I INTRODUCTION

Luxembourg employment law is mainly based on:

  • a EU regulations;
  • b the Labour Code;
  • c special laws;
  • d grand-ducal regulations implementing provisions of special laws;
  • e agreements declared generally binding by grand-ducal regulations;
  • f case law;
  • g collective bargaining agreements and agreements resulting from multi-industrial social dialogues; and
  • h custom and practices that may be relied on in specific cases.

The labour courts are competent to hear disputes between employers and employees. An employee can sue his or her employer in the court of the employer’s registered seat or where the employee habitually carries out his or her work. An employer may bring proceedings against an employee in the court where the employee is domiciled.

Actions are brought by way of a petition that the plaintiff must submit to the court, indicating:

  • a the name of the parties;
  • b the purpose of the legal action;
  • c the points of contention; and
  • d any arguments.

The parties will then be summoned to appear before the court. After the first hearing, the court will schedule a second hearing, during which the parties will set out their respective arguments. After examining the case, the court will issue its judgment. It typically takes between eight months and 18 months for a court to reach a first-instance decision.

Either party can appeal a labour court judgment within 40 days of the date on which the judgment is notified to the parties. Appeals are lodged with the court of appeal and will be sent to the chamber examining labour matters. The matter will be instructed in writing by the judge appointed to this effect, at which point the parties will be invited to a final hearing, during which they will present their arguments. After examining the case, the court of appeal will issue its judgment.

At the apex of the judicial pyramid stands the Court of Cassation. Its main function is to review decisions of the courts of appeal and certain other decisions that are not subject to any further appeal. Review by the Court of Cassation is restricted to questions of law. In case of reversal, the court must remand the case for further proceedings.

The following institutions and government agencies assist in the administration or oversight of employment law:

  • a The Labour and Mines Inspectorate is in charge of monitoring standards of health and safety for employees in all sectors of industry and ensuring the implementation of the legislation relating to the working conditions (wages, working hours and holidays), employment of children and teenagers, equal treatment of men and women, as well as protection against sexual harassment in the workplace. The Labour and Mines Inspectorate is also in charge of monitoring the election of employee representatives and responsible for the prevention and resolution of disputes that do not fall within the competence of the National Conciliation Body.
  • b The Employment Administration, whose main role is to register unemployed persons as job seekers and to seek work for them.
  • c The National Conciliation Body, which is in charge of preventing or resolving collective labour disputes.

II YEAR IN REVIEW

Work–life balance is a concept that is becoming increasingly recognised and implemented in Luxembourg – in particular, it has been supported by a recent law that reforms parental leave. The new law, which entered into force on 1 December 2016, introduces four new types of parental leave with the aim of encouraging both parents to benefit from these provisions.

On 2 February 2016, the European Commission and the United States reached an agreement on a new framework for transatlantic data flows. This EU–US privacy shield will replace the Safe Harbor framework that was invalidated by the Schrems ruling rendered by the European Court of the European Union.

On 26 July 2016, a draft bill on the implementation of the 2017 tax reform package provides for, among others, certain measures on the individual taxation (amendments to the progressive income tax rate schedule, abolition of the temporary equalisation tax and other tax measures, such as incentives in respect of social housing, increase in tax credits for employees and independent workers, etc.), which will have an impact on employees.

III SIGNIFICANT CASES

Under Luxembourg labour law, the key differences between senior executives and ordinary employees pertain to their remuneration, their responsibilities, and their freedom and flexibility to organise their work and the absence of constraints in their working time. Each of the criteria is assessed on a case-by-case basis.

During April 2016, the Court of Appeal’s employment section issued three decisions through which the judges had to make a comparison between the annual gross salary of the employees concerned (which in that specific case included the gross monthly bonus increased by a monthly bonus, and the monthly benefit in kind in respect of a company car, as well as the 13-month salary) with the annual gross salary of an employee who was part of the best-paid category of the collective bargaining agreement (which in that specific case included the annual gross salary increased by the 13-month salary, a bonus and a conjuncture allowance) to ascertain whether or not the employees concerned were senior executives. Judges in the Court of Appeal analysed whether the salaries of the employees concerned were significantly higher than that of an employee who is entitled to the highest amount of remuneration according the applicable collective bargaining agreement.

IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP

i Employment relationship

Employment relationships are essentially characterised through a legal link of subordination between the employer and employee. The employee must perform his or her duties under the authority and instruction of his or her employer. The employment relationship relies on:

  • a the provision and performance of effective work or services;
  • b compensation granted for the performance of work;
  • c the subordination of the employee to the employer; and
  • d the employer’s powers of direction and control over the employee.

A written employment contract is required regardless of whether the employment is entered into for an indefinite term or for a definite term. Employment contracts must be executed in writing and signed no later than the date on which work commences.

Fixed-term employment contracts are permitted in certain circumstances. They may not be renewed more than twice and may not exceed a total period of 24 months, renewals included.

Employment contracts must contain the following minimum requirements:

  • a the names of the parties;
  • b the employee’s start date;
  • c the place of performance of work;
  • d the employee’s function;
  • e the employee’s daily or weekly standard hours;
  • f the employee’s working schedule;
  • g the employee’s remuneration, including any benefits;
  • h paid holidays;
  • i the length of the employee’s notice period upon termination;
  • j the length of the employee’s probationary period, if any;
  • k any supplementary provisions;
  • l reference to the collective agreement, if any; and
  • m reference to the pension scheme, if any.

Additional implied terms should be inserted in employment contracts for part-time and fixed-term employment.

If there is no written employment contract, the employment relationship is deemed as valid. However, in case of dispute between the employer and the employee, the terms and conditions of employment may be brought in as evidence by the employee through any means.

Any substantial amendment to an employment contract that is detrimental to the employee will be deemed as a substantial modification to the terms and conditions of employment. Under Luxembourg law, employers may impose essential modifications to the detriment of an employee for real and serious reasons. The procedure to be followed is similar to that relating to dismissals (e.g., in terms of notification, notice periods, requests for grounds and the obligation to communicate the reasons for the substantial amendment).

Non-substantial amendments to an employment contract can be implemented through a written amendment to the existing employment contract and must be signed by both parties.

ii Probationary periods

Probationary periods are allowed, provided that a specific clause is inserted in the employment contract in this respect. The length of the probationary period depends on the employee’s qualifications and salary, and cannot be extended. Probationary periods may be for between two weeks and 12 months.

During the probationary period, each party may terminate the employment relationship by giving notice and without providing a reason. Termination may not occur during the first two weeks of the probationary period, save for gross misconduct.

The length of the notice period during the probationary period shall depend on whether such a probationary period is expressed in weeks or in months. If expressed in weeks, the length of the notice period shall be equal to one day per week. If expressed in months, the length of the notice period shall be equal to four days per month, with a minimum of 15 days and a maximum of one month.

iii Establishing a presence

According to the Law of 2 September 2011 (the Business Licence Law) a written authorisation from the Ministry of Economy, Section of Middle Classes and Tourism (the Ministry) is required in order to carry out commercial, industrial or craft activities and certain independent professions. This authorisation is typically referred to as a ‘business licence’ and is compulsory both for individuals and legal entities performing the above activities. The purpose behind the business licence is to ensure that commercial businesses are adequately managed and avoid unqualified and inexperienced persons setting up badly managed businesses.

Commercial activity is defined as ‘all the economic activities which involve performing commercial acts within the meaning of the Commercial Code’; such activity includes, for example, sales of goods.

However, the Ministry exempts certain types of activity from the business licence requirement (e.g., ‘one-off’ transactions, financing activities by holding companies and transactions within a group of companies).

The Business Licence Law also requires each commercial company to have an appropriate establishment in Luxembourg from which the company’s activities are permanently and effectively managed. The establishment must be suitable for the company’s activities and must have sufficient infrastructure for the performance of these activities.

A Business Licence is not required for companies established within the territory of the European Union that perform services within Luxembourg occasionally or temporarily.

Companies wishing to perform activities in Luxembourg on a permanent basis that are established in one of the Member States and whose activities are exempted activities under the Business Licence Law, or other applicable laws, may hire employees. They may also engage independent contractors.

