I INTRODUCTION

i Employment law framework

The relevant statutes and regulations applicable in Luxembourg are:

  1. EU regulations;
  2. the Constitution;
  3. the Labour Code;
  4. grand-ducal regulations;
  5. agreements resulting from multi-industry social dialogue declared generally binding by grand-ducal regulations;
  6. collective bargaining agreements (industry or company-level agreements). Some collective agreements are declared generally binding by a grand-ducal regulation, others are not; and
  7. case law.

ii Courts and tribunals

The relevant courts and tribunals in Luxembourg are:

  1. the labour courts, competent to settle disputes concerning employment contracts and apprenticeship contracts;
  2. the Court of Appeal, competent to settle appeals against decisions from the labour courts; and
  3. the Court of Cassation, competent to review decisions from the Court of Appeal on the grounds of legal or procedural error.

iii Government agencies with competence for enforcement of employment law

The Inspectorate of Labour and Mines (ITM) is competent in terms of working conditions and protection of workers in the exercise of their professional activity. ITM's aim is to help develop a culture of prevention and cooperation concerning working conditions, including the health, safety and hygiene of the employee, with respect to all aspects of employment law.

II YEAR IN REVIEW

i Time savings account for private sector employees

The Law of 12 April 20192 has introduced a time saving account (CET) for employees in the private sector. The purpose of introducing the CET is to allow greater flexibility in managing working time for both companies and employees, particularly with regard to finding a healthy work–life balance. In particular, an employee can set aside his or her overtime and days off and recover them at a later time.

ii Additional statutory leave and public holiday

The Law of 25 April 20193 has increased the minimum statutory paid leave from 25 to 26 days per year and declared Europe Day, celebrated on 9 May, as a statutory public holiday. The law came into force retroactively as of 1 January 2019.

iii Increase in the social minimum wage

The Law of 12 July 2019,4 amending Article L. 222-9 of the Labour Code, increased the social minimum wage (SSM) by 0.1 per cent as of 1 January 2019. This increase to the SSM was in addition to the 1.1 per cent increase resulting from the law of 21 December 2018.

Currently, the mandatory minimum wage for a non-qualified employee is €2,141.995 (index 834.76) and the minimum wage for a qualified employee is €2,570.39 (index 834.76).

iv Professional training reform

The Law of 12 July 2019 incorporates provisions into the Labour Code relating to apprenticeship and internship contracts as stipulated by the 2008 Law reforming professional training, and adds certain clarifications and modifications. The main changes include:

  1. duration of the apprenticeship contract: the Labour Code explicitly specifies that the duration of the contract is the same as the actual duration of the apprenticeship;
  2. trial period in the apprenticeship contract: the Law now provides that the apprenticeship contract must include a non-renewable three-month trial period; and
  3. end of the apprenticeship contract: there are four new circumstances in which the apprenticeship contract can be ended, namely:
    • a mandatory career change for the apprentice;
    • if the apprentice is removed from the training;
    • in the event of the apprentice's absence without a valid reason for 20 consecutive working days; and
    • when the rights to sickness benefits granted to the apprentice have been exhausted in accordance with Article 9(1) of the Social Security Code.

v Creation of a new assistance activity

The Law of 1 August 20195 has introduced an 'assistance activity for inclusion in employment' to regulate and promote the integration of employees with disabilities and an external reclassification in the employment market by offering assistance to suit their needs.

III SIGNIFICANT CASES

i Impact of trial period on right to bonuses

With regard to the purpose of a trial period, the objectives to be achieved and the terms of the payment of bonuses are to be set by the employer at the end of the trial period. Consequently, even if a contractual clause expressly provides for the payment of an annual bonus, according to the terms fixed each year, termination of an employment contract during the trial period does not give entitlement to a contractual bonus pro rata temporis.6

ii Maintenance of acquired rights during a transfer of business

The payment of a 13th-month salary has a presumption of liberality, which can be reversed by proof of a custom. If an employee proves that he had an acquired (non-contractual) right to the payment of a 13th-month salary before the transfer, the contractual clause concluded after the transfer and providing that the premiums are non-binding benefits for the employer is void.7

iii Employee's right to disconnect when on leave

The Court of Appeal recognised a restaurant manager's right to disconnect during his annual leave and ruled that he 'had a right during his leave . . . to the disconnection and not be approached during the night by his superior in a threatening tone'). This is the first time that Luxembourg courts have recognised the existence of an employee's right to disconnect.8

iv Usual absenteeism related to professional activity

When usual absenteeism of an employee for medical reasons is directly related to professional activity, the employer is not authorised to terminate the contract for that cause. In this particular case, the medical certificate attesting that the employee's anxiety disorders are concomitant with professional difficulties is not sufficient, in the absence of other objective elements, to establish the link between the illness and the professional activity.9

IV BASICS OF ENTERING into AN EMPLOYMENT RELATIONSHIP

i Employment relationship

Employment contract

Employment contracts must be evidenced in writing and signed, in principle, no later than on the first day of work. In the absence of a written employment contract, the existence of a contract may be proven by the employee via any other means of evidence, whereas the employer may only prove it via limited means of evidence.

Fixed-term employment contract

Fixed-term employment contracts are only permitted for the performance of specified time-limited tasks and shall only be used under strict conditions (e.g., execution of an occasional and punctual task defined and not falling within the framework of the current activity of the company, the performance of a specific and unsustainable task in the event of a temporary and exceptional increase in the activity of the business, or when starting or expanding the business).

Terms of the employment contract

All employment contracts must contain the following essential terms:

  1. identity of the parties;
  2. date of the beginning of the performance of the employment contract;
  3. place of employment (or if there are various places of employment, a statement that the employee will perform work in various places (including abroad), and the employer's headquarters or address, as the case may be);
  4. nature of employment (and, as the case may be, a description of the tasks assigned at the moment of hiring);
  5. daily or weekly standard working hours;
  6. standard working schedule;
  7. remuneration and any benefits;
  8. length of paid holiday or the method of determining it;
  9. length of notice period for termination or the method of determining it;
  10. length of the probationary period, if any;
  11. any complementary or derogatory provisions;
  12. any collective work agreement governing the employee's working conditions; and
  13. any supplementary pension scheme.

