I INTRODUCTION

In Luxembourg, the labour court is responsible for resolving employment law disputes and has exclusive competence for all employment law disputes, regardless of the amount at stake. The labour court has jurisdiction for all complementary pension scheme disputes and disputes in relation to an apprenticeship agreement, among others.

There are three labour courts in Luxembourg; one in Diekirch (in the north of the country), one in Luxembourg City (the capital) and one in Esch-sur-Alzette (in the south). Each court covers all towns and cities within to its jurisdiction. To determine which court is competent to rule on a case, one has to verify the jurisdiction in which the employee performed his or her employment contract. If the employee has performed work all over the territory of Luxembourg, the Labour Court of Luxembourg City will have jurisdiction.

The parties do not need to be represented by a lawyer before the labour court. They may either defend themselves or be represented by a lawyer, their partner, a relative in the direct or collateral line up to the third degree, or a person from his or her company, as the case may be. If a party is represented by a person other than a lawyer, the representative will need a special mandate to represent one of the parties before the court.

Generally, a labour court is composed of one professional judge and two non-professional assessors. Litigation with respect to a dismissal is generally submitted to a labour court.

Luxembourg procedural rules provide for certain specific cases in which a labour court's decisions are made by a single judge. This is the case, for instance, concerning requests for reintegration of employees if a dismissal has been considered null and void (e.g., in cases of dismissal during a declared pregnancy, redundancy prior to the signing of a social plan or dismissal of a staff delegate), or in the case of a request for unemployment benefits following a dismissal with immediate effect or (since 2018) a resignation with immediate effect.

Proceedings before the labour court are oral, meaning that, in principle and except for the document introducing proceedings and the documentary proof, no written documents are submitted to the court and all arguments must be developed orally. Hence, the court will take into consideration and base its decision solely on what has been orally discussed between the parties during the pleadings.

If a party is not satisfied with a decision of the labour court, it may lodge an appeal up to 40 days after the notification of the judgment. Even though the Luxembourg territory has three different labour courts, it only has one court of appeal, which deals with any challenged judgment of the labour courts. The challenging party needs to introduce its appeal against the labour court's decision before the Luxembourg Court of Appeal, which includes two chambers that are exclusively competent to deal with labour law-related disputes.

Unlike the conduct of proceedings before the labour courts, proceedings before the Court of Appeal are made in writing and require the parties to be represented by attorneys-at-law to defend their respective interests. In written proceedings, the legal arguments are expressed through written submissions called 'conclusions', which are notified by the concluding lawyer to his or her constituted opponent. Through these conclusions, the parties alternatively take a position on the arguments and merits developed by their opponents.

As proceedings before the labour courts, and especially before the Court of Appeal, may prove to be cumbersome and may take several months, it is common practice in Luxembourg to solve disputes extrajudicially by way of a settlement agreement.

Finally, it should be noted that although Luxembourg employment law may be considered business-friendly, some of the Labour Code provisions are set out in a framework that is more favourable to employees than employers, given that employees are considered to be the 'weaker party' in the employment relationship, because of their subordination to the employer within the performance of their employment contract. Consequently, if there is any doubt, labour courts tend to rule in favour of employees.

As a general rule, no government bodies or quasi-government bodies assist in resolving employment disputes. In this respect, it should merely be noted that employees dismissed with notice are entitled to employment benefits if they are resident in Luxembourg and fulfil the applicable conditions. Employees residing in Luxembourg who are dismissed with immediate effect may file a request for unemployment benefits. In cases of dismissal, Luxembourg's Employment Development Agency (ADEM) must also be present, or represented, during related court proceedings, as one of its objectives is to pay unemployment benefits to the employee. If the termination is declared wrongful by the court, the employer will have to reimburse the ADEM with any unemployment benefits the employee received during the proceedings.

II PROCEDURE

i Process for resolution of individual actions and labour disputes

Individual disputes are conducted separately between an employer and an employee. Even if several employees have the same conflict with their employer, each employee will take legal action individually by bringing his or her own action. There is no collective action (i.e., class action) under Luxembourg law. Each procedure will thus be treated as a separate, individual case.

Before bringing an action before the labour court, employers and employees can try to reach an agreement, either by negotiating on their own or through public authorities in certain specific cases.