An independent contractor may, under certain circumstances and depending on the provisions of the applicable convention for the avoidance of double taxation between Luxembourg and the country where the foreign company is established, create a permanent establishment of the company. The Luxembourg domestic tax law follows OECD model convention principles in this respect and refers to the concept of a permanent representative (i.e., an agent or employee who allows the company to carry on an activity in Luxembourg and who acts in lieu of the company that he or she represents).

In principle, under most of the conventions for the avoidance of double taxation, the existence of a permanent establishment requires a fixed place of work through which the company carries out its business. One of the key characteristics of an independent contractor is the authority to conclude contracts in the name of the company. In this respect, the decisive factor from a Luxembourg tax perspective is not the power of signature but rather to know if the representative or employee binds the company by confirming a deal.

If the existence of a permanent establishment is recognised under a specific convention from a Luxembourg point of view, the profits and wealth attributable to the permanent establishment may be subject to taxation in Luxembourg.

Apart from the monthly remuneration, and any additional benefits in kind agreed upon between the company and the employees, there are no specific statutory benefits to be granted to employees. The company will have the obligation to register with the social security administration and deduct from the monthly remuneration social security contributions if the employees are subject to the Luxembourg mandatory state social security regime. It will also have to withhold tax from the monthly remuneration of the employees and pass on the withheld amount to the Luxembourg tax administration.

V RESTRICTIVE COVENANTS

Non-compete clauses are regulated by the Labour Code. In accordance with Article L.125-8 of the Labour Code, in order to be valid, a non-compete clause must fulfil the following conditions:

  • a it must be in writing;
  • b it must apply only to employees who go on to run their own company after leaving their employer;
  • c the employee signing the employment contract or any modification containing a non-compete clause must be at least 18 years old;
  • d the employee must earn an annual salary of at least €54,163.45 (value based on Index 794.54)2 on the day that the employee leaves the company;
  • e it must refer to a specific professional sector and professional activities that are similar to those performed for the former employer;
  • f it must be limited to 12 months, beginning on the day that the employee’s employment contract ends; and
  • g it must be limited geographically to Luxembourg.

VI WAGES

i Working time

The normal working time is eight hours per day and 40 hours per week. The normal duration of work may be extended to a maximum of 10 hours per day and 48 hours per week, including overtime. Employees should be provided with a reasonable period for meals. Duty-free meal periods need not be paid. Employees must take a 30-minute break after every six working hours. Further, employees must rest for at least 11 consecutive hours over each 24-hour period.

Work at night is work carried out between 10pm and 6am. It is generally permitted, but is limited to an average of eight hours per 24 hours over a period of seven days. Night work is prohibited for adolescents during a period of 12 consecutive hours, between 8pm and 6am unless duly authorised by the Labour Minister. Pregnant women and women breastfeeding their children, up until the child’s first birthday, may refuse to work at night.

ii Overtime

Generally, overtime must be paid for hours worked in excess of 40 hours per working week. Since the introduction of new provisions in the Labour Code, overtime is limited to specific circumstances. Overtime will either be compensated with time off or be recorded in a savings account provided for by a collective agreement or an arrangement between social partners. If time off cannot be granted, overtime pay will be calculated at a rate of 140 per cent of the employee’s regular rate of pay.

Exemptions to the regulations on working hours are provided for certain sectors (e.g., home carers, agriculture, hotels and catering, healthcare and goods transport). Further, the regulations on working hours do not apply to:

  • a river transport firms;
  • b fairground establishments;
  • c family-run enterprises;
  • d teleworkers;
  • e salespersons performing their activity outside the employer’s premises; and
  • f senior executives.

VII FOREIGN WORKERS

There is no specific provision that employers must keep a register of foreign workers. In principle, employers must keep a register for their employees (whether foreigners or not) in respect of the overtime work and work on Sundays and legal holidays.

No express limitation on the number of foreign workers a company must have is provided for under Luxembourg law. However, employers must, under penalty of a fine, advertise all vacant positions before hiring a worker. This may be considered as a restriction as the Employment Administration may argue that it has found suitable candidates for the job offer as declared. Moreover, the Employment Administration imposes certain restrictions with regard to non-EU workers: the employer would be able to hire a non-EU worker only after the Employment Administration had a reasonable time frame to find a worker residing in Luxembourg who might correspond to the candidate researched by such employer and had issued a certificate.

