Luxembourg: Employment & Labour Law (3rd edition)

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This country-specific Q&A provides an overview to employment laws and regulations that may occur in Luxembourg.

This Q&A is part of the global guide to Employment & Labour Law. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/employment-and-labour-law-3rd-edition/

  1. Does an employer need a reason in order to lawfully terminate an employment relationship? If so, describe what reasons are lawful in your jurisdiction?

    If an employment contract is terminated during a valid probationary period, then the employer need not provide any reasons.

    If an employment contract is terminated without notice for gross misconduct, the reasons must be explained in detail already in the termination letter.

    If an open-ended employment contract is terminated with notice, the reasons must be provided in writing if they are formally and validly requested by the employee.

    The reasons for termination are broadly based either on the company’s strategy (employee’s role made redundant further to a reorganisation, sale or shutdown) or on the employee’s behaviour or situation (poor performance, long term sick leave or other leave of absence, unfair competition, harassment, theft, etc.).

    If the employee was not protected by law against dismissal, courts control that the reasons are explained with sufficient detail so that the employee concerned knows exactly why his employment contract has been terminated. Courts also control that the reasons provided by the employer are sufficiently serious to justify a termination (as opposed to a mere disciplinary warning) and that the employer is able to prove said reasons.

  2. What, if any, additional considerations apply if large numbers of dismissals (redundancies) are planned?

    If collective redundancies are planned (triggered by legal thresholds) then the employer must first negotiate a social plan with the personnel representatives (and the unions if a collective bargaining agreement is applicable). The negotiations include the possibility to avoid or mitigate the number of redundancies planned.

    If the company should have had personnel representatives (again, triggered by legal thresholds) and does not when the collective redundancies are planned, then it must first organise the social elections to comply with the above.

    At the latest when the negotiations for a social plan start, the employer must provide the Employment Office and the personnel representatives (and unions, if applicable) with the reasons for planning the collective redundancies, the number and categories of employees impacted, the number and categories of employees on payroll, the period during which the redundancies are planned (if known), the selection criteria to determine the employees impacted and the calculation method for any extra-legal compensation or the reasons for not considering any such compensation.

    Usually the employee made redundant is faced with a choice: he may either choose the benefits of the social plan concluded (and waive his rights in a settlement agreement) or he may renounce them and request the reasons for his redundancy.

    In the latter case, the reasons to be provided must follow the general criteria of being specific, real and serious.

  3. What, if any, additional considerations apply if a worker’s employment is terminated in the context of a business sale?

    If the business sale qualifies as TUPE, then the termination of an employment contract on the basis of that sale is not allowed as all employment contracts assigned to that business must follow and be maintained with the buyer, even if the buyer was not properly informed by the vendor. The terms and conditions of employment include any collective bargaining agreement applicable until its term.

    If TUPE applies: before the business sale the employer (vendor and buyer) must inform their employees and personnel representatives of the planned business sale and the reasons for such business sale as well as the possible consequences of the business sale on the employees’ terms and conditions. The employer (vendor or buyer) planning the redundancies must first negotiate with the personnel representatives.

    However a termination for a reason that is not directly linked to the business sale is permitted by law.

  4. What, if any, is the minimum notice period to terminate employment?

    It depends again on the type of termination: a termination during the probationary period is of minimum fifteen days and of maximum one month whereas a termination without notice takes effect on the day it is validly notified to the employee.

    More generally, where the employment contract is terminated with notice, a legal notice of two months, four months or six months must be served by the employer unless a longer notice period is agreed to in the employment contract or the collective bargaining agreement applicable, if any. Collective bargaining agreements applicable in the banking or insurance sectors provide for longer notice periods in the case of redundancies.

    Beware that a legal severance pay also applies to employees with a minimum of five years’ length of continuous service.

  5. Is it possible to pay monies out to a worker to end the employment relationship instead of giving notice?

    Payment in lieu is not legal in Luxembourg: employers must (terminate the contract and) pay out the wages (and the social security premiums and taxes) every month, even if the employee is on garden leave.

    An employer may, however, conclude a ‘termination by mutual consent’ with the employee concerned and therefore mutually agree upon a payment and an (earlier) end date to the employment relationship.

  6. Can an employer require a worker to be on garden leave, that is, continue to employ and pay a worker during his notice period but require him to say at home and not participate in any work?