Specific terms should be added depending on the type of employment contract involved (e.g., a fixed-term, part-time or student employment contract). For example, fixed-term employment contracts must contain the following additional essential terms:

  1. reason for making the contract;
  2. termination date, or the minimum length of the employment contract if it has no defined length;
  3. name of the absent employee if the contract is concluded to replace an absent employee;
  4. length of the probationary period, if any; and
  5. renewal provision, if any.

In addition, certain provisions must be expressly provided in writing for them to be applicable (e.g., probationary period, non-compete provisions).

Modification of the employment contract

Any modification to an employment contract must be effected by the conclusion of an addendum to the employment contract. The employer may unilaterally impose a favourable change if it concerns a non-significant employment condition.

However, the employer may also unilaterally modify essential clauses of the employment contract (e.g., remuneration or working hours) to the detriment of the employee if it has real and serious reasons to do so. The procedure to be followed is similar to the one applicable to dismissal (with notice or with immediate effect). This involves notifying the employee, providing any notice period (as the case may be) and, if the employment contract is being modified with notice, giving reasons for the modifications if the employee requests them. The timeframe for changes to essential terms must also comply with the rules on dismissal. If this procedure is not followed, the modification will be void.

Under the rules, either:

  1. the employee does not challenge the modification or its reasons and accepts the change to his or her employment contract. If the employee does not resign and remains with the employer after the changes come into force, he or she is deemed to have accepted them; or
  2. the employee refuses to accept the changes. The employee must then resign before the end of the notice period, if applicable. This will be considered as a dismissal rather than a resignation. The employee must then start a procedure before the competent labour court to claim for damages. If the labour court determines the reasons for the modification are not sufficiently real and serious, or not provided to the employee with sufficient precision, it will declare the dismissal as wrongful and the employer will be required to pay compensation for material and moral harm to the employee.

ii Probationary periods

Conditions of the trial period

Probationary periods may, in principle, only be applied if a probationary clause is included in the employment contract at the time it is signed, or at the latest before the beginning of the work, or if the applicable collective work agreement provides that all new employees are subject to a probationary period.

In the absence of a written statement that the contract has been concluded on a trial basis, it is deemed to be concluded for an indefinite period, and proof to the contrary is not admissible.

Probationary periods may not be less than two weeks, with the normal maximum probationary period being three months. It is possible to extend a probationary period to six months for employees with a professional qualification (i.e., a certificate of technical and professional capacity) and to 12 months if the employee earns a monthly gross salary of at least €4,474.31 (index 834.76).10

End of the trial period

Employment contracts cannot be terminated unilaterally during the first two weeks of a probationary period, except in cases of gross misconduct. Once this two-week period is completed, the contract may be terminated with notice and without justification by either party through a registered letter or a countersigned copy of the termination letter.

The length of the notice period depends on the length of the probationary period. If the probationary period is expressed in weeks, each week should give rise to one day's notice. If the probationary period is expressed in months, four days' notice should be granted for each month of the probationary period, with a minimum of two weeks and a maximum of one month.

The end of the employment contract (notice period included) should occur within the probationary period. Otherwise, the employment contract will be considered as an open-ended employment contract or a fixed-term employment contract (depending on the type of employment contract initially concluded).

iii Establishing a presence

Establishment permit

According to the Law of 2 September 2011, a natural or a legal person cannot exercise, as either a principal activity or an ancillary activity, an independent activity in the field of trade, craft industry, industry or a specific liberal and intellectual profession without an establishment permit.

However, an establishment permit is not required for companies duly established in a Member State of the European Union or the European Economic Area (EEA), or Switzerland, that provide services in Luxembourg on an occasional or temporary basis. This freedom of services does not apply to non-EU companies.

Thus, in principle, a foreign company wishing to carry on any activity in Luxembourg shall obtain an establishment permit before starting its activity in Luxembourg and hiring employees here. An establishment permit is required for a subsidiary as well as for a branch of a foreign company.

To obtain an establishment permit, the company shall demonstrate an effective activity in Luxembourg, notably through premises, administrative and technical equipment, and the regular presence of the business licence holder.

The permit establishment is granted by the Ministry of Economy, the Middle Class and Tourism after a formal application process. The Ministry verifies that the applicant (an individual setting up his or her own business or the legal representative of a company) complies with honourability conditions (e.g., has no criminal record in Luxembourg or abroad, and no record of bankruptcy or insolvency) and qualification conditions (such as diplomas or actual professional experience).

Tax

Employment income is mainly taxed by means of withholding payroll taxes, the amount of which depends on the yearly gross income and the personal situation of the employee.

At the beginning of the year, each employee must provide his or her employer with a tax card containing all the information needed by the employer to be able to withhold taxes.

V RESTRICTIVE COVENANTS

i Non-competition during employment contract

Employees' obligation of loyalty to their employer (which is implied in any employment contract) prohibits them from any competing activity during the employment relationship.

An employer also may include an exclusivity clause in an employment contract, according to which the employee commits to provide work only for the employer and the employee is expressly prohibited from providing services for any other organisation (whether a competing employer or not). However, exclusivity clauses are only applicable to contracts for full-time employees.

In the event of a dismissal with notice, if the employee is released from performing his or her duties during the notice period, the loyalty obligation still applies. However, according to case law, as the employee has been dismissed, he or she has the right to prepare for a new career during the notice period by working on a future project.

If an employee engages in competing activity during the employment contract, the employer may sanction the employee and bring a claim for damages before the competent labour court.

ii Non-competition after employment contract

Once an employment relationship has ended, the employee is free to perform any competing activity, provided he or she is not bound by a non-compete clause.

The parties may agree on a non-compete clause in the employment contract, preventing the employee from performing similar professional activities by running his or her own business as a sole enterprise after termination of the employment contract. These clauses are strictly regulated by Luxembourg labour law.11

Non-compete clauses can only apply to employees who are at least 18 years old and whose annual gross salary, at the date of termination of the contract, is more than €56,906.17.

