On 4 February 2026, two important arbitration awards were issued in industrial arbitration, which are fundamentally changing the understanding of the rules on overtime pay for part-time employees under the Industrial Collective Agreements and in the public sector. The arbitration awards establish that the previous practice, whereby part-time employees only receive overtime pay once they exceed the full-time norm, is in breach of the EU Part-Time Work Directive (Directive 97/81/EC).
The effect of these awards will most likely also be extended to part-time employees who are not covered by a collective agreement.
Background to the Awards
The EU Part-Time Work Directive and the accompanying framework agreement prohibit part-time employees from being treated less favourably than comparable full-time employees solely on the grounds of their part-time status, unless any difference in treatment can be objectively justified.
The arbitration awards from the industrial arbitration stem from two recent judgments of the Court of Justice of the European Union – the so-called Lufthansa judgment (2023) and the Dialysis judgment (2024) – both of which have clarified and tightened the interpretation of the Part-Time Work Directive. On the basis of these judgments, it was decided to establish a industrial arbitration tribunal to determine whether the practice under collective agreements is in breach of EU law.
What Was the Previous Legal Position?
The previous arrangement under collective agreements has for decades been structured such that part-time employees only became entitled to overtime pay once they exceeded the full-time norm – typically 37 hours per week. Hours in the interval between the agreed part-time norm and the full-time norm (the so-called “additional hours”) were paid at the ordinary hourly rate without any supplement, whilst full-time employees received an overtime supplement from the first hour beyond the full-time norm.
What Do the Awards Establish?
Both arbitration awards establish that this arrangement constitutes “less favourable treatment” in breach of the Part-Time Work Directive. The reasoning is that part-time employees work hours beyond their agreed working time without receiving an overtime supplement, whilst full-time employees receive an overtime supplement from the very first hour beyond the full-time norm. Part-time employees are therefore placed in a worse position than comparable full-time employees solely as a result of their part-time status.
Part-time employees covered by the Industrial Collective Agreement (in Danish: “Industriens Overenskomst”) and the Collective Agreement for Salaried Employees in the Industry (in Danish: “Industriens Funktionæroverenskomst”) will accordingly in future be entitled to an overtime supplement for hours beyond their individually agreed working time, regardless of whether those hours fall within the company’s normal working hours or below 37 hours per week – provided that comparable full-time employees exist at the company who would be entitled to an overtime supplement.
Part-time employees in the public sector will likewise be entitled to overtime compensation for hours in the interval between their part-time norm and the full-time norm, provided that full-time employees have the same entitlement. The awards further clarify that time off in lieu on a 1:1 basis for hours in this interval is in breach of the Directive if full-time employees’ overtime is compensated with time off in lieu at a higher rate (1:1.5 or 1:2).
From When Do the Changed Conditions Apply?
The arbitration awards establish that the effect of the EU interpretation in principle applies from the date of implementation of the Directive in Denmark. For the areas under the Industrial Collective Agreements (in Danish “Dansk Industri’s overenskomstområde”), this is 1 January 2001 (the parties’ implementation protocol), whilst for the municipal/regional area it is likewise 1 January 2001, and for the state sector it is 20 January 2000.
The arbitration awards do not expressly address the question of limitation, and it therefore remains unresolved to what extent claims for back pay may be raised.
Bird & Bird’s Comments
The arbitration awards of 4 February 2026 may have potentially far-reaching consequences for all employers with part-time employees – including employees who are not covered by a collective bargaining agreement. We therefore recommend that employers:
- Identify whether there are part-time employees, and if so, assess whether comparable full-time employees exist at the company.
- Assess whether part-time employees should in future receive an overtime supplement/time off in lieu for hours beyond their individually agreed working time. This is particularly relevant where comparable full-time employees receive overtime pay/supplements or time off in lieu.
- Ensure that employment contracts and/or pay policies are in accordance with the new interpretation of the rules.
As the awards do not address the question of limitation, we would further recommend carrying out an assessment of the risk of being met with a potential claim for back pay covering at least the past 5 years, which is the ordinary limitation period for employee claims.
We are monitoring developments and will provide ongoing updates with further information, including once the consequences for other collective agreement areas have been clarified.
For further information, please contact:
Søren Narv Pedersen, Partner, Bird & Bird
sorennarv.pedersen@twobirds.com