    Employers may (and often do) require an employee whose employment contract is terminated to stay at home: it may be decided at any time and communicated by any means, including email.

  7. Does an employer have to follow a prescribed procedure to achieve an effective termination of the employment relationship? If yes, describe the requirements of that procedure or procedures.

    An employment contract may be terminated by the employer with the employee’s consent or unilaterally with or without notice.

    Briefly the unilateral termination must be preceded by a preliminary meeting for large companies and followed by a registered termination letter including either a notice period or the reasons for not granting such a notice period.

    The termination by mutual consent must be drawn up in two original documents signed by the parties.

    Specific categories of employees are protected from the termination of their employment contract (see below).

  8. If the employer does not follow any prescribed procedure as described in response to question 7, what are the consequences for the employer?

    The employee may file a lawsuit to receive damages for either wrongful or unfair dismissal.
    If the employer does not comply with its obligation for a preliminary meeting (if any), the termination is deemed irregular and the employee wrongly dismissed is entitled to damages up to one month’s salary.

    If the employer does not provide the reasons for terminating the employment contract without notice for gross misconduct (or does not provide them with the required level of detail or provide reasons that do not qualify as gross misconduct), then the termination is deemed unfair by a court and the employee is entitled to the applicable notice period and severance pay, if any, and damages (financial damages and injury-to-feelings damages).

    In the case of a termination with notice, the employer must (if requested by the employee) provide in due time by registered mail the specific, serious and real reasons for dismissal. This is a crucial step for the employers as they may not fulfil that duty at a later stage: a termination with belated, vague or incomplete reasons is deemed unfair by courts. As a result the employee is entitled to damages (financial damages and injury-to-feelings damages).

    The employer may also be ordered by courts to reimburse part or all of the unemployment benefits paid by the relevant administration (in Luxembourg or abroad) to the employee unfairly dismissed.

  9. How, if at all, are collective agreements relevant to the termination of employment?

    Some collective bargaining agreements provide for specific provisions regarding the preliminary interview required for larger companies when they plan to terminate an employee’s contract.

    Some collective bargaining agreements provide for longer notice periods or higher severance pay (‘indemnités de départ’) in specific circumstances.

    Some collective bargaining agreements may include a prohibition to terminate the employment contract (for instance: redundancies are not allowed for a period of two years following a business sale or reorganisation in the banking sector or the insurance sector).

  10. Does the employer have to obtain the permission of or inform a third party (e.g local labour authorities or court) before being able to validly terminate the employment relationship? If yes, what are the sanctions for breach of this requirement?

    If the employer plans to terminate the employment contract of a personnel representative the court must be involved and first validate the reasons and allow the termination. Failing to comply results in either reinstating the personnel representative by order of the court (the termination being void) or paying the personnel representatives damages, including ‘specific damages for void termination of a personnel representative specifically protected’.

    If the employer plans collective redundancies, the unions are involved if there is a collective bargaining agreement applicable and in any case various administrations are involved (Employment Agency, Labour Inspectorate, sometimes National Conciliation Office or Ministry of Economy).

    By law the employees made redundant further to an irregular collective dismissal procedure (e.g. not involving the Employment Agency) may claim damages for unfair termination.

    Moreover, failing to comply with specific provisions of the procedure for collective redundancies makes the redundancies void.

    Where the termination is void by law, the courts must order that the employee dismissed is reinstated if s/he so wishes. By law, the employee dismissed may however opt for damages for unfair termination instead.

  11. What protection from discrimination or harassment are workers entitled to in respect of the termination of employment?

    An employee whose employment contract is terminated because s/he refused to be the victim of (or was a witness to) sexual harassment may request that the court declares such termination void.

    Where the termination is void by law, the courts must order that the employee dismissed is reinstated if s/he so wishes.

    A similar legal provision (and protection) applies for victims of discrimination based on religion or beliefs, disability, age, sexual orientation, nationality, race or ethnie (and their witnesses).

  12. What are the possible consequences for the employer if a worker has suffered discrimination or harassment in the context of termination of employment?

    A collective action may be triggered the unions in specific instances.

    If the employee resigned or was dismissed as victim or witness of sexual harassment, he may claim damages in court (and the payment of the notice period and severance pay applicable, if any).