To be valid, a non-compete clause must also comply with the following conditions:

  1. it must be in writing in the employment contract;
  2. it must refer to a specific professional sector and to similar professional activities to those performed by the employer;
  3. it must be limited to 12 months following the day the employment contract ends; and
  4. it must be geographically limited to a relevant area (i.e., locations in which the employee could effectively compete with the employer) and cannot extend beyond the national territory of Luxembourg.

Finally, according to the law, a non-compete clause only prevents a former employee from setting up his or her own undertaking but not from working as an employee for another organisation, which could be a competitor of the former employer.

However, the Court of Appeal12 ruled on the validity of a non-compete clause preventing a former employee from working as an employee for a competitor. The clause in that case prevented the employee from performing similar activities as an employee of a competitor for 12 months within Luxembourg and France (i.e., more than 500 kilometres beyond the Luxembourg border), in exchange for a monthly allowance for 12 months of 25 per cent of the last gross salary (i.e., approximately €20,000). The Court validated the principle of this clause but found it 'excessive' owing to its broad geographical scope. The Court reduced its implementation to Luxembourg and the French border areas. It also ordered the employer to pay the employee the financial compensation stipulated.

There is nevertheless no legal certainty about these extended non-compete clauses since they are not provided for by law. There is a risk that, in a legal challenge, a court declares such a clause as unlawful and not binding for the parties.

VI WAGES

i Working time

Working hours regulations

Normal full-time working hours in Luxembourg are eight hours per day and 40 hours per week, or up to nine hours a day provided the weekly working time remains at 40 hours over a maximum of five days. Specific provisions apply in some sectors, such as transport, hotels, restaurants and bars.

The normal duration of work may be increased to a maximum of 10 hours a day and 48 hours per week, including overtime. It is not permitted to work beyond these limits, except in specific circumstances, such as force majeure, and in some sectors, such as transport.

Overtime pay may be incorporated in a work organisation plan or a flexitime regulation. This will apply over a reference period determined by the employer. The maximum reference period is four months, except if a collective bargaining agreement (CBA) provides for a longer period (of up to 12 months).

  1. Work organisation plan: This allows the employer to plan the working hours over a reference period. If the reference period is longer than one month, the employee is entitled to supplementary annual leave (up to 3.5 days) and to specific overtime pay (if the CBA does not provide other rules). A work organisation plan may be implemented only after consulting employee representatives or the affected employees; for some issues, their consent is required.
  • Flexitime regulation: This allows employees to organise their working time as they see fit, while observing the core work time imposed by the employer, if any, during the reference period. A flexitime regulation may be implemented only with the mutual consent of the employer and the employee representatives, if any, or if none, the affected employees themselves.

In both cases, hours worked over eight hours per day and 40 hours per week are not considered overtime if the average weekly hours of work during the reference period do not exceed either 40 or the maximum weekly working hours set by agreement. In other words, at the end of the reference period, the working hours performed with the agreement of the employer that exceed an average of 40 hours of work per week during the reference period are considered overtime.

Exceptionally, in specific sectors and for a period not exceeding six consecutive weeks, a CBA may provide for 12-hour days and 48-hour weeks.

For young employees (i.e., under 18) the duration of work must not exceed eight hours a day and 40 hours a week. This maximum includes hours spent at school.

Any work organisation plan applicable within an organisation should contain specific provisions for young employees. As part of a work organisation plan, a reference period of a maximum of four weeks can be set for young employees and only in exceptional cases. The effective duration of work must not exceed nine hours a day, 44 hours a week or 10 per cent more than the normal duration of work within the organisation. The average duration of work for each reference period must not exceed eight hours a day and 40 hours a week.

Night workers

Specific rules apply to night workers. Employees are deemed night workers if they perform at least three hours of work a day between 10pm and 6am (i.e., the night period) as part of their normal schedule, or may perform hours of work during the night period of more than one quarter of their annual working hours. The working hours of these employees must not exceed an average of eight hours during a 24-hour period calculated over a period of seven days. Overtime is permitted, with the same limitations as for normal working time.

However, night workers whose work involves particular risks, or significant mental or physical stress factors, must not work more than eight hours within a 24-hour period. In some sectors, such as the hotel and restaurant businesses, the night period is between 11pm and 6am. Young employees (i.e., under 18) are prohibited from working between 8pm and 6am, or between 10pm and 6am in some sectors.

ii Overtime

Limits to the amount of overtime

Overtime hours are those worked beyond eight hours per day and 40 hours per week (or beyond the part-time hours set in the employment contract) at the request or with the consent of the employer. If a company operates a work organisation plan or a flexitime regulation, overtime is defined as each hour worked beyond the limits fixed by the plan or regulation, at the request or with the consent of the employer.

Overtime worked by full-time employees must not exceed two hours a day and eight hours a week. If an employee decides to work overtime, he or she should ask for the employer's approval so as to be entitled to an overtime payment. Employees may be required to work overtime within the limits and under the conditions provided for by law.

Overtime is, in principle, limited to specific circumstances, namely:

  1. to prevent the loss of perishable goods or to avoid compromising the results of work;
  2. to allow for special work, such as inventories or balance sheets, timelines, liquidations and statements of account; and
  3. exceptional cases in the public interest and events of national danger.

It is generally prohibited for adolescents (aged 15 to 17 years) to work overtime, except in very specific circumstances and under conditions strictly regulated by law. Under part-time work contracts, overtime hours may be worked only by mutual agreement between the employer and employee.

Overtime compensation

Overtime is generally compensated by paid leave of one hour and 30 minutes for every hour of overtime. An employer may choose to compensate overtime financially.

If an employer decides to provide financial compensation instead of paid leave, or if an employee leaves the organisation without taking his or her leave, overtime will be paid at the rate of 140 per cent per hour or the normal hourly rate. Some CBAs provide for specific conditions and a higher rate (e.g., 150 per cent in the banking sector).

