Redeployment by customer
Dismissal by customer
Consultation and notification requirements
Service provider offering jobs to customer's employees
Service provider's employees found to be customer's employees
Respective liabilities
Luxembourg has no specific legislation on the impact of outsourcing on employees. However, if a service is outsourced, there may be circumstances in which the EU law on transfers of undertakings applies. This law is implemented in Luxembourg by Articles L127-1 to 127-6 of the Labour Code. Consideration should be given as to whether the law applies. Some collective bargaining agreements may provide specific rules that apply to outsourcing.
The customer may consider whether employees can be redeployed within the customer entity or the service provider. An agreement may be reached between the customer and the service provider to the effect that all or some of the customer's employees will be hired by the service provider under working conditions to be determined by agreement. The employee is entitled to refuse to work for the service provider.
The customer's employees have no right to transfer to the service provider; they may be redeployed or made redundant. In the latter case, the normal redundancy rules will apply. The employer must have real and serious reasons to dismiss employees who carry out the service in question. Luxembourg case law has established that the employer has the authority to manage itself and to make unilateral decisions regarding its functions, organisation and economic policy; it can make changes at whatever time it deems appropriate. A judge cannot assess the measures taken by the customer, irrespective of their impact on the customer's employment levels.
Employees in these circumstances benefit from the rights and protections provided by the Labour Code in relation to redundancy (ie, notice period and severance). If the thresholds are met, the provisions for collective redundancies will apply (and negotiations for a staffing or layoff plan will take place). If outsourcing results in a change in headcount, this may have consequences for the employees' rights in future (eg, the obligation to have employee representatives or to comply with the procedure for a preliminary meeting in the event of dismissal).
Consultation and notification requirements
The customer and the service provider are required to inform and consult staff representatives if the outsourcing will have an impact on the conditions, structure and probable growth of employment within the company. They must also inform and consult staff representatives on potential anticipatory measures, particularly where there is a threat to employment or where the outsourcing will lead to substantial changes in the organisation of work or in contractual relations. This information and consultation procedure must take place before the decision to outsource is made. However, if the employee representatives disagree with the plans, the employer is not bound by their opinion.
Service provider offering roles to customer's employees
The service provider is free to offer roles to employees who have been made redundant as a result of the outsourcing process, and to offer them new terms and conditions. Continuity of employment is not preserved in this case, but the customer's employees are free to accept the service provider's offer.
Service provider's employees found to be customer's employees
Although it is unlikely, the service provider's employees may be found to be the customer's employees if the performance of the contract to provide services, as concluded between the customer and the service provider, results in the customer being the actual employer (eg, where it gives detailed instructions or determines working hours).
Failure to inform and consult is a criminal offence, punishable by a fine of between €251 and €15,000.
If a dismissal is found to be unfair, the employer is liable to compensate the employee for material and non-material harm suffered, based on the factors of age, function, economic context and the state of the employment market.
Where provisions in relation to collective redundancies apply and the employer fails to comply with the procedure laid down by the Labour Code, it will be required to declare the dismissal null and void or to pay compensation, depending on the material or non-material harm suffered by the employee based on the criteria mentioned above.
For further information on this topic please contact Christophe Domingos at Castegnaro by telephone (+352 26 86 82 1), fax (+352 26 86 82 82) or email ([email protected]).
An earlier version of this update previously appeared in Outsourcing and Employment: An International Guide, published by IusLaboris in 2011.