Calculating size of workforce
Inclusion of group companies
Other factors in preliminary interview requirement
Under Luxembourg's employment law regime, the requirement to conduct a preliminary interview is intended to prevent hasty and unconsidered dismissals by providing for a conciliation process through dialogue between employer and employee.(1) The employer must indicate the reasons that justify the contemplated termination of the employment contract, while the employee has an opportunity to explain his or her position.(2)
If the employer fails to follow this procedure, it may be ordered to pay the employee up to one month's salary in compensation, provided that the dismissal is held to be justified.(3)
It is therefore important to be aware of the circumstances in which dismissal must be preceded by a preliminary interview. In general, employers must summon an employee to a preliminary interview before terminating the employment contract if the company employs 150 employees or more. However, in certain sectors (eg, banking) the threshold is 100 employees.
It is the employer's responsibility to verify the number of its employees for the purpose of assessing whether a preliminary interview is required. The relevant number of employees is the number on the day on which the employee is summoned to the preliminary interview.(4)
All employees who are bound by an employment contract with the company must be taken into account, including employees on part-time or fixed-term contracts and employees on maternity or parental leave. However, employees who are within their trial period are not included, as their employment contracts are not yet definitive. In addition, apprenticeship contracts are not regarded as employment contracts.
If a dismissed employee considers that his or her dismissal should have been preceded by a preliminary interview, he or she has recourse to the labour court. The onus is then on the employer to prove how many people it employed at the relevant time. This evidence may notably be documented by a certificate issued by the social security authorities.(5)
Inclusion of group company employees
If a company has strong connections to other entities in the same group, all employees of the various companies - whether such companies are established in Luxembourg or abroad - must be included for the purpose of calculating the number of employees. Companies that are closely linked in this way are considered to constitute a 'single economic and social unit' (a term which implies among other things, strong interconnections in terms of power of direction across the different legal entities and identical, similar, complementary or common terms and conditions of employment). Such entities may have autonomous or distinct legal personalities; however, they will be deemed to be a single unit if one or more circumstances indicate that:
- the individual units do not exercise independence or autonomy in practice;
- they are subject to a single power of direction and undertake identical or complementary activities; and
- the employees are connected by identical, similar or complementary interests and, in particular, a comparable social status.(6)
In order for a group of companies to be regarded as a single unit for such purposes, the corporate and economic criteria must be met on the basis of a number of indicators, rather than a sole characteristic. It will be relevant to consider aspects such as:
- shared or complementary infrastructure;
- a collective, complementary or coordinated strategy;
- the same management or shareholders (or a complementary or interrelated management or shareholding structure); and
- shared staff.
The courts will consider the existence of such a unit on a case-by-case basis and in concrete terms, taking into account the way in which the company functions and is organised in practice.
Key indicators of shared management include shareholdings by the same entities, management functions that are conducted from the same location and the same chairman of the board.(7)
The activities undertaken must be identical and complementary(8) - these two conditions are cumulative.
Employees may be regarded as forming a single workforce on the basis of:
- identical or similar terms and conditions (eg, an identical or similar collective bargaining agreement);(9) or
- frequent transfers (or potential transferability) of employees between the companies.(10)
In particular, the following elements(11) will be considered:
- the existence of a single and centralised management function to monitor and manage staff throughout the corporate group;
- the transferability of staff and the use of frequent employee transfers between group companies;
- a single collective bargaining agreement for the group; and
- the implementation of an internal procedure whereby the holding company can intervene in all terminations of employment contracts.
Other factors in preliminary interview requirement
The termination of any employment contract, whether with notice or with immediate effect, must be preceded by a preliminary interview if the employer's staffing level exceeds the threshold determined by the law or the relevant collective bargaining agreement. However, the employer is not required to arrange a preliminary interview when terminating with notice an employee within his or her trial period, since no grounds need be given for such a termination. Even if the employee asks the employer to justify its decision, it is not required to do so. As a result, there is no requirement to hold a preliminary interview to discuss the reasons for the termination.
Reasons must be given for the termination of an employee's trial period for gross negligence or misconduct. Therefore, termination in these circumstances must be preceded by a preliminary interview, so that both sides have an opportunity to discuss their grievances. The same principle applies to the termination with immediate effect of either a fixed-term or non-fixed-term employment contract or a trial period.(12)
Once it has been established that the employee must be summoned to a preliminary interview, the employer is bound by certain requirements in terms of the form, content and timing of both its communication with the employee and the interview itself, as provided by Article L124-2 of the Labour Code or by the collective bargaining agreement.
For further information on this topic please contact Guy Castegnaro or Ariane Claverie at Castegnaro by telephone (+352 26 86 82 1), fax (+352 26 86 82 82) or email ([email protected] or [email protected]).
(1) Court of Appeal Decision 24622, April 11 2002.
(2) Article L124-2 of the Labour Code.
(3) Article L124-12 of the code essentially provides that if a dismissal is declared unfair, the employer must compensate the employee for moral and material damage suffered as a result of his or her unfair dismissal. However, the employee is not entitled to compensaction specifically for the employer's failure to compy with the preliminary interview requirement. If the dismissal is found to have been based on valid reasons, but the employer failed to comply with the preliminary interview requirements, the employer may be ordered to pay up to one month's salary.
(4) Court of Appeal Decision 34937, March 31 2011. This decision established that the day of the dismissal is the relevant point in time, not the first day of the month in which the dismissal occurred.
(5) Court of Appeal Decision 35321, June 17 2010.
(6) Article L161-2 of the code.
(7) Court of Appeal Decision 23315, May 11 2000.
(8) Court of Appeal, March 4 1999, Noack/Promarkt Elektrohandel sàrl, in Pasicrisie, 31, p 117.
(9) Administrative Court Decision 11081C.
(10) Court of Appeal Decision 16466, November 30 1995. This decision established that a collective bargaining agreement which regulates the employment contracts of the employees of all the companies of the group provides for all of them the possibility to be transferred from a company to another. As a result, it is obvious that as regards the narrow link between the different companies, the latter altogether constitute an economic and social unit .
(11) Labour Court Decision 900/99, February 2 1999, and Court of Appeal Decision 23315, May 11 2000, in the same case.
(12) Court of Appeal Decision 24050, December 21 2000; Court of Appeal Decision 23773, July 5 2001.