In order to work legally in Luxembourg, a person must hold a temporary residence permit with the right to work. Luxembourg law on immigration makes a distinction between EU citizens and third-country nationals. EU citizens, Swiss citizens and European Economic Area (EEA) citizens may freely perform work in the Luxembourg territory. They only need a valid passport or national identity card. For administrative purposes, EU/EEA and Swiss citizens must declare their arrival within eight days of entry into the country. Subsequently, if they wish to stay in Luxembourg for a period exceeding three months, they shall request within three months of arrival the issuance of a registration certificate, available at the town hall of their chosen place of residency.

Non-EU/EEA/Swiss citizens should obtain a residence permit for their employment in Luxembourg. Such residence authorisation is not necessary if they are a family member of an EU citizen already living in Luxembourg. The residence permit is valid for a certain period of time, and may be renewed if the legal requirements are satisfied. The residence permit is only granted if the employment of the foreign nationals does not harm the priority of employment benefiting certain employees pursuant to national and European legislation. Such authorisation must also serve the economic interests of Luxembourg and the employee shall have the required professional qualifications for the position.

Foreign workers duly authorised to work in Luxembourg benefit from the same protection that local employees are entitled to under the legal provisions.

VIII GLOBAL POLICIES

Under Luxembourg law, there is no express requirement to have internal discipline rules within a company. The text of, or an amendment to, the internal discipline rules cannot be adopted by the employer before it has been submitted to the employees’ representatives, if any. The internal rules may only contain those disciplinary rules that are necessary to allow the coexistence of all employees and the proper performance of their work. The internal discipline rules must also be proportionate and in compliance with the Luxembourg legal provisions. The text of, or an amendment to, the internal discipline rules must be drafted into a language that is understood by the employees. In order to be enforceable against the employees, the internal discipline rules must expressly mention the date on which they will enter into effect and should have been notified to all employees. An express acknowledgment by the employees of the internal discipline rules should be sought by the employer to prove that the employees had knowledge of their content and the sanctions listed therein. They may be attached to the employment contract in case of a new hire.

IX TRANSLATION

Luxembourg has three official languages: French, German and Luxembourgish. There are no mandatory rules as to the specific language to be used in employment contracts. Parties may draft the employment contract in the language understood by them and specifically by the employee, who should be able to read and understand the terms and conditions of his or her employment contract.

In the event of court action, parties might be required to provide the court with a translation of the employment contract in one of the official languages. English versions are, in principle, accepted.

X EMPLOYEE REPRESENTATION

Employee representatives must be elected in companies employing at least 15 employees during the 12 consecutive months preceding the first day of the month of publication of the upcoming election.

The number of employee representatives depends on the employee headcount. Depending on the number of employee representatives, a certain number of alternates must be elected. The employee representatives are elected for five years and may be re-elected. The new elections will, in principle, take place in 2018.

The employee representatives’ role is to preserve and defend employees’ interests in respect of employment conditions, health and safety, and social position. Their duty is also to prevent and resolve any individual or collective disputes as well as to put forward to the employer individual or collective claims and the application of the provisions of employment law and collective agreements.

A new law concerning the reform of the social dialogue, which entered into force on 1 January 2016, (the New Law) abolished works councils (works councils were, under the old provisions, established in companies employing at least 150 employees). All the competencies of the works council will be taken over by employee representatives in companies hiring at least 150 employees.

Any company employing at least 150 employees is required to hold a monthly meeting with employee representatives. Companies employing fewer than 150 employees are required to hold at least three meetings per year with employee representatives.

Employee representatives may meet once a month during the working hours by giving notice of at least five working days to the management of the company, unless a shorter notice has been agreed upon. They must hold meetings at least six times a year.

Employee representatives enjoy protection from dismissal. The New Law amended certain provisions related to the protection regime of employee representatives. Employee representatives will, upon their dismissal, be able either to request the voidance of their dismissal and ask for their reinstatement (this option was already foreseen through the former statutory provisions) or claim compensation for damages for unfair dismissal, which is the new alternative employee representatives have in the event of dismissal.

