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Year in review

i Significant legal developments

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

Accordingly, these legal changes 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.

Reform of the social dialogue

The Law of 23 July 2015 on the reform of social dialogue, which significantly modified staff representation within companies, is being implemented in two stages: certain provisions entered into force on 1 January 2016 and the remainder take effect after the social elections, currently scheduled for 12 March 2019.

To avoid a clash with the parliamentary elections that were held in October 2018, the Law of 7 May 2018 amending the Labour Code and the amended Law of 4 April 1924 establishing professional chambers on an elective basis, effective as of 18 May 2018, put the social elections back to 12 March 2019.

Members of employee delegations, safety delegates and equality delegates benefit from special protection from dismissal during their term of office and for six months afterwards. One of the main innovations of this reform is that a staff delegate who is dismissed despite the protection provided for by law, will be granted an option that did not exist under the former statutory provisions: he or she can either request cancellation of the dismissal and his or her reinstatement, or damages for unfair dismissal.

The former legislation provided for a specific procedure for suspending a staff delegate from work and for requesting the labour court to terminate the employment contract in cases of serious misconduct. The social dialogue reform adapted a procedure whereby the employer is obliged to inform the concerned employee in precise terms about his or her relevant misconduct, and the circumstances that make this misconduct a serious ground for termination. The staff delegate, even though suspended, will continue to be paid during the first three months of the suspension, after which he or she will have to request the continued payment of his or her remuneration from the president of the labour court until the final decision regarding the termination of the employment contract.

Further to the social dialogue reform, staff delegates now benefit, inter alia, from increased paid leave to fulfil their duties as staff delegates, in companies with at least 150 employees, and from increased opportunities to seek the assistance of external counsellors and experts (henceforth in companies of 51 employees or more).

Regarding the forthcoming effects of this reform, joint company committees will cease to exist after the next social elections (currently scheduled for 12 March 2019) and their tasks and duties will be transferred to the staff delegates (in companies with at least 150 staff) during the 12 months preceding the first day of the election announcement. The staff delegates will have new functions and their powers will be extended. The central and young-employee delegates will also cease to exist after the social elections.

Reform concerning the early retirement solidarity scheme

The law of 30 November 2017 provides that as from 1 July 2018, only three early retirement schemes are applicable. As from that date, the remaining schemes provided for by law are (1) the early retirement adjustment scheme, (2) the early retirement of shift workers and night workers scheme, and (3) the phased retirement scheme.

To benefit from one of these schemes, a minimum of five years' employment with the applicant company is required, in principle. Furthermore, the period of compensation for early retirement has been limited to three years, bearing in mind that it will end in any event at the age of 63 years.

Regarding the early retirement allowance, this will be calculated over the last 12 months of employment.

Reform of the provisions on family carer leave, maternity leave and special leave

The Law of 15 December 2017, which came into force on 1 January 2018, amended the provisions of leave for personal reasons.

Previously employees were entitled to two days of family carer leave per year and per sick child under the age of 15, without being able to accumulate leave days over several years.

Under this new law, a 2018 plan has been established, which grants parents:

  1. 12 days per child aged up to four years (not yet attained);
  2. 18 days per child aged between four and 13 (not yet attained); and
  3. five days per child aged between 13 and 18 (not yet attained).

It is now possible to split and carry forward leave under each category to the following year.

With regard to maternity leave, the Law of 15 December 2017 amended the Labour Code by increasing postnatal leave, hence granting 12 weeks leave to every woman who gives birth, instead of only eight weeks as previously foreseen by the legal provisions.

The Law of 15 December 2017 further modified the duration of leave for certain types of special leave. Accordingly, as from 1 January 2018, an employee is entitled to:

  1. one working day for the bereavement of a second degree relative of either the employee or his or her spouse or civil partner (unchanged);
  2. five working days for the bereavement of a minor (leave which previously did not exist);
  3. three working days for the bereavement of a spouse, civil partner or a first degree relative (unchanged);
  4. 10 working days for paternity leave, which have to be taken at one time and immediately after the child's birth. Previously, employees were only entitled to two working days of paternity leave;
  5. 10 working days for adoption leave when adopting a child below the age of 16. The 2017 Plan only granted employees two working days for adoption leave;
  6. one working day for each parent in the event of their child's marriage (reduced from two working days);
  7. two working days within a three-year period for moving house;
  8. three working days in the event of the employee's marriage (previous dispositions granted six working days); and
  9. one working day in the event of the employee's civil partnership ceremony (reduced from six working days).

Although the 2017 Plan granted employees two working days in the event of their child's civil partnership declaration, the 2018 Plan removed this provision.