There are four public authorities that intervene in employment cases: (1) the labour courts (even though it is rare for a dispute brought before the court to result in conciliation, it should be noted that the judges have the preliminary task of reconciling the parties); (2) the Individual Conciliation Body, which was created in 2007 and can be consulted by mutual agreement between the parties to the dispute before legal proceedings are initiated to reach a settlement, although at present this body is not yet operational; (3) the Litigation Commission, whose role is to try to attempt mediation at the pre-claim stage in the area of apprenticeships; and (4) the Labour Inspectorate, whose role at the pre-claim stage is to intervene informally by hearing the parties' explanations and attempting to find an extrajudicial solution.

In practice, the most common way to end litigation in an extrajudicial manner is to settle. In labour law, the settlement is a contract concluded by and between the employer and the employee to end any dispute (mostly in connection with the termination of an employment relationship), agreeing to make mutual concessions and covenants. Once the parties have reached a settlement, they can no longer bring an action before the labour court to resolve the questions raised in the settlement. Furthermore, the settlement agreement is strictly construed and relates only to the points it explicitly addresses. The parties can only take legal action to compel the other party to comply with the terms of the settlement agreement.

When individual disputes cannot be resolved before litigation, employers and employees must bring their actions before the labour court. In addition to the employer and employee, other parties may be involved. This is the case when, at the end of the procedure, the employer or employee is likely to have to reimburse unemployment benefits. In this case, the Luxembourg state intervenes and becomes a party to the dispute. Trade unions may also intervene if they are signatories to a collective bargaining agreement applicable to the employee who initiated the dispute and if the outcome of the case may be of collective interest to the members of the trade union.

Proceedings are initiated by the employer or employee (usually through a lawyer) by filing a simple request with the court clerk's office in as many copies as there are parties. It is not necessary, as in other proceedings, to notify the opposing party by bailiff of the filing of such a request. The court clerk's office will then contact the opposing party. The parties will subsequently be summoned to a first hearing, at which the hearing date will be set for oral pleadings. Cases are rarely pleaded at the first hearing.

There is also a rapid procedure, known as summary proceedings, which must be introduced before the president of the labour court (this mostly applies in cases of unpaid wages). This procedure is generally aimed at allocating a provision on a determined amount. The president of the labour court grants such a provision only in the absence of serious contestation (otherwise the president must automatically declare that he or she lacks competence and the case will be subject to the proceedings on the merits in accordance with the standard procedure).

Other specific procedures, subject to special rules, also exist, in particular an action for nullity of a dismissal for certain specific employees (e.g., pregnant employees, employees benefiting from professional reclassification and staff representatives) or action for interim maintenance of remuneration for protected employees who have been suspended.

Actions for payment of remunerations are barred after three years from the date on which the payment is due.

There are specific evidentiary requirements with regard to dismissals. The employee must prove that a valid employment relationship existed, that a dismissal has taken place (this is a challenging question specifically in the case of oral dismissal). The employee must also establish the damage caused by the dismissal and demonstrate that active steps have been undertaken to find a new job. The employer must prove that the reasons for the dismissal are precise, serious and real.

ii Process for resolution of collective actions and labour disputes

Collective actions are of two kinds: the promotion of rights (aiming to ensure that the employer complies with positive law) and the struggle for rights (aiming to improve an existing situation).

Collective actions do not fall within the jurisdiction of the labour courts but lead to a conciliation procedure before the National Conciliation Office (ONC). When conciliation fails, it remains possible for employees to go on strike (although strikes are rare in Luxembourg). According to case law, a strike is lawful if it takes place once all possible conciliation means of settling conflicts have been exhausted and provided that a report of non-conciliation has been duly established.

There are three categories of collective disputes, subject to three different conciliation procedures: (1) disputes relating to working conditions; (2) disputes relating to collective bargaining agreements, in particular when the employer refuses to enter into negotiations or when negotiations do not result in a concrete result; and (3) disputes relating to collective dismissal, when the parties cannot reach an agreement on a social plan within the legally set conditions.