XI DATA PROTECTION

i Requirements for registration

The Law of 2 August 2002 on the protection of persons with regard to the processing of personal data, as amended, (the 2002 Law) does not require the data controller to register with the Luxembourg Data Protection Authority (CNPD), but requires the data controller to notify each processing of personal data. It may, therefore, be necessary for one data controller to lodge several notifications. The notification is mandatory, unless the processing is exempt from the obligation to notify.

The following are, among others, exempt from notification:

  • a The processing of data relating exclusively to personal data necessary for the administration of the salaries of persons in the service of or working for the controller, inasmuch as this data is used exclusively for the said administration of salaries and is only communicated to such persons as are entitled.
  • b The processing of data relating exclusively to the management of applications and recruitments and the administration of the staff in the service of or working for the controller. The processing may not cover data on the health of the data subject, or sensitive or legal data and may not be communicated to third parties, except in the context of application of a provision of law or regulation, or if they are essential to achieving the objectives of the processing.

The monitoring of the employees requires an authorisation from the CNPD for such processing of personal data. It is worth mentioning that a draft law that shall suppress this obligation is currently being discussed.

It is important to identify the personal information being processed, as this will determine the scope of obligations of the data controller. The data subject has the right of access to his or her personal data and the right to rectify it.

The data controller must supply the data subject, no later than the date at which the data are collected and regardless of the type of media used, with the following information:

  • a the identity of the controller and of his or her representative, if any;
  • b the purpose or purposes of the processing for which the data are intended;
  • c the recipients or categories of recipients to whom the data might be disclosed;
  • d whether answering the questions is compulsory or voluntary, as well as the possible consequences of failure to answer; and
  • e the existence of the right of access to his or her personal data and the right to rectify it.

Depending on the type of data processed, the consent of the employee may not be required.

The data controller shall ensure that personal data is processed in a fair and lawful manner, and notably that personal data is collected for specified, explicit and legitimate purposes and not further processed in a way that is incompatible with those purposes. The data controller shall also protect personal data against unauthorised dissemination or access. The personnel processing personal data shall be trained to process such data in a lawful way. The company must limit access to personal data which is processed.

The data controller must implement all appropriate technical and organisational measures to ensure the protection of personal data against accidental or unlawful destruction or accidental loss, falsification, unauthorised dissemination or access, in particular where the processing involves the transmission of data over a network, and against all other unlawful forms of processing.

ii Cross-border data transfers

If personal data is transferred to an EU country or a country that provides an adequate level of protection of personal data, the data controller is obliged to notify such processing, unless the processing is exempt from notification. If personal data is transferred to a country that does not provide an adequate level of protection of personal data, the data controller has to seek authorisation from the CNPD.

The data controller must supply the data subject with the information about the recipients or categories of recipients to whom the data might be disclosed. If these recipients are established outside Luxembourg, this should also be indicated.

A joint-user agreement is sufficient if an individual understands standard contractual clauses. However, under Luxembourg law, it is necessary to obtain authorisation for transfer of personal data on such basis. This is currently a lengthy process. A draft law that would suppress this obligation is currently being discussed.

Safe harbour was invalidated by the decision of the Court of Justice of the European Union in the Schrems case, C-362/14. The privacy shield that replaced safe harbour has its own requirements under which entities established in the United States can certify their processing of personal data. The privacy shield can currently be used to transfer personal data to the United States.

Personal data shall be collected for specified, explicit and legitimate purposes and not further processed in a way that is incompatible with those purposes. The possibility of an onward transfer of personal data is, therefore, limited. The data controller may, for example, wish to transfer personal data to a processor, who will execute the processing of personal data on its behalf. The data controller must choose a processor that provides sufficient guarantees with regard to the technical and organisational security measures pertaining to the processing to be carried out. It is up to the data controller as well as the processor to ensure that the said measures are respected. The data controller remains responsible for the processing of personal data by the processor.

Any processing carried out on behalf of the data controller must be governed by a written contract or legal instrument binding the processor to the data controller and providing, in particular, that:

  • a the processor will act only upon instructions from the data controller; and
  • b the obligations to implement all appropriate technical and organisational measures to ensure the protection of the personal data will also be incumbent on the sub-contractor.
iii Sensitive data

Sensitive data is personal data that reveals racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, or concerns health or sex life, including genetic data.