    The court must also order that the employer reimburses the local or foreign administration that paid the employee unemployment benefits following that unfair dismissal (or justified resignation).

  13. Are any categories of worker (for example, fixed-term workers or workers on family leave) entitled to specific protection, other than protection from discrimination or harassment, on the termination of employment?

    In principle fixed-term contracts may be terminated before their term only for gross misconduct.

    Pregnant employees are protected and may either request the nullity of their termination (and their reinstatement) or they may claim damages for unfair termination.

    Employees on parental leave may request the nullity of their termination (and subsequent reinstatement in the company).

    Personnel representatives are protected and may either request the nullity (and reinstatement) or specific damages for their termination.

    Employees on sick leave are protected from termination (with or even without notice) for a period of 26 weeks of continuous leave: otherwise their termination is deemed unfair and they are entitled to damages.

    Employees benefiting from internal redeployment are protected from termination with notice for a period of twelve months as of the decision of the administration granting the redeployment and may request that the court order their reinstatement for void termination.

    Specific whistleblowers are protected against termination: their termination is deemed void.

  14. Are workers who have made disclosures in the public interest (whistleblowers) entitled to any special protection from termination of employment?

    Employees who protested against an act who they thought in good faith that it was illegal are protected against termination: their termination is deemed void.

    Where the termination is void by law, the courts must order that the employee dismissed is reinstated if s/he so wishes. By law, the employee dismissed may however opt for damages for unfair termination instead.

    However the illegal activities seem to be limited to: vested interests, corruption and undue influence as characterised in the criminal code.

    It does not seem to offer a protection similar to that described in the case law of the European Court of Human Rights.

  15. What financial compensation is required under law or custom to terminate the employment relationship? How do employers usually decide how much compensation is to be paid?

    Employers must pay a (legal or contractual) notice period and severance pay. The size of the extra-legal compensation, if any, depends on various factors, such as the length of the notice period granted, whether or not garden leave was granted, the age and position of the employee, the buoyancy of the market, etc.

  16. Can an employer reach agreement with a worker on the termination of employment in which the employee validly waives his rights in return for a payment? If yes, describe any limitations that apply.

    An employer may conclude a settlement agreement with an employee whose employment contract is terminated. To be valid the settlement agreement must include reciprocal concessions. For instance, employers may no longer grant garden leave as a concession for which the employees will waive their rights in return. The payment must therefore be extra-legal and sizeable. There are also formal conditions to comply with.

  17. Is it possible to restrict a worker from working for competitors after the termination of employment? If yes, describe any relevant requirements or limitations.

    A contractual non-competition clause as per the Luxembourg labour code is of little use: the employee (whose annual wages exceed a threshold at the end of his employment) agrees to not run a personal undertaking including activities similar to that of his former employer on the territory of the Grand Duchy of Luxembourg for a period of twelve months following the end of the employment contract with that former employer.

    Contractual clauses on non sollicitation or poaching of clients and colleagues are however common and usually provide for financial sanctions.

    Whether or not there is a contractual non-competition clause, unfair competition law applies.

  18. Can an employer require a worker to keep information relating to the employer confidential after the termination of employment?

    Very often clauses in the employment contract include such a contractual obligation for employees to keep information relating to the employer confidential (especially on clients or billing arrangements). Some employees are also bound by a legal secrecy obligation.

  19. Are employers obliged to provide references to new employers if these are requested?

    There is no legal provision, according to which employers must provide references to new employers. Employers must, however:

    • refrain from issuing negative statements about their former employees and
    • provide their employees with an ‘employment certificate’ if they so wish. That employment certificate merely indicates the start date, end date and positions held in the company.
  20. What, in your opinion, are the most common difficulties faced by employers in your jurisdiction when terminating employment and how do you consider employers can mitigate these?

    Employees are more and more aware of their rights, the law pitfalls and the case law swings. The rules are becoming more and more complex with local law intertwined with GDPR as well as ECJ and ECHR case law. Employers are well advised to seek counsel when planning dismissals!

    Regarding collective redundancies, the most common difficulty often lies with the unions: the employer may mitigate that risk by ensuring a continuous implication of (and dialogue with) its personnel representatives throughout the years.

  21. Are any legal changes planned that are likely to impact on the way employers in your jurisdiction approach termination of employment? If so, please describe what impact you foresee from such changes and how employers can prepare for them?

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