Specific rules and pay apply to overtime under a work organisation plan (where a CBA does not provide other rules). This should provide that:

  1. monthly working hours exceeding the statutory monthly working hours by more than 12.5 per cent are treated as overtime, when the reference period is more than one month and less than three months. The rate is 10 per cent when the reference period is between three and four months;
  2. work performed at the request of the employer beyond the limits set in the initial planning for the day, week or during an entire work organisation plan, is deemed to be overtime if the employer gives the employees less than three days' notice; and
  3. if the employer changes a work plan with less than three days' notice and this does not result in an increase in the hours scheduled, but is simply a change of schedule, the hours of work exceeding the initial work plan by more than two hours should be paid at a rate of 1.2 times the hourly rate for the first two hours.

Overtime for young employees, when exceptionally permitted, is compensated by a 100 per cent increase in the normal hourly rate paid for the hours performed.

CBAs may provide for a different form of compensation or higher rates.

The aforementioned overtime rules do not apply to top executives.

VII FOREIGN WORKERS

i Register of foreign workers

The hiring of foreign employees directly by a Luxembourg company does not entail a specific obligation for an employer to keep a register of foreign employees. However, the employer shall keep a copy of the employee's residence authorisation in case the ITM carries out an inspection.

Moreover, employees seconded to Luxembourg must be declared to the ITM before starting to work in Luxembourg. This declaration is made through an e-platform and several documents must be uploaded (such as a medical statement, social security certificate and employment contract).

There is no limit on the number of foreign employees that a workplace or company may have.

ii Length of assignment

As regards the secondment of employees to Luxembourg by a foreign company, the length of a assignment shall remain temporary. Although the Luxembourg Labour Code does not provide for a specific time limit, the length of a secondment is limited by the validity of the residence authorisation and by social security rules.

iii Work permit

Citizens of an EU or EEA Member State and Switzerland are exempt from the obligation to obtain authorisation to work in Luxembourg. They only need a valid passport or national identity card. However, if EU nationals intend to stay in the territory of Luxembourg for more than three months, they must make a declaration of arrival registration with the municipality within eight days of their arrival, and fill in a registration certificate for EU nationals no later than three months after their arrival.

Third-country nationals wishing to work in Luxembourg must obtain a residence authorisation. However, and depending on the purpose of their stay in Luxembourg, third-country nationals can rely on an exemption of residence authorisation for work if the stay does not exceed three months. A residence permit is valid for a certain period and may be renewed if the legal requirements are satisfied.

Nationals from certain non-EU countries who wish to visit, travel through or work in Luxembourg must, before their departure, have a valid travel document with a visa issued by a consular authority from one of the countries in the Schengen area.

iv Application of legal provisions

Foreign workers who are authorised to work in Luxembourg benefit from the same protection as Luxembourg nationals under the legal provisions.

Moreover, legal, regulatory and administrative provisions, and provisions resulting from a CBA declared to be generally binding, apply to all employees working in Luxembourg (including on secondment or a short-term posting), as regards the following matters:

  1. minimum wage and its automatic adjustment to the cost of living;13
  2. working time, daily breaks, 11 hours of daily rest, 44 hours of weekly rest;
  3. annual leave;
  4. public holiday;
  5. interim work and loan of workforce;
  6. protection of young workers, pregnant and breastfeeding workers;
  7. non-discrimination;
  8. unemployment resulting from weather disruptions;
  9. temporary lay-off;
  10. prohibition of illegal work; and
  11. health and security at work.

VIII GLOBAL POLICIES

Internal rules are not required by law in Luxembourg. If internal rules are established, the content may be freely determined by the employer and the staff delegation, if any, provided that it does not breach Luxembourg labour legislation.

However, it is mandatory for employers to set up a specific written procedure to manage problems of harassment on the basis of an internal assessment and subsequent reassessments of harassment within the enterprise.

If internal rules are established, the organisation must inform and consult the staff delegation before implementing, amending or withdrawing any internal rules. In organisations with at least 150 employees, the establishment or amendment of internal rules must be by mutual agreement between the employer and the staff delegation.

Internal rules are not subject to registration with government authorities or any other legal body. Moreover, the law does not impose the use of a specific language in the drafting of internal rules. Nevertheless, the rules shall be written in a language that can be understood by all employees.

For an internal rule to be considered as binding upon an employee, the employer shall be able to prove that this employee has acknowledged the internal regulations. As a result, internal regulations shall be either signed by the employee at the time of recruitment, or attached to the employee's employment contract provided that a mention is inserted into the employment contract stating that the employee has received a copy of the internal regulations and has acknowledged their contents. Internal regulations may also be placed on a company's intranet but simply posting regulations online would not be sufficient to demonstrate that the employee has acknowledged them.

IX PARENTAL LEAVE

i Maternity leave

Maternity leave is divided into two periods: eight weeks' prenatal leave and 12 weeks' postnatal leave. While on maternity leave, the employee is paid by the National Health Fund and receives an indemnity equal to the employee's remuneration, but limited to five times the monthly minimum social salary for unqualified employees as in force on a particular date (€10,709.95 as of 1 January 2020). Payment of maternity leave is subject to membership of the Luxembourg social security scheme for at least six months during the 12 months before the commencement of maternity leave. However, the EU regulation providing for the aggregation of insurance periods applies.

Employees are protected against dismissal during maternity leave. However, for gross misconduct, an employer may suspend an employee and apply to the courts for permission to dismiss without notice.

ii Adoption leave

If a child under the age of 12 is adopted by a couple, an adoptive parent who is employed through an employment contract is entitled to 12 weeks' leave upon presentation of a certificate from the court stating that the adoption application has been filed. If both parents are employed, or if one parent is in a non-salaried position, the adoption leave can only be granted to one of them. If an employee is adopting as a single parent, he or she can benefit from adoption leave, except if the adopted child already lives with the employee, or is the child of the spouse or partner of the employee. Most of the provisions that apply to maternity leave apply equally to adoption leave, including the requirements for being entitled to leave, entitlements and protection against dismissal.

iii Paternity leave

Paternity leave can be taken as an 'extraordinary leave for personal reasons'. Since 2018, a father is entitled to 10 paid days off work (it was previously two days).