It is, in principle, forbidden to process sensitive personal data. The 2002 Law authorises the processing of sensitive personal data if it is necessary for the purposes of carrying out the obligations and specific rights of the data controller in the field of employment law insofar as it is authorised by law.

iv Background checks

Background checks are allowed, provided that these comply with the provisions prohibiting discrimination and those related to the protection of privacy.

At the moment, the Law of 29 March 2013 authorises all employers (irrespective of their sector of activity) to ask candidates and existing employees to provide copies of their criminal records. The criminal record excerpt (original or photocopy) must not be kept for more than 24 months from the date on which it was provided. This will, however, significantly change at the beginning of 2017. A new law shall enter into force at the beginning of 2017 and will substantially amend current provisions related to criminal records, as follows:

  • a During the recruitment process, the potential employer will only be able to request a criminal record excerpt in writing and shall justify the reasons for such a request in view of the role requirements. The requirement to provide a criminal record excerpt shall be indicated in the job offer. A criminal record excerpt obtained in the recruitment phase can only be kept one month starting from the signature of the contract. If the candidate is not hired, the excerpt must be destroyed.
  • b During the course of employment, the employer will only be able to request a new criminal record excerpt if:

• the employer is permitted by law to request a criminal record excerpt; or

• the employee’s post will change and the new role requires a new verification of honourability.

A criminal record excerpt obtained during the employment relationship can only be kept for two months, unless provided otherwise under other legal provisions.

Requesting a criminal record excerpt in breach of the new legal provisions will be a criminal offence that may be sanctioned by a fine between €251 and €5,000 and a term of imprisonment between eight days and one year. Retaining a criminal record excerpt in excess of the time frame is also a criminal offence that may be sanctioned by a fine between €251 and €3,000.

With the entry into force of the new legislation, the employer will need to keep record of:

  • a the job offers requesting a criminal record excerpt from future employees with the justification of such request; and
  • b the requests for a criminal record excerpt from current employees with the justification of such request.

Credit checks are covered by personal and private data provisions and thus cannot be the subject of employer inquiries. However, depending on the applicant’s position and the nature of his or her activities, an employer may request him or her to provide such information.

Employers may ask whether a job applicant has authorisation to work in Luxembourg and request evidence thereof.

During the hiring process, employers are prohibited from making inquiries based on sexual orientation, religion, convictions, disability or ethnic origin.

XII DISCONTINUING EMPLOYMENT

i Dismissal

An employment contract entered into for an indefinite period of time may be terminated by either party immediately for gross misconduct, with notice period or by common consent of both parties. Only termination with notice and termination with immediate effect for gross misconduct will be defined in this section. The decision to opt for either the termination with immediate effect or the termination with notice will mainly depend on the grounds on which the dismissal is founded.

Dismissal with notice

An employment contract entered into for an indefinite period of time may be terminated by the employer for serious and real cause with a notice period, by giving notice to the employee. The employee may also terminate the employment contract by giving notice to the employer in accordance with the provisions of the Labour Code.

In case of a dismissal with notice, the reasons for dismissal must be supported by demonstrable and explicit facts, including reasons in relation to:

  • a the employee’s aptitude;
  • b the employee’s conduct; or
  • c the operating needs of the business, establishment or department.

Furthermore, if requested by the employee within one month of receiving notice of dismissal, the employer must provide him or her with a justification letter that clearly and precisely specifies the reasons for termination. The employer must send this justification letter by registered letter within one month of the employee’s request. If an employer fails to provide an employee with the grounds for dismissal within the statutory time frame, the dismissal will be deemed unfair and the employee may be entitled to a compensation for damages. A settlement arrangement may, however, be agreed upon between the employee and the employer, under which the employee would receive a settlement amount in consideration for his or her waiver of any rights deriving from the employment relationship.

