When internal policies increase the complexity of the legal formalities

On 29 June 2017, the Luxembourg Court of Appeal issued a decision in the framework of a modification of an employment contract (demotion to a more junior role) unilaterally imposed by the employer through the procedure of a substantial modification of employment pursuant to article L.121-7 of the Labour Code.

In the framework of its reasoning, the Court of Appeal underlined that if an employer has implemented internal rules or procedures which are referred to in the employment contract, the employer is obliged to follow them. In other words, the employer must comply with its own standards. The potential impact of this decision is considerable. In fact, it is not unusual, in particular in large international groups, to have policies on disciplinary measures. If these policies foresee obligations/formalities for the employer in terms of disciplinary steps before a dismissal or a substantial modification of employment, the employer must not only comply with the formalities under Luxembourg law (which cannot be avoided), but also with such internal obligations/formalities.

In other words, having such internal obligations/formalities means that the employer is subject to two sets of rules, the Luxembourg legal rules (which are unavoidable) and the internal