Disputes relating to working conditions

The ONC has jurisdiction to resolve collective disputes concerning working conditions (i.e., genuinely collective disputes concerning the collective interests of all, or most of, the company's staff), and disputes arising from problems of organisation, reorganisation or restructuring of the company that have an impact on the working conditions of all, or most of, the company's staff.

The ONC is composed of a president (the Minister of Labour), a joint committee composed of eight assessors (four employee representatives and four employer representatives) and an administrative service. The joint committee is assisted by delegates who are directly involved in the matter and who represent the employer or the employee of the company concerned respectively. This should allow the assessors to decide in full knowledge of the facts.

The employer or the representatives of the employees concerned in the dispute must refer to the ONC by submitting a written request stating the reasons for the referral and including any relevant documentation. The request must be accompanied by a file specifying the subject matter of the dispute and its context. The president of the ONC may request additional documents and forward the file to the members of the joint committee so that it can decide whether the file is complete and can be submitted for conciliation.

The joint committee investigates the case and then meets in camera for the first time no later than two weeks after the date on which the dispute was referred to the ONC. The two groups of assessors may jointly formulate a conciliation proposal. The relevant vote shall be taken by a group with a majority of the votes cast. If this proposal is rejected by at least one of the parties, the president may submit a proposal on his or her own initiative. The rejection of this proposal by at least one of the parties shall be deemed to constitute a declaration of non-conciliation. In the event of non-conciliation, the parties may decide to start a strike. In that respect, it should be noted that an employee's participation in a lawful strike does not constitute valid grounds for dismissal.

Disputes relating to collective bargaining agreements

During the term of a collective agreement, the parties are obliged to refrain from strikes and lockouts. Collective disputes regarding employment matters that are not subject to a collective agreement, or regarding the failure of the parties to reach a collective agreement (including cases in which an employer refuses to engage in collective bargaining when properly requested to do so), must be referred to the ONC before any party to the dispute can take industrial action. During the ONC conciliation process, the parties to the dispute must not hold a strike or lockout.

In disputes relating to collective bargaining, a first conciliation meeting must generally be held by the first day of the sixth week after the date on which the dispute was referred to the ONC.

During the conciliation process, the ONC will seek to broker an agreement between the parties to the dispute. Conciliation ends when a collective agreement is reached, or it is agreed unanimously that conciliation has failed. If no settlement has been reached 16 weeks after the first conciliation meeting, any party to the dispute may declare the conciliation to have failed. When conciliation fails, the ONC draws up a statement of the points still in dispute.

When conciliation fails, any party to the dispute may commence industrial action.

If conciliation fails, either party to the dispute may, in the following two weeks, ask the government to nominate an arbitrator (even while industrial action is under way). The government will then propose an arbitrator to the parties within two weeks of the request. The parties then have two weeks to accept or reject the arbitrator. If both parties accept, the arbitrator will make an arbitration award, which is binding on the parties and has the effect of a collective agreement.

Disputes relating to collective dismissal

Collective redundancies are defined as dismissals made by the employer, for reasons not inherent in the employees concerned, affecting at least seven employees over a period of 30 days or at least 15 employees over a period of 90 days.

Before initiating collective redundancies, an employer must hold negotiations with employee representatives with a view to reaching agreement on a 'social plan'. The negotiations must deal with means of avoiding the redundancies or reducing their number and of mitigating the consequences by recourse to accompanying social measures aimed, notably, at helping to redeploy or retrain redundant employees and to return them to the labour market immediately.

For the purposes of the negotiations for a social plan, the employee representatives are the employee delegation (an employee representative body that must be set up in all establishments employing 15 or more employees), the joint company committee, if one exists (enterprises with 150 or more employees are obliged to set up such a committee) and, in certain circumstances, trade unions.

If, after 15 days have passed since the negotiations started, no agreement on a social plan has been reached, the parties must draw up a document setting out their respective positions on the various issues negotiated and submit it to the public labour authorities. Then, within three days, the parties must jointly refer the matter to the ONC. Within two days of being notified, the ONC will invite representatives of the parties to a meeting, which must take place within three days of the invitation. The conciliation process, aimed at brokering agreement on a social plan, lasts a maximum of 15 days from the first meeting.

