee within the meaning of the Danish Salaried Employees Act and was therefore not entitled to salary during the notice period, compensation for having no employment contract or holiday pay.

The circumstances of the case

In March 2013, A drafted a Cooperation Agreement for the company, V. The purpose of the agreement was to set the framework for the parties' cooperation, including A's tasks, remuneration, etc.

According to the Cooperation Agreement, A's primary task was to attract goods for sale and to establish collaborations to increase the sales at V. A received a fixed, but low monthly salary and was in addition also paid a commission salary. A's salary would, however, be deducted in the commission statement.

Furthermore, the Cooperation Agreement stated that A should attend relevant meetings with V and that A was otherwise entitled to schedule his own working hours and the selection of customers and goods.

The parties agreed that V carried the risk for A's work and that A was paid directly to his bank account. A paid tax at source from the salary payments and it appeared from the paychecks that the salary was subject to holiday payment. The Cooperation Agreement could be terminated by both parties with one month's notice.

In 2017, V terminated the Cooperation Agreement with A. Subsequently, A claimed that he had been employed as a salaried employee and thus as an employee of V, and that A was therefore entitled to salary during his notice period (in accordance with The Danish Salaried Employees Act), was entitled to holiday pay and to compensation for lacking employment contract. V, on the other hand, argued that A should be regarded as self-employed under the Cooperation Agreement.

The distinction between being an employee and self-employed

The Danish Salaried Employees Act and the Danish Holidays Act only apply to employees. Employers are therefore only obliged to comply with the rules of the Danish Salaried Employees Act and the Danish Holiday Act, including to pay salary during the notice period and pay salary during holidays or holiday allowances, if an employee is covered by the term "employee". Additionally, it is only employees who are entitled to obtain an employment contract within 30 days of employment.

It depends on a specific assessment of the individual circumstances of the cooperation, whether or not a person will be considered as an employee.

In a Circular [1], The Danish Tax Authority has presented several criteria that can be used as a guideline for this assessment. To support the employee concept, emphasis can be placed whether the employer has a general right to exercise his/her management power, whether the employee has one or more sources of income, whether there is a right to notice of dismissal, whether the employee receives a regular salary, whether the salary is paid periodically and whether this is the employee's net income. To support the view of being self-employed, emphasis can be placed on whether he/she is self-managed, distribute and supervise his/hers own work, whether he/she is limited in his/hers access to work for others, whether he/she carries the risk of the performance of the work and whether the income depends primarily on your own performance.

The Court's comments

In the specific case, the High Court of Western Denmark stated that A should not be considered as an employee.

The High Court placed special emphasis on the fact that A had essentially drawn up the Cooperation Agreement himself, that A planned his working hours himself, that A only took one week holiday, and he also worked independently with the selection of costumers. Furthermore, A did not attend meetings and moreover rarely showed up at V's domicile. Furthermore, A was not covered for his expenses, just as the size of the commission payment which were depended on A's work performance.

Although A received a fixed salary which was paid as the "ordinary" employee’s salary and A also paid taxes thereof, and even though V bore the financial risk of the work and also partly had instructional powers over A, the High Court of Western Denmark ruled that this was not substantial enough to give A the employee status.

The High Court upheld the District court's judgement.

Bird & Bird's comments

It is essential to observe that the judgment supports the difficult distinction between when a person is considered as an employee or self-employed - and that it in each case still depends on a specific assessment. However, the judgment supports the fact that even more is needed before a person is considered as an employee, if both parties performs in accordance with a cooperation agreement (especially if it has been prepared by the "supplier" of the benefits).

It can have a significant financial importance if you mistakenly assume a person to be self-employed, when he was actually considered to be an employee. It is therefore important to consider the consequences thereof before entering into collaboration.

[1] Circular no. 129 of 4th July 1994

[2] Judgement from the Danish High Eastern Court of 21th June 2019, case number: BS-27273/2018