Reform of the guaranteed minimum income and the minimum social wage

The Law of 28 July 2018 on social inclusion income (the 2018 Law) entered into force on 1 January 2019. The social inclusion income (also called Revis) replaces the previous guaranteed minimum income. The 2018 Law sets out the conditions for benefiting from Revis and notably foresees, as a preliminary condition, that the applicant must be registered as a job seeker with ADEM. As of 1 January 2019, the National Solidarity Fund is solely in charge of examining, granting and managing claims and pay revisions.

On 24 October 2018, Bill No. 7381 modifying Article L222-9 of the Labour Code (hereinafter referred to as the Bill) was submitted to the Chamber of Deputies. With effect from 1 January 2019, the minimum social wage has been by 1.1 per cent. Consequently, the minimum social wage for a non-qualified worker paid per month increased from €251.54 to €254.31, with the index value of 100 weighted for the cost of living as at 1 January 1948.

Reform of the remuneration of employees unable to work and right to compensation for employees resigning due to gross misconduct of the employer

The Omnibus Law of 8 April 2018, effective as of 15 April 2018, notably provides that an employer must guarantee full continuation of salary payments to employees who are unable to work because of illness. The Omnibus Law differentiates in particular between situations in which an employee who is unable to work because of illness (1) received his or her work schedule, in which case he or she will receive his or her salary as the employee would have if he or she had worked, and (2) did not receive his or her work schedule, in which case the employee will be paid a daily allowance, calculated on the basis of the last salaries received.

Further, the Omnibus Law, by taking into account the case law of the Constitutional Court, amended Articles L124-6 and L124-7 of the Labour Code by introducing a new principle according to which an employee who resigned with immediate effect for gross misconduct of the employer is entitled to the same compensation as an employee whose dismissal with immediate effect has been declared abusive by the labour court, namely compensation in lieu of notice and, where applicable, severance pay. The Omnibus Law also amended Article L521-4 of the Labour Code, which allows the employee who resigned with immediate effect to be entitled to unemployment allowances.

Reform concerning the conditions for applying for a residence authorisation

The Grand-Ducal Regulation of 18 July 2018 entered into force on 21 September 2018. In particular, this Regulation changed the conditions relating to the additional documentation that must be submitted with an application for a residence authorisation as an employed person. Indeed, the new legislation has facilitated the application procedure. The changes are also applicable to an application for a residence authorisation as a highly qualified worker, although no specific legislative change has occurred in that regard.

Index increase

On 1 August 2018, the index applicable to employees' wages was increased from 794.54 to 814.40. This increase resulted in a 2.5 per cent increase in the gross salary paid to employees with employment contracts subject to Luxembourg law. Wage indexation is an automatic mechanism for the adjustment of salaries to keep pace with evolving living costs, as determined by the statistics and economic studies office, STATEC. Thus, salaries are automatically increased each time the cost of living rises by at least 2.5 per cent. The aim of this measure is to compensate for a loss of purchasing power caused by inflation, by increasing the salaries of employees accordingly.

Even though this adjustment to the wage index may seem to be surprising, given that the previous adjustment was on 1 January 2017, STATEC's growth expectations would suggest another adjustment before the end of 2019.

Creation of a specific parental representation leave

The Law of 1 August 2018, creating a national representation of parents, entered into force on 24 September 2018. According to this new legislation, employees who are members of the national representation of parents of pupils in basic secondary and differentiated education in the Grand Duchy of Luxembourg are entitled to parental representation leave. More specifically, parents who are members of the national school board are entitled to leave amounting to two-and a half days per month and parents who are members of the national parents' representation are entitled to eight days' leave per year to carry out the obligations arising from their respective mandates.

Reform concerning the data protection and the monitoring of employees

The Law of 1 August 2018 establishing a National Commission for Data Protection and the general regime on data protection (hereinafter the Law) entered into force on 20 August 2018. Through the Law, the Luxembourg legislator made use of the margin for manoeuvre granted by Article 88 of Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 (hereinafter the GDPR) to EU Members States to enact additional legislation relating to the protection of personal data in the employment context. In that respect, the Law amends Article L261-1 of the Labour Code regulating the monitoring of employees.

Under the former wording of Article L261-1 of the Labour Code, the processing of personal data for surveillance purposes at the workplace could only be carried out in five situations:

  1. for the safety and health needs of employees;
  2. for the purpose of protecting the company's assets;
  3. for the control of the production process relating only to machinery;
  4. for the temporary control of production or employee services, where such a control measure was the only way to determine the exact salary; and
  5. in the context of a flexible work organisation.

Furthermore, an employer wishing to set up a monitoring system at the workplace had to obtain the prior authorisation of the National Commission for Data Protection.