Paternity leave can be split, but must be taken within two months of:

  1. the birth of the child; or
  2. in the case of adoption, the arrival of the child under the age of 16. However, this leave is not available if the parent had the benefit of leave for the adoption of a child under the age of 12 (see Section IX.ii).

An employer may refuse to allow paternity leave to be split if it is contrary to the needs of the business. If an employer and an employee disagree on a possible split of paternity leave, it must be taken in one block, immediately after the birth or arrival of the child.

In practical terms, the employee must inform the employer in writing, with two months' notice, of the expected dates on which he would like to take his paternity leave. If this notice is not given, the employer may reduce the leave to two days.

There are no specific conditions for entitlement to paternity leave except the birth of the child.

Only the first two days of paternity leave are paid by the employer; the government pays from the third day onwards. The employer must submit its request for a refund for salaries paid to the Minister responsible for employment within five months of the birth or arrival of the child, failing which the request will not be considered. The salary taken into consideration for this refund is limited to five times the minimum social wage for unqualified employees (i.e., €10,709.95 as of 1 January 2020).

There is no protection against dismissal during paternity leave.

iv Parental leave

Parental leave is offered to parents following the birth of one or several children until they are six years old, or the adoption of one or several children under 12 years old. The parent can request:

  1. first parental leave, which must be taken immediately after maternity or adoption leave; or
  2. second parental leave, which must be taken before the child's sixth birthday or, in the case of adoption, within six years of the adoption leave, or (if no adoption leave was taken) from the date of the adoption order but before the child's 12th birthday.

Leave can be taken full-time, part-time or split (under certain conditions provided by law), whether it is for the first or second parental leave, provided that the employee has completed at least one year of service with the same employer.

The leave may be granted if the parent:

  1. has been affiliated to the Luxembourg social security scheme at the time the child is born or adopted, and for at least 12 continuous months prior to the parental leave, via one or more employment contracts totalling at least 10 hours of work as an employee per week;
  2. is engaged as an employee via one or more employment contracts during the full period of the parental leave;
  3. ceases any professional activity during the course of the leave (in the case of full-time parental leave) or reduces his or her working hours (in the case of part-time parental leave); or
  4. during parental leave, raises the child in his or her home and mainly uses the time to take care of the education of the child.

The parent must submit his or her request to the employer by registered mail (with acknowledgement of receipt) at least two months before the start of maternity leave or adoption leave (for first parental leave) or at the latest four months before the start of second parental leave.

The employer is obliged by law to accept parental leave on a full-time basis, except if the request was not made in the manner and within the timescale required.

While on parental leave, the employee is directly paid by the Fund for the Future of Children and receives an allowance calculated on the basis of his or her normal monthly income. The allowance must not be lower than the monthly minimum social wage for unqualified employees (i.e., €2,141.99 as of 1 January 2020) nor higher than the monthly minimum social wage for unqualified employees increased by two-thirds (i.e., €3,569.99 as of 1 January 2020).

The employee is protected against dismissal starting from the last day of the notice period for requesting the leave, and during the parental leave. Any attempted dismissal during this period is null and void but the employee is not protected against immediate termination for gross misconduct.

X TRANSLATION

There are three official languages in Luxembourg: French, German and Luxembourgish.

Luxembourg law does not impose the use of any specific language in the drafting of employment contracts. However, the use of a language understood by both parties is recommended to avoid any discussion regarding lack of consent.

In the event of litigation, a court could request translation into one of the three official languages, but particularly French or German. If a contract is written in more than one language and there is doubt about its meaning, the version with the meaning that is more favourable to the employee will prevail.

XI EMPLOYEE REPRESENTATION

i Obligation to set up a staff delegation

Undertakings with at least 15 employees during the 12 months prior to the announcement of social elections must set up a staff delegation.

The staff delegation members are elected by and from the eligible employees through a secret vote.

The renewal of the staff delegation takes place every five years within a statutory timeframe on a date set by the Ministry of Labour. Thus, the term of a staff delegate is five years. If the threshold is staggered between two statutory timeframes, a staff delegation must be set up as well.

ii Number of staff delegates

The size of the staff delegation varies according to the number of employees represented:

Composition of the staff delegation
Represented employees Number of delegates
Between 15 and 25 1
Between 26 and 50 2
Between 51 and 75 3
Between 76 and 100 4
Between 101 and 200 5
Between 201 and 300 6
Between 301 and 400 7
Between 401 and 500 8
Between 501 and 600 9
Between 601 and 700 10
Between 701 and 800 11
Between 801 and 900 12
Between 901 and 1,000 13
Between 1,001 and 1,100 14
Between 1,101 and 1,500 15
Between 1,501 and 1,900 16
Between 1,901 and 2,300 17
Between 2,301 and 2,700 18
Between 2,701 and 3,100 19
Between 3,101 and 3,500 20
Between 3,501 and 3,900 21
Between 3,901 and 4,300 22
Between 4,301 and 4,700 23
Between 4,701 and 5,100 24
Between 5,501 and 5,500 25
More than 5,500 +1 for each 500

For each effective member, a substitute shall be elected so that a deputy is available should an effective member no longer be able to exercise his or her duties.

iii Attributions of staff delegations

The Law of 23 July 2015 on the reform of social dialogue abolished the works council. All the rights and attributions previously granted to works councils were transferred to staff delegations in undertaking with at least 150 employees.

A staff delegation's general duty is to safeguard and defend employees' interests with respect to working conditions, job security and social welfare. More precisely, a staff delegation is expected to:

  1. prevent or solve individual or collective disputes arising (or likely to arise) between the employer and the employees;
  2. submit employees' individual or collective claims to the employer; and
  3. in the event of unsuccessful negotiations, submit a claim to the Labour Inspectorate regarding the legal or contractual rights of the employees.

A staff delegation is also expected to ensure compliance with the principles governing equal treatment, access to employment, vocational training, promotion, working conditions and remuneration.

To enable a staff delegation to carry out its mission, the employer is required to provide information and data regarding the functioning of the organisation, including the evolution of its activities and its economic situation. It is also required to provide information regarding health, safety and absenteeism.

