Court orders state to pay nearly seven million kroner over unlawful dismissal
Wednesday 14th October 2026 on 23:15 in
Iceland
Iceland’s Court of Appeal has ordered the state to pay a former division manager at Iceland Health Insurance 2,546,500 kroner in damages, plus default interest, after ruling that her dismissal was unlawful. The state must also pay 4.5 million kroner in legal costs, mbl.is reported.
The court rejected her separate claim for two million kroner in compensation for non-financial harm. A district court had previously dismissed all her claims.
The woman was among 14 employees dismissed on September 29, 2020, as part of organisational changes that took effect on January 1, 2021. She had worked at the agency since 2006, first as a specialist in its pharmaceutical division and later as a division manager with staff responsibilities.
Soon after her dismissal, she signed a contract for a specialist position at the same agency. The new job began after her notice period and paid less than her previous role. The Court of Appeal found that her loss consisted of the lower wages during the period covered by her damages claim.
The dispute centred on whether five board members should count as employees when determining whether the dismissals met the legal threshold for collective redundancies. The threshold in the case required at least 10 per cent of the workforce to be dismissed within 30 days at an employer with at least 100 but fewer than 300 employees.
The district court counted the board members, putting the workforce at 143 and the 14 dismissals below the threshold. The Court of Appeal ruled that the five members, who had been appointed by the health minister for fixed terms and were independent of the agency director’s authority, should not count as employees for this purpose. Counting them, the court said, would weaken the protections collective redundancy rules are meant to provide.
The appeal court concluded that the 14 dismissals represented 10 per cent of the agency’s 138 employees. The agency was therefore required to notify the Directorate of Labour and hold the consultation required by law before carrying out the dismissals. It did neither.
Both courts considered an advisory opinion from the EFTA Court, but reached different conclusions about the board members’ status.