On 2 October 2024, a bill was presented proposing amendments to the Act on the Posting of Employees, etc. and the Aliens Act. The bill will lead to tightening of the requirements for posting foreign employees in Denmark, if adopted the new rules will apply from 1 January 2025. The bill implements a political agreement from 23 May 2024, which aims to strengthen efforts against social dumping and illegal labour.
This article explores a foreign company’s obligation pursuant to current law and the proposed amendments.
Obligation to notify the Register of Foreign Service Providers (RUT)
Currently foreign companies posting employees to Denmark to provide services are obliged to notify the Register of Foreign Service Providers (RUT-register).
Genuinely self-employed service providers are only obliged to register in RUT if they provide services in the sectors of building and construction or installation and repair of machinery and equipment.
The notification duty also applies to foreign companies that, when performing work in Denmark, provide services without the conditions for posting being met, cf. section 7a(2) of the Posting of Workers Act, which includes, for example, employees if the service provider is not genuinely established or has real activities in the country of establishment and is thus not covered by the posting rules. The purpose of this is to ensure that the authorities have the opportunity to check that foreign companies that are not posting companies comply with Danish legislation on the exercise of business in Denmark. The notification requirements pursuant to subsection (2) are identical to the notification requirements pursuant to subsection (1), and the two categories of employees are treated equally in the Act in general.
It is the Danish Working Environment Authority that decides on a foreign company’s actual establishment in the company’s country of establishment on the basis of an overall assessment of the factual elements that characterize the activities that a company carries out over a long period of time in the country of establishment.
In this context, emphasis may be placed on the place where the undertaking has its registered office, where the administration is located and where offices are used, tax and social security contributions are paid, the place where the posted staff are recruited and from where they are posted, the legislation applicable to the contracts which the undertaking concludes with its employees and with its customers, and the place where the company carries out its main business activities and where it employs administrative staff.
In this connection, reference is made to Executive Order no. 133 of 31 January 2017 on the Danish Working Environment Authority’s investigation of the actual establishment of foreign companies.
Companies both within and outside the EU are covered by the notification obligation
The duty to notify the RUT register applies both to companies established in and outside the EU that temporarily post third-country nationals as part of the provision of services in Denmark.
Companies established in the EU can make use of the right to freedom to provide services, which is enshrined in Article 56 TFEU and is supplemented by the case-law of the Court of Justice of the European Union in this area.
As a consequence of the rules on freedom to provide services, a service provider established in an EU Member State has the right to post its employees in connection with the service provider providing a service in another Member State, including Denmark, without the need for a residence and work permit in this connection. The right of a service provider to post its staff in the context of the provision of a service applies regardless of the nationality of the employees. Thus, on the basis of a posting, a third-country national has a right to stay and work while performing a specific task. The right derives from the right of the employer of the third-country national to provide services in another Member State. The right of residence and work is limited to the provision of a service in cases where the freedom to provide services is exercised by an undertaking established in the EU. This means, for example, that the third-country national cannot remain in the EU country to which the third-country national has been posted after the service has been provided.
What information is provided today?
The notification to RUT must be made no later than at the same time as the work is started in Denmark. For each service, a number of information must be reported, including:
Tightening of the registration requirements in the RUT register
The proposed bill will lead to a significant tightening of the registration requirements for foreign employers who post third-country nationals for the purpose of providing services in Denmark.
The bill proposes that as of 1 January 2025, additional requirements be introduced for the information that must be reported in RUT. This includes a requirement to upload copies of the service contract, employment contracts and residence and work permits for the posting of third-country nationals. Such a requirement will support the authorities’ enforcement of the rules on legal residence in Denmark for posted third-country nationals.
As such, the bill does not distinguish between whether the third-country national is posted by a company outside or within the EU. As the bill is worded, the additional requirements will apply to third-country nationals posted by companies outside the EU, but they will also apply to third-country nationals posted by companies within the EU, with the exception of the requirement to upload a copy of a Danish residence and work permit, as this is derived from the company’s right to freedom to provide services. Companies within the EU will instead have to upload copies of valid residence and work permits in the EU country from which the employee is posted.
The service provision agreement is the agreement entered into between the service provider and the Danish principal, which forms the basis for one or more employees being posted to Denmark. The service agreement will be able to contribute to the authorities’ assessment of whether there is a genuine posting from another EU country to Denmark in connection with the provision of a service.
The employment contract and residence and work permits are intended to help clarify who the third-country national is the employer and whether he or she has the necessary residence and work permit in the EU country from which he or she is posted. For example, if an Indian is employed by a German company and is posted to Denmark, the German company must upload a copy of the Indian employee’s valid residence and work permit in Germany. In this example, it is not necessary for the Indian employee to apply for a residence and work permit in Denmark, as this is derived from the German company’s right to freedom to provide services.