A staff delegation must be informed and consulted in certain matters, especially:

  1. on the situation, structure and likely evolution of employment within the company as well as possible anticipatory measures envisaged, in particular threats to employment;
  2. on decisions likely to lead to substantial changes within the organisation, in particular redundancies and transfers of undertakings;
  3. before implementing, amending or withdrawing a supplementary pension plan and before publishing or amending internal rules; and
  4. on any issue relating to working time or apprenticeships.

Moreover, in organisations with at least 150 employees, certain decisions must be made jointly by the employer and the staff delegation (e.g., the introduction or application of technology to monitor or control employees' behaviour and performance, or the introduction or modification of measures concerning the health and safety of employees and the prevention of occupational diseases).

iv Rights of staff delegations

A staff delegation is allocated a credit of hours in proportion to the number of employees represented, namely 40 hours per week for 500 employees (in an undertaking with fewer than 150 employees) or 250 employees (in an undertaking with between 150 and 259 employees).

Members of the staff delegation have the right to participate in training sessions, even during working hours and without loss of wages, organised by trade unions or a specialist institution, such as professional chambers, with the purpose of improving their knowledge in economics, their social and technical skills, as far as this is in relation to their role as employee representatives. The duration of time taken for training depends on the number of employees in the undertaking:

  1. fewer than 50 employees: one working week over the full term of the member's term of office (i.e., five years);
  2. between 50 and 150 employees: two working weeks over the full term of the member's term of office; or
  3. more than 151 employees: one working week per year.

v Meetings

A staff delegation may meet once a month during working hours. Notice of five working days shall be given to the employer, unless both parties agree on a shorter notice period. These meetings are paid as working time.

A staff delegation is compelled to meet at least six times per year during working hours, and three of those six meetings must be attended by the employer.

Finally, the employer is required to convene the staff delegation whenever at least one-third of the regular members so request.

vi Protection against dismissal and unilateral modification of employment contracts

The members of a staff delegation are protected against dismissal during their term of service and for six months after the end of that term. Any dismissal of a staff representative may be declared null and void. However, in a case of gross misconduct, the employer may suspend a staff representative with immediate effect and ask the labour court to terminate the employment contract. Similarly, the employer cannot introduce any modifications to a staff representative's employment contract.

XII DATA PROTECTION

i Requirements for registration

The Law of 1 August 2018 on the organisation of the National Data Protection Commission and the general data protection framework does not require the data controller to register with the Luxembourg Data Protection Authority (CNPD). The obligation to notify each instance of personal data processing provided for by the Law of 2 August 2002 on the protection of persons with regard to the processing of personal data no longer exists as of the Law of 1 August 2018.

However, the data controller and, where applicable, the data controller's representative must, in principle, maintain a record of processing activities as part of their responsibilities. Moreover, the data controller or the processor must communicate the details of the undertaking's data protection officer to the CNPD.

ii Cross-border data transfers

Personal data can circulate freely from Luxembourg within the EEA, as long as the general principles of the EU General Data Protection Regulation GDPR are respected.

Any data controller who wishes to export personal data outside the EEA must first establish that there is an adequate level of protection in the recipient country. Indeed, when the third country is considered to offer an adequate level of protection, the transfer can be carried out as if it were a transfer within the EEA. However, the general principles of the GDPR must be respected.

If a country that is not a member of the EEA, or an international organisation to which the data is to be transferred has not been recognised as adequate by the European Commission, the transfer must be subject to appropriate safeguards or be based on one of the legally recognised derogations. Among the appropriate safeguards that may be put in place for a transfer of personal data to a country without an adequate level of protection, the data exporter and the data importer may sign standard data protection clauses adopted by the European Commission (contractual clauses), or may rely on binding corporate rules, codes of conduct, certification mechanisms, or guarantees specific for transfers between public authorities or bodies.

For transfers of personal data to the United States, the data exporter and the data importer may also have recourse to the EU–US Privacy Shield. The Privacy Shield (which replaced Safe Harbour) has its own requirements, under which entities established in the United States can certify their processing of personal data to facilitate the transfer of personal data. Although its lawfulness is currently being challenged, the Privacy Shield can still be used to transfer personal data to the United States.

An employer must inform the employee in question (the data subject) that his or her personal data can be transferred to a third country. In limited cases, the data subject's consent can be required.

iii Sensitive data

The processing of personal data that reveals racial or ethnic origin, political opinions, religious or philosophical beliefs, or trade union membership, and the processing of genetic data, biometric data for the purpose of uniquely identifying a natural person, data concerning health or data concerning a natural person's sex life or sexual orientation, are prohibited as the aforementioned are regarded as sensitive data.

This prohibition does not apply when the data subject has given explicit consent to the processing (it is usually not recommended to rely on an employee's explicit consent as the sole legitimate ground in the context of employment) or when the processing operations are necessary to comply with specific rights and liabilities in relation to the employment legislation to which the data controller (the employer) is subject, provided that there is a legal requirement (e.g., requirements regarding safety and security in the workplace).

Social security numbers are not regarded as sensitive data under Luxembourg data protection laws.

iv Background checks

The legislation does not specifically rule, restrict or prohibit background checks on applicants. However, background checks must comply with the general principles resulting from legislation on privacy, protection of personal data and discrimination.

Hence, an employer may conduct background checks only if applicants are informed of the process used, its purposes and the rights relating to the processing of their personal data (e.g., the right to access, rectify, request or erase). Furthermore, the processing operations shall be legitimate, operated loyally and in proportion to the objective sought (i.e., limited to the data directly linked to and necessary for filling the vacant position). The processing of sensitive data such as religious beliefs, political opinions, sexual orientation or ethnicity is subject to very restrictive rules.

The processing of criminal data (i.e., convictions or judicial proceedings) shall be prescribed by law, otherwise it is strictly forbidden. Following the reform of the legislation on criminal records – in force as of 1 February 2017 – an employer may request a job applicant's criminal record under the condition that the request is specified in the job advertisement and is justified by the specific needs of the position. The criminal records of an applicant cannot be kept longer than one month following the conclusion of the employment contract; the criminal records of unsuccessful applicants must be destroyed immediately.