On termination, employees are entitled to a notice period calculated according to their length of service within the company. Unless the employer and employee have agreed otherwise in the employment contract, notice periods are calculated as follows:

Service

Employer

Employee

Less than 5 years

2 months

1 month

5 to 10 years

4 months

2 months

10+ years

6 months

3 months

Unlike laws in other jurisdictions, Luxembourg law provides that notice takes effect only on the 1st or the 15th of the month. Thus, notice given before the 15th of the month takes effect on the 15th of the same month and notice given after the 14th takes effect on the 1st of the following month.

Dismissal without notice

Dismissal without notice is possible in the event of gross misconduct by the employee. Gross misconduct is considered conduct that immediately and definitively makes it impossible to continue the employment relationship. The appraisal of this notion is purely factual and rests with the courts, which consider the employee’s professional behaviour, level of education, social situation and any other relevant factors to determine his or her responsibility.

Before notifying an employee of his or her dismissal resulting from gross misconduct, the employer may temporarily suspend the employee, with immediate effect and without any particular form. Until the employer provides notification of the dismissal, the payment of the remuneration must be maintained.

If the termination (with immediate effect) is a result of gross misconduct, the dismissal letter must include the specific reasons for termination.

Employees dismissed for gross misconduct are not granted a notice period.

Pre-dismissal interview

Any employer with at least 150 employees wishing to dismiss an employee must, before reaching a decision in this respect, convene the employee concerned to a pre-dismissal interview. Notice should be made by way of a registered letter or by providing the employee with a convening notice letter after having sought proof of receipt thereof. The convening notice letter must provide sufficient information in relation to the purpose of the interview, and mention the date, time and place where the interview should be held. Dismissal with notice or without notice cannot be notified before the expiry of the day following the interview and no later than one week later.

Process for giving notice

In the case of dismissal with notice as well as without notice, the employer must notify the employee of his or her termination by way of a registered letter or by providing the employee with a dismissal letter after having sought proof of receipt thereof.

Severance payment

In addition to the notice period, employees dismissed with notice are entitled to a severance payment calculated according to their length of service. Severance payments are calculated as follows:

  • a from five up to 10 years of employment – one month’s salary;
  • b from 10 up to 15 years of employment – two months’ salary;
  • c from 15 up to 20 years of employment – three months’ salary;
  • d from 20 up to 25 years of employment – six months’ salary;
  • e from 25 up to 30 years of employment – nine months’ salary; and
  • f over 30 years of employment – 12 months’ salary.

Employees dismissed for gross misconduct are not granted a severance payment.

Protection against dismissal
Pregnant employees and employees on maternity leave

Under Luxembourg employment law, pregnant employees enjoy protection from dismissal. Dismissal of pregnant employees is prohibited from the time the employee is medically certified as being pregnant, except where the pregnant employee has committed a gross misconduct. Any dismissal notified in breach of this protection will be deemed as null and void. The same protection against dismissal will apply to a woman on maternity leave during the entire maternity leave period, and up to 12 weeks from the delivery.

Employees on sick leave

Employees suffering from a medical disease, a workplace accident or occupational disease benefit from protection from dismissal during the period of the sick leave up to 26 weeks. A new law that entered into force on 1 September 2015 amended the provisions related to an employee’s inability to work, both from the perspective of employment law and social security law.

Payment of an employee on sick leave will cease from the date the National Health Fund of Luxembourg (CNS) notifies the employer to cease such a payment, and can only resume once the decision has been modified as a result of legal recourse. The employer will be informed by the CNS as to whether they should cease any payment of salary to an employee, and if a decision has been reached that should change this. The protection against dismissal of 26 weeks in favour of employees on sick leave may thus cease prematurely under certain conditions.

Employees on parental leave

Employers cannot dismiss an employee on parental leave. Such protection against dismissal starts two months before the first day of maternity leave if the employee is on the first parental leave (i.e., the parental leave that immediately follows the maternity leave), and six months before the first day of parental leave if it relates to the second parental leave (i.e., the parental leave taken before the child reaches the age of five).

ii Redundancies

Article L.166-1 (1) of the Labour Code defines collective redundancies as ‘dismissals effected by an employer for one or more reasons not related to the employees concerned’ where the number of redundancies is either: over a period of 30 days, at least seven; or, over a period of 90 days, at least 15.