The requirement to upload the employment contract will be able to support the work of the Danish Working Environment Authority in cases where there are problems with clarifying who is the responsible employer under the Working Environment Act.
The requirements apply to everyone who is already covered by the registration obligation in RUT, and thus supplement the current requirements for registration in RUT. However, the supplementary registration requirements only apply if the employer/service provider posts third-country nationals (employees with citizenship of a country outside the EU/EEA and Switzerland in connection with their work in Denmark).
As today, the new supplementary registration requirements will have to be met at the latest at the same time as the work is initiated in Denmark.
Presentation of identification to the Danish Working Environment Authority
In addition, the bill proposes that it shall be the responsibility of the service provider/employer to ensure that posted employees can present valid identification to the Danish Working Environment Authority. The requirement also applies to the service provider itself, including where it is self-employed, provided that it is a natural person.
The service provider is already liable in relation to a number of obligations to the authorities and can, in its role as employer, ensure that valid identification is available from the employees. However, it is still the employee himself who must be in possession of the ID.
Valid identification can be available in the form of a passport, driver’s license or health card. For foreign employees, visas, ID cards or residence cards may also be possible forms of valid identification, provided that they are issued by a public authority and that the Danish Working Environment Authority assesses the documents suitable as identification.
If the identification shows that the person in question is a third-country national, the Danish Working Environment Authority will be able to find the work permit in the RUT register, cf. the main purpose of the bill.
It is not proposed that all employers should ensure that employees in the company can present valid identification. It will only be an obligation for foreign service providers who post employees to Denmark covered by the notification obligations of the Posting of Workers Act.
Presentation of identification to SIRI
Finally, the bill proposes that the Danish Agency for International Recruitment and Integration (SIRI) should be able to request the persons who are assessed to be performing work in the company in connection with its own inspections to present valid identification.
It will depend on the Agency’s specific assessment based on observations during an inspection visit which persons it will be relevant for SIRI to request to identify themselves.
Valid identification is, for example, passport, driver’s license, health card. For foreign employees, visas, ID cards or residence cards may also constitute valid identification, provided that they have been issued by a public authority and that SIRI assesses the documents suitable as identification.
The purpose of this amendment is to give SIRI a better opportunity to determine whether a person has a residence and work permit issued by SIRI, and thus to check that the conditions for the residence and work permit are met, and whether there are, for example, foreign nationals working at the company on the basis of a residence and work permit issued with the intention of working for another company.
Fine for failure to comply with the registration obligation
Failure to report, incorrect or incomplete information or exceeding the deadline for registration in the RUT register can be punished with a fine.
The level of fines for breach of the duty to report to RUT is normally DKK 10,000. The penalty is doubled to DKK 20,000 in the case of violations of a more serious nature, for example in the case of repeated offences.
The Danish Working Environment Authority will be able to issue orders for the upload of the service agreement, employment contracts and residence and work permits. If the order is not complied with, the Danish Working Environment Authority will notify the police, who may bring charges of illegal residence and work.
Consequences of lack of residence and work permits
If a third-country national is staying illegally and/or working illegally in Denmark, the Immigration Service can make a decision on administrative expulsion and issue an entry ban.
The Immigration Service has so far followed a practice where they in the event of illegal stay/illegal work in Denmark administratively expel the employee in question, and set an entry ban of 2 years to the entire Schengen area. This is a relatively harsh sanction, and there will probably be specific situations where it would be too far-reaching.
Decisions on administrative expulsion made by the Immigration Service can be appealed to the Immigration Appeals Board.
Fine for failure to present identification to the Danish Working Environment Authority
If the service provider/employer or employees cannot present valid identification to the Danish Working Environment Authority, the authorities may order the company to rectify the situation within a deadline. If the order is not complied with, the company can be punished with a fine.
The employee will not receive an order or be punished with a fine if the employee does not present identification upon request, as the proposed provisions on this are targeted at the company and not the employee himself.
Failure to present identification to SIRI
If SIRI finds that a person is working in violation of a residence and work permit issued by SIRI, SIRI will assess whether the permit should be revoked and whether the employee and/or employer should be reported to the police.
If SIRI suspects that work is being done without the necessary work permit, e.g. in violation of the rules for posting, or in violation of a residence permit issued in accordance with rules administered by other authorities, SIRI will notify the relevant authorities and will generally advise the employee and employer about the rules for work permits in Denmark.
If a person does not present valid identification during an inspection, SIRI will, depending on the circumstances, notify the relevant authorities, e.g. the European Commission. The Working Environment Authority or the police.
Further progress of the bill
The bill will be given its first reading in the Danish Parliament on 24 October 2024. Mette Klingsten Law Firm follows developments and will provide regular updates.
The bill can be read here.
Thanks to the following contributors to the website: Steen Evald (photograph), Stine Heilmann (photograph), Count Pictures (video), Kunde & Co. A/S (design), WeCode A/S (coding)