The employer may not notify employees affected by the planned collective redundancies of dismissal before a social plan is agreed or, where agreement is not possible, before the end of the conciliation process involving the ONC. Any notice of redundancy issued before the agreement is signed, or the process ends, is null and void, and any employee dismissed in these circumstances can obtain a court order to this effect under an expedited procedure.

When an employer notifies an employee of dismissal as part of a collective redundancy, the minimum period before the dismissal may take effect is generally 75 days – the public authorities may extend this to 90 days in some circumstances. If employees are entitled to a longer notice period by law, or as a result of their employment contract or an applicable collective agreement, this longer notice applies.

At the latest, at the time when it begins negotiations with employee representatives for a social plan, an employer contemplating collective redundancies must notify ADEM in writing, providing the same information that it is required to be given to the employee representatives (see above). The employer must give a copy of this notification to the employee representatives, who may make any observations they have about the planned redundancies to ADEM.

Furthermore, employers with 15 or more employees are obliged to report all redundancies to the national tripartite Economic Committee. If an employer reports more than five redundancies over a period of three months, or eight redundancies over a period of six months, or if the Committee foresees financial or economic difficulties at the company, the Committee can ask the employer and employee representatives to negotiate a job protection plan aimed at preventing further job losses. For the purposes of the negotiations, the appropriate employee representatives may be employee delegations, the joint company committee or trade unions. An employer or employee representatives may also take the initiative to negotiate a job protection plan, if they envisage financial or economic problems that may have a negative effect on employment.

The negotiations for a job protection plan must cover broadly the same issues as those covered for a social plan to accompany collective redundancies (see above), plus several additional topics, such as special measures for older employees. There is no obligation or deadline to reach an agreement on a job protection plan. If the negotiations lead to an agreement, that agreement must be sent to the Economic Committee, which will pass it on to the public authorities for approval. If a job protection plan is approved, the employer benefits from certain advantages, such as training subsidies and partial reimbursement of early retirement costs. Further, employers that are covered by an approved job protection plan are not required to negotiate a social plan if they proceed with collective redundancies in the six months following the approval of the job protection plan.

III TYPES OF EMPLOYMENT DISPUTES

i Dismissal matters before Luxembourg courts

Most of the court proceedings in Luxembourg handle unfair dismissal matters.

According to labour law provisions, an employee who is dismissed with notice may request within one month of the notification of the dismissal to be provided with the reasons for the dismissal (Article L124-5 of the Labour Code). Within one month of receipt of the request, the employer must provide the employee with the reasons for the dismissal, which must be precise, serious and real. Upon receipt of those reasons, the dismissed employee has three months to challenge the dismissal before the court or to formally challenge the dismissal. If the employee formally challenges the dismissal, he or she will have one year from lodging a formal complaint to challenge the dismissal in court.

If the employee files a claim before a given court, the court will analyse whether the reasons for the dismissal are sufficiently precise, serious and real. If the court does not consider the reasons to be sufficiently precise, serious or real, it will declare the dismissal wrongful, thereby entitling the employee to damages.

In the event of unfair dismissal, the amount of the damages awarded by a court depends on the actual prejudice suffered by the employee as a result of the termination of his or her employment.

A distinction needs to be made between material prejudice and moral prejudice.

Material prejudice

The period between the date of termination and the date on which the employee has either found new employment or should have found new employment constitutes the reference period, which the labour court will set in the event that it declares the dismissal to be wrongful.

If the employee has not been able to find new employment, the duration of the reference period is determined by the courts based on different criteria, such as the duration of the notice period (if the employee has been exempted from work during the notice period, the notice period will be set off against the reference period), the employee's seniority, age, expertise, ability to find new employment and the situation on the employment market.

Throughout the reference period, the employee is entitled to damages for an amount equal to the compensation that the employee would have earned if he or she had not been dismissed. Unemployment benefits or income derived from a professional activity conducted by the employee during the reference period must be set off against the amount of damages. If the dismissed employee is living in Luxembourg, he or she will be entitled to unemployment benefits that will be paid by the Luxembourg state. If the termination is declared unfair, the employer will be ordered to reimburse to the Luxembourg state the amount of unemployment benefits awarded to the employee during the reference period.