The statutory procedure regarding collective redundancies as set out in the Labour Code must be followed as soon as an employer wishes to dismiss at least seven employees within a period of 30 days or to dismiss 15 employees within a period of 90 days. If, however, at least four employees are dismissed during the relevant period for a reason unrelated to their behaviour, the employer must also include, when calculating how many employees are involved in the dismissals:

  • a terminations for economic reasons that are made by mutual consent; and
  • b departures by employees who are retiring as a result of the company’s economic reasons before the usual retirement date.

This procedure requires the employer to enter into negotiations with employee representatives before proceeding with collective redundancies, in order to come to an agreement relating to the establishment of a redundancy scheme. Before commencing negotiations, the employer must inform the employee representative of the measures envisaged by providing him or her in writing with the information legally required.

A written notification of the envisaged collective redundancies must be provided by the employer to the Employment Administration. Such a notification is sent by the Employment Administration to the Labour and Mines Inspectorate.

Upon the employer and the employee representatives reaching an agreement, the redundancy scheme is signed. After the signature of the redundancy scheme, the employer can notify the termination to each of the employees concerned.

In case no agreement is reached between the parties within 15 days as from the beginning of the negotiations, signed minutes of said negotiations are sent to the Employment Administration. Within three days as from the signature of these minutes, the employer and the employee representatives must jointly refer the matter to the National Conciliation Body. The members of the parity committee shall be appointed to consider the issues. Unless the parity committee has deliberated, the employer shall not be entitled to notify the dismissals on an individual basis to each of the employees concerned.

Collectively dismissed employees have the same rights as employees dismissed on an individual basis, but the statutory rights on collective dismissal are extended. The dismissal will be qualified as unfair on the same basis as the one applicable to individual dismissals. Collectively dismissed employees may also negotiate with the employer in order to reach an amicable settlement arrangement.

XIII TRANSFER OF BUSINESS

Luxembourg legal provisions relating to transfer of undertakings apply to any transfer of an undertaking, business or part of an undertaking or business as a result of a contractual sale, merger, inheritance, division of companies or incorporation of a company. These provisions are applicable to any transfer where an undertaking, business or part of an undertaking or business to be transferred is located in Luxembourg. Thus, it would theoretically apply to situations where the transferor is located within the territory of Luxembourg and the transferee is located in another state.

A transfer must be of an economic entity that retains its identity. In essence, this means an organised grouping of resources that have the objective of pursuing an economic activity, whether that activity is central or ancillary. Luxembourg case law makes clear that the activities performed by the employees must be carried out after the transfer with a view to achieving the same purpose, meaning the continuation of the existence of the business but not of its legal structure.

A transfer of an undertaking within the meaning of the legal provisions shall operate the effect of an automatic transfer of the employment contracts to the transferee. Luxembourg law does not provide for any right of objection by which an employee may prevent the transfer of his or her employment. If an employee refuses the transfer, he or she will be considered as a resigning employee, hence, not entitled to any legal indemnities as provided for in the Labour Code. Employees transferred cannot be dismissed on the grounds of the transfer. However, they can be dismissed on the basis of the organisational measures provided it can be evidenced that the reorganisation is not directly linked to the transfer.

A specific procedure shall be followed in this respect, which consists essentially of the obligations to notify, inform and consult the employees concerned prior to the occurrence of the transfer.

XIV OUTLOOK

As of 1 February 2017, employers’ right to request a criminal record will be strictly limited according to the provisions of the new law of 23 July 2016.

The draft bill on equal treatment between men and women has been adopted. The Labour Code will be amended so as to provide an obligation for the employer to grant the same remuneration for the same or a similar function irrespective of whether the employee is a man or a woman. The employer may incur sanctions, including a fine, if it fails to comply with this obligation.

The current legal provisions on flexible working time arrangements will no longer be effective as of 1 January 2017. A draft bill is currently being discussed and provides the possible extension of the reference period up to four months upon information and consultation of the employee representatives, if any, or employees in the absence of employee representatives. The draft bill sets new appraisal criteria of overtime work within the framework of the reference period. Additional days of leave are foreseen.

Footnotes

1 Annie Elfassi is a partner at Loyens & Loeff Luxembourg S.à r.l.

2 As from January 2017, 794.54 is the current index applicable. The previous index was 775.17.