During employment, restrictive rules apply (except where specifically prescribed by law) as the employer cannot request new criminal records unless the employee is assigned to new functions. Specific rules apply for jobs involving regular contact with minors.

XIII DISCONTINUING EMPLOYMENT

i Dismissal

Dismissal with notice and dismissal with immediate effect

An employer can only dismiss an employee with notice or with immediate effect in the following circumstances:

  1. Dismissal with notice: related to an employee's aptitude or conduct, or reasons relating to the operational needs of the organisation, establishment or department (i.e., economic grounds).
  2. Dismissal with immediate effect: in the event of gross misconduct (i.e., conduct that is considered immediately and definitively to make it impossible for the working relationship to continue.

According to labour law, an employer with 150 or more employees must invite any employee affected by a potential dismissal (with or without notice) to a meeting prior to giving notice of the dismissal. A copy of this invitation must be sent to the staff delegation, if any.

If an employee disagrees with the grounds for dismissal, he or she is entitled to bring a claim against the former employer.

Notice period

In cases of dismissal with notice, notification must be sent by registered letter or by a letter for which the employee must sign to acknowledge receipt. The notice period that must be given by the employer depends on the length of service of the dismissed employee:

  1. less than five years: two months;
  2. five to nine years: four months; or
  3. 10 years or more: six months.

Employment contracts or applicable collective agreements may provide for specific notice periods. However, these must not be, in principle, less than the minimum length of notice period provided for by law (as above).

The notice period may be extended in lieu of the payment of a departure allowance provided the employer has fewer than 20 employees and depending on the employee's length of service.

Luxembourg labour law does not provide for a lump sum payment, that is, a payment in lieu of notice. However, an organisation may discharge an employee from the obligation to work for the entire notice period or a part of it. The release date must be included in the letter of termination or in a subsequent letter.

Hiring priority

If an employment contract has been terminated for reasons unrelated to an employee's conduct at work, the employee may request in writing a hiring priority during the 12 months following the date on which he or she left the undertaking. If the employee exercises this hiring priority, the employer is obliged to inform the employee of any vacancy corresponding to that employee's qualifications and to rehire him or her if he or she applies for the position.

Protection against dismissal

Some categories of employees are protected against dismissal and their dismissal may therefore be declared void. For example:

  1. dismissal of a pregnant woman, or dismissal during maternity leave and parental leave (see Section IX);
  2. dismissal of a victim or a witness of sexual harassment;
  3. dismissal based on the marriage of a female employee;
  4. dismissal during a period of sickness (under specific conditions); and
  5. dismissal during the protection period for an employee declared disabled in his or her last position who has been internally professionally redeployed by the Joint Committee.

Dismissal indemnities

At the end of an employment contract, the employee is entitled to:

  1. payment for any remaining untaken annual leave calculated up to the end of the notice period, even if the employee has been released from the obligation to perform active work during the notice period;
  2. the prorated amount of a contractual 13th-month payment or a bonus, provided that the bonus can be considered as being part of the remuneration (i.e., not a discretionary bonus); and
  3. a legal departure allowance (i.e., severance pay) if the employee has at least five years' service within the organisation (excluding dismissal for reasons of gross misconduct).

Settlement agreement

Once a notice of termination has been served on an employee, both the employee and the employer may conclude a settlement agreement under Luxembourg civil law. This agreement settles any existing or potential disputes about the termination.

Settlement agreements are valid only when both parties make reciprocal concessions (e.g., the employer accepts to pay an out-of-court indemnity and in return the employee undertakes to waive his or her right to bring an action against the employer in court). Thus, to be enforceable, the settlement agreement must:

  1. be drawn up in writing, in as many copies as there are parties;
  2. contain reciprocal concessions; and
  3. initiated and drawn up with the full consent of the parties.

ii Redundancies

In the case of individual redundancies on the grounds of a restructuring or staff reduction, the employer must observe the above-mentioned rules for a dismissal. However, specific procedures apply to collective dismissals.

Social plan

For collective dismissals, a social plan must be prepared and negotiated. This procedure applies when an employer with at least 15 employees is contemplating dismissing at least seven employees within 30 days, or at least 15 employees within 90 days, for a reason unrelated to the employees' conduct or behaviour at work, that is, for an economic reason, or in relation to a reorganisation or restructuring.

The collective dismissal rules apply if at least four dismissals are contemplated during the relevant period for reasons unrelated to conduct at work. The employer must then include in the calculation of the threshold for collective redundancies any termination of employment (other than a dismissal) based on economic reasons that it offers as an incentive, such as redundancy for economic reasons by mutual consent and employees retiring for economic reasons before the usual retirement date.

Content of the social plan

The negotiation of the social plan must cover ways of avoiding or reducing collective dismissals and of mitigating the consequences by using social measures for redeploying or retraining employees who are made redundant.

Further, the social plan may, and usually does, contain provisions on outplacement or training measures.

Information and consultation

The employer must inform and consult the staff delegation about any decisions likely to lead to substantial changes in work organisation or contractual relations, including those relating to collective dismissals. In undertakings with at least 150 employees, the staff delegation must be informed and consulted before any decision of an economic or financial nature that might have a determining effect on the structure of the organisation or on the number of employees, such as a restructuring.

After completing the information and consultation process and before entering into negotiations with social partners, or at the beginning of the negotiations of the social plan at the latest, the employer must notify the employee representatives of its intentions to proceed with a collective dismissed.

The employer should provide the following information:

  1. the reasons for the proposed (collective) redundancies;
  2. the number and categories of employees affected by redundancy;
  3. the number and categories of employees working regularly for the organisation;
  4. the period during which the proposed redundancies will take place;
  5. the selection criteria for employees to be made redundant (with the input of the staff delegation); and
  6. the method of calculation of any compensation above the minimum provided for by law, or CBA, if any, or the reason for not awarding any additional compensation.