Moral prejudice

In addition to material damages, the employee may be awarded damages to compensate for the moral prejudice suffered. In this respect, the circumstances surrounding the termination and the inconvenience caused to the employee (for example, in light of the employee's seniority, age or ability to find new employment) because of the termination of the employment constitute the key criteria. This assessment will be made by the courts on a discretionary and case-by-case basis.

ii Moral and sexual harassment claims

There has been a noticeable increase in claims before the labour courts relating to moral harassment in the workplace.

Dismissed employees frequently make these claims together with a request for financial compensation for unfair dismissal.

Although the Labour Code provides a framework for sexual harassment claims, despite the increase in moral harassment (or mobbing) claims before the courts, there is no legal framework as yet under Luxembourg law. Only one collective agreement has been concluded with the Luxembourg trade unions with respect to harassment and violence in the workplace. Consequently, decisions on moral harassment are made on the basis of this convention and on the basis of Article 1134 of the Luxembourg Civil Code, according to which contracts must be executed in good faith.

It is very likely that because of the increase in harassment cases and the very few provisions that exist in this respect, the Luxembourg legislator will update existing laws and regulations on this matter.

iii Recharacterisation of the employment contract

Employment contracts are normally drawn up for an unlimited period, meaning that fixed-term employment contracts should be the exception. In this respect, the Luxembourg labour law provisions further foresee, among other things, that the reasons for recourse to a fixed-term employment contract must be precisely indicated in that contract. Moreover, the maximum duration of the employment contract shall be 24 months.

As these conditions are very often not respected, employees frequently request before the courts a recharacterisation of their fixed-term employment contract as an open-ended employment contract.

IV YEAR IN REVIEW

i Significant legal developments

Luxembourg labour law is in constant development for adapt itself to the changing circumstances of the social environment. In the past three years, several important legal developments have occurred, with the aim, among other things, of providing employees with a better work–life balance and to improve the quality of life in general.

Accordingly, the legal changes of the preceding years have resulted in several important court decisions, changing previous rulings and hence amending the general understanding of certain matters and aspects of Luxembourg labour law.

The time savings account

The Law of 12 April 20192 introduced 'time savings accounts' (CET) to the private sector. A CET allows an employee to accumulate paid leave on an ongoing basis to be used, for example, to organise longer periods of leave (on a full-time or part-time basis), to carry out a personal project or to follow vocational training. The establishment of a CET is at the discretion of the employer but can only be done within the framework of a collective agreement.

Employees with at least two years' tenure in the company can contribute to their CET. The CET is supplied in hours and is limited to 1,800 hours or 45 weeks at 40 hours. Upon the employee's written request, the CET can be supplied with several types of hours (overtime hours, unused days of recreational leave, compensatory days granted following work on Sundays or public holidays falling on a Sunday, etc.)

Each employee can freely use his or her CET by making a prior written request at least one month in advance. The use of rights accrued on the CET is considered working time.

One additional day of annual paid leave and one additional public holiday

The Law of 25 April 2019, amending Articles L. 232-2 and L. 233-4 of the Labour Code3 increased the minimum paid annual leave from 25 days to 26 days and declared 9 May to be a new public holiday in Luxembourg, increasing the total of public holidays to 11 days per year. The date of entry into force of the Law has been set retroactively to 1 January 2019.

Increase of the minimum wage

The Law of 12 July 2019 amending Article L. 222-9 of the Labour Code applied retroactively from 1 January 2019. From 1 January 2019, the minimum social wage increased by 0.9 per cent. The new legal provisions entail an increase in the minimum wage for unskilled workers from €2,071.10 gross (index 814.40) to €2,089.75 gross (index 814.40).

Index increase

Since 1 January 2020, the index applicable to employees' wages has been increased from 814.40 to 834.76 this results in a 2.5 per cent rise in the gross salary paid to employees with employment contracts that are subject to Luxemburg law.

Henceforth the minimum wage for unskilled workers, which was previously €2,089.75 gross, will now be €2,141.99 gross, which represents a gross increase of €52.24.

Qualified employees who previously received a minimum wage of €2,507.70 gross also had their wages increased in the same proportion to €2,570.39 gross as of 1 January 2020 (i.e., a gross increase of €62.69).

ii Significant case law

Further to recent legal changes, notably following the reform of parental leave, the Labour Court of Luxembourg City maintained its position that protection against dismissal was inapplicable in cases of total cessation of the activities of the employer. On another note, the Luxembourg Court of Appeal restated its lack of competence in terms of social mandate in the absence of a subordinate relationship.