The new layout of Article L261-1 of the Labour Code, as amended by the Law, no longer restricts the opening to legitimate processing of employees' personal data for the purpose of monitoring at the workplace. It now also states that an employer may process its employees' personal data for the purpose of monitoring, as long as that processing is carried out in compliance with the principles of the GDPR, in particular in accordance with the lawfulness grounds of Article 6 of the GDPR. In practice, most often, the monitoring would be justified by the legitimate interests of the employer.

Reform of immigration matters

The Law of 1 August 2018, which entered into force on 21 September 2018, amended several dispositions with regard to immigration and the free movement of persons (hereinafter the Immigration Law).

One of the main purposes of the Immigration Law is to transpose the EU Directive of 11 May 2016 into domestic law. This Directive constitutes a recasting of the existing Directives in this field and improves the legislative instruments applicable in these matters.

One of the major innovations of the Immigration Law is the fact that students and researchers may continue to stay in Luxembourg for nine months after completing their studies or research activities, either to find a job or to set up a company. In this regard, a new category of residence permit has been created to allow young candidates to continue to reside in Luxembourg. In addition, students and researchers may move more easily during their stay between EU Member States.

Further, the Immigration Law provides rules for trainees and volunteers within the European voluntary system who will benefit from harmonised conditions for entering the European Union and from better protection during their stay.

Reform introducing new rules on prolonged illness

The Law of 10 August 2018 amending the dispositions on prolonged illness (hereinafter the 2018 Law) entered into force on 1 September 2018.

The 2018 Law introduced some legislative changes regarding the period during which the employee is entitled to receive full remuneration from the employer and from which point in time the National Health Fund (CNS) will take over.

Under the former regime, if during any 12-month period an employee had been absent for 77 days, after the month during which the 77th absence occurred, the CNS started covering any sick leave the following month (with the 77 days verified on a monthly basis thereafter).

The new legal provisions require that as of 1 January 2019, the 12-month reference period is increased to a 18-month reference period. Indeed, as from this date, during properly notified and certified absences for illness, employees are entitled to receive their full normal remuneration from their employer. This entitlement applies until the end of the calendar month in which the 77th calendar day of absence in a 18-month period falls.

Another amendment applicable as from 1 January 2019 is an increase in the duration of employee illness management.

Under the previous regime, if an employee was still absent after he or she had exhausted his or her entitlement to sick leave paid by the employer, the employee was entitled to receive a benefit from the CNS. This benefit was payable for up to 52 weeks for any period of 104 weeks.

As from 1 January 2019, the benefit is payable for up to 78 weeks, instead of 52 weeks, for any period of 104 weeks.

The third amendment introduced by the 2018 Law entails that an employee who gradually resumes work for therapeutic reasons will continue to be considered as an employee who is unable to work.

ii Significant case law

Further to two Constitutional Court decisions dated 8 July 2016 (Nos. 123/16 and 124/16), by which the said Court stated that the same indemnities should be granted to employees in cases of abusive dismissal by the employer with immediate effect, as in the case of an employee resigning with immediate effect, which is justified on the grounds of severe misconduct by the employer, the Court of Appeal of Luxembourg had the opportunity to deeply analyse the scope of the resignation for gross misconduct.

Court of Appeal decision dated 1 March 2018 No. 44350

According to this case law, late and partial wage payments at irregular intervals, taking into consideration their repetitive nature, constitute a serious breach of the employer's obligations, justifying the employee's resignation with immediate effect.

Damages claimed and awarded on the basis of Article L124-10 of the Labour Code require proof of the existence of hardship in connection with the termination of the employment relationship.

Court of Appeal decision dated 4 October 2018 No. CAL-2018-00617

This decision confirmed the above-mentioned Court of Appeal decision No. 44350 relating to the justified nature of resignation in the event of incomplete or late wage payments and further outlined the rights of the resigning employee to be entitled to unemployment allowances during the course of judicial proceedings.

Further to the Omnibus Law, this decision implemented the new Article L521-4 of the Labour Code, whereby any jobseeker may request the allocation of unemployment allowances by provision in the event of dismissal for serious misconduct, resignation as a result of sexual harassment, or resignation for serious misconduct by the employer.

Outlook and conclusions

In practice, employers tend to avoid court proceedings except if there is a matter of principle at stake. Hence many labour law cases are resolved by way of a settlement, in particular 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 more extrajudicial dispute resolutions during the next 12 months.

Notwithstanding this general tendency to settle out of court, it is expected that there will be a rise in disputes concerning the recent legislative changes discussed, particularly in view of the social dialogue reform (since some provisions are expected to come into force after the next social elections scheduled for 12 March 2019) and the law on the organisation of working time.

We expect notable case law on the indemnification of dismissed or laid-off delegates who opt for termination of the contract and compensation for damage caused, as well as on different new mechanisms for the organisation of working time.

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