Notification to the National Employment Agency

At the beginning of the negotiations at the latest, the employer must notify the National Employment Agency in writing of any proposed collective redundancies. The National Employment Agency must then forward this information to the Inspectorate of Labour and Mines.

The employer must also send a copy of the information given to the employee representatives to the National Employment Agency, which will forward the information to the ITM. The employee representatives may notify the National Employment Agency of any observations in relation to the information provided by the employer. These observations will also be forwarded to the ITM.

Protection against dismissal

In addition to the protections against dismissal mentioned in Section XIII.i, during the period of negotiation of a social plan, dismissal for a reason unrelated to the employees' conduct or behaviour at work is void. During the period of negotiation, the employer can notify a dismissal with notice or with immediate effect for reasons related to the aptitude or conduct of an employee.

Payments due in collective dismissals

There are no legal requirements for additional payments in the context of collective dismissals. However, in addition to statutory severance pay, the employer will have to respect any payment commitments made under the social plan (e.g., moving allowance, training allowance, or other financial assistance).

XIV TRANSFER OF BUSINESS

A transfer of undertaking is defined as a transfer of an economic entity that retains its identity and constitutes an organised grouping of resources (notably human and material) with the objective of pursuing an economic activity, whether or not that activity is central or ancillary.

i Employee's rights and protection

In a transfer of undertaking, employment contracts and employment conditions are automatically transferred from the transferor to the transferee. If the transferred employees benefited from the application of a CBA with the transferor, the transferee is required to maintain all the conditions that result from the CBA until the termination date or the expiry date of the CBA, or until the entry into force or the application of a new CBA.

There is no requirement for a transfer to be personally approved by employees.

A transfer of undertaking leads to a restriction on the employer's rights to dismiss employees and to amend a substantial provision of employment contracts to the detriment of the employees.

Neither the transferor nor the transferee can dismiss employees on the grounds of the transfer of undertaking itself. Moreover, the transferor and the transferee cannot justify a modification of a substantial provision of the employment contract that is detrimental to the employee on the transfer itself.

ii Informing and consulting staff representatives

During the transfer of an undertaking, the staff delegation of both the transferor and the transferee must be informed both before and after the decision to transfer is made. If there is no staff delegation, the employees are informed directly.

After the decision to transfer is made, but before the transfer is effective, the transferor and the transferee must disclose the following information to the staff delegation (or directly to the employees):

  1. the fixed or proposed date for the transfer;
  2. the reasons for the transfer;
  3. the legal, economic and social consequences of the transfer for the employees; and
  4. the envisaged measures towards the employees.

When the transferor and the transferee contemplate implementing measures in respect of their respective employees, they must consult their respective staff delegations about these measures in a timely manner.

XV OUTLOOK

i Bill modifying right to leave for family reasons

Bill No. 7489 modifying Articles L. 234-51, L. 234-52, L. 551-2 and L. 552-1 of the Labour Code in respect of leave for family reasons and professional redeployment was submitted to the Chamber of Deputies on 10 October 2019.

The aim of the Bill is to add an exception to the condition relating to hospitalisation if a child, from the age of 13:

  1. receives a special supplementary allowance in accordance with Article 274 of the Social Security Code; or
  2. is suffering from an exceptionally serious illness or impairment, as defined by the Grand Ducal regulation specified in Article L. 234-52 of the Labour Code, confirmed by the child's doctor.

In these two situations, the parent who is an employee would be able to claim their leave entitlement for family reasons, even if their child was not hospitalised.

In addition, the Bill allows both parents to take leave for family reasons at the same time in both the cases described above.

ii Extension of beneficiaries of the right to leave for family reasons

Bill No. 7436 provides for the extension of the circle of beneficiaries of leave for family reasons to grandparents, and amending the Labour Code accordingly.

iii Transposition of EU Directive on posting of workers

Bill No. 7516 on (1) transposition of Directive (EU) 2018/957 of the European Parliament and of the Council of 28 June 2018 amending Directive 96/71/EC concerning the posting of workers in the framework of a provision of services and (2) modification of the Labour Code, was tabled in the Chamber of Deputies on 23 January 2020.

The purpose of the Bill is to codify Directive (EU) 2018/957 modifying Directive 96/71/EC on the posting of workers within the framework of the provision of services into national law and to modify the provisions of the Labour Code relating to posting workers.

According to the government press release, the main purpose of the Bill is 'to consolidate respect for the rights of employees when they are posted in Luxembourg, while also guaranteeing fair competition for businesses'.


Footnotes

1 Guy Castegnaro is the founder and managing partner and Ariane Claverie and Christophe Domingos are partners at Castegnaro – Ius Laboris Luxembourg.

2 Law of 12 April 2019 introducing a time savings account and modifying the Labour Code, the Civil Code and the modified law of 4 December 1967 on income tax (Mémorial A No. 262 of 24 April 2019).

3 Law of 25 April 2019 amending Articles L. 232-2 and L. 233-3 of the Labour Code, and Article 28-1 of the modified law of 16 April 1979 establishing the general status of civil servants (Mémorial A No. 271 of 26 April 2019).

4 Law of 12 July 2019 modifying the Labour Code, the modified law of 31 July 2006 introducing a Labour Code, and the modified law of 19 December 2008 reforming professional training (Mémorial A No. 497 of 12 July 2019).

5 Law of 1 August 2019 complementing the Labour Code by creating a new assistance activity designed to encourage the inclusion in employment of employees with disabilities or in external reclassification (Mémorial A No. 545 of 14 August 2019).

6 Court of Appeal, 28 March 2019, No. CAL-2018-00140.

7 Court of Appeal, 28 March 2019, No. CAL-2018-00558.

8 Court of Appeal, 2 May 2019, No. 45230.

9 Court of Appeal, 6 June 2019 No. CAL-2017-00041.

10 Wage indexation is an automatic mechanism for the adjustment of salaries when the cost of living increases by at least 2.5 per cent. The current index of 834.76 is applicable as of 1 January 2020.

11 Labour Code, Article L. 125-8.

12 Court of Appeal, 13 November 2014, No. 39706.

13 See footnote 10.