Labour Court of Luxembourg City, Order of 16 August 2019, Docket No. 2658/2019

This decision recalls that the special protection against dismissal during parental leave provided for in Article L. 234-47 (8) of the Labour Code 'is inapplicable in the event of the total cessation of the activity of the Luxembourg branch of a company governed by foreign law, if the employment contract stipulates that the workplace of the employee benefiting from parental leave is located exclusively at that branch'.

The Labour Court of Luxembourg held that 'it must be considered, on the one hand, that the employer's right to close a branch takes precedence over the right granted to an employee on parental leave and, on the other hand, that the employee cannot claim to maintain employment relations if he has been assigned exclusively to that branch'.

In the present case, the applicant was dismissed by registered letter during the applicant's parental leave and brought an application for a declaration that the dismissal was null and void and for an order that the employment contract be maintained. Since the applicant was exclusively assigned to the service of the Luxembourg branch, which had definitively ceased its activities in Luxembourg with the resultant dismissal of all employees for economic reasons, the applicant's request was denied.

Luxembourg Court of Appeal, Judgment No. 90/19 of 27 June 2019, Docket No. CAL-2018-00011

This decision recalled that:

the employment contract is defined as the agreement by which a person undertakes to place his or her activity at the disposal of another, under whose subordination he or she places him- or herself, for remuneration, with the consideration that for there to be a relationship of legal subordination the contract must place the employee under the authority of his or her employer who gives orders concerning the performance of the work, monitors performance and verifies results. The existence of an employment contract depends neither on the will expressed by the parties nor on the name or qualification they have given to their agreement, but on the factual conditions in which the employee's activity is carried out

and that

taking into account the absence of any written employment contract and the respondent's objections as to the existence of an employee activity in the appellant's favour, it is for the appellant, who relies on it in support of his request, to establish its reality4

In this particular case, the appellant had been appointed chief executive officer of a company by the company's management board, and was responsible for the day-to-day management with general power of attorney. The Court of Appeal found that the appellant had received from the management board, in its capacity as representative of the company, a mandate to carry out the day-to-day management and to represent it. Contrary to what the appellant argued, the Court of Appeal considered that '[t]he pay sheet for [the appellant's] remuneration, as well as the fact that he benefited from a supplementary pension and a certain number of days of leave are not sufficient to establish, in the absence of any other evidence, that there was a relationship of subordination between the appellant and the respondent as an agent and his principal could freely agree on remuneration and the conditions under which the mandate must be exercised.'

The Court of Appeal also found that the appellant 'organised his own working time by not reporting to anyone, that he did not inform his colleagues of his absences, nor of their cause or duration, and that it was only following complaints from his colleagues (of whom he was the superior according to the organisation chart provided by the respondent) that the management board was informed of his absences and inappropriate behaviour'.

The Court of Appeal thus concluded that the appellant had failed to establish that he had performed the day-to-day management of the company in the context of a subordinate relationship.

V OUTLOOK AND CONCLUSIONS

In practice, employers tend to avoid court proceedings unless there is a matter of principle at stake. Hence many labour law cases are resolved by way of a settlement, particularly as a lawsuit may damage the reputation of both the employee and the employer, and sensitive information or sensitive incidents are likely to be debated in public hearings. In particular, in the event of dismissals, employers tend to favour settlements. Hence, we may expect to see more extrajudicial resolution of disputes in the coming months.

Otherwise, given the fact that Luxembourg is a stable country in which labour law is not over-regulated, no major upheavals are expected, either in procedure or litigation activity.


Footnotes

1 Philippe Schmit is a partner at Arendt & Medernach.

2 Law of 12 April 2019 introducing a time savings account and amending the Labour Code, the Civil Code and the amended Law of 4 December 1967 concerning income tax.

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 amended Law of 16 April 1979 establishing the general status of civil servants.

4 Luxembourg Court of Appeal, Judgment No. 90/19 of 27 June 2019, Docket No. CAL-2018-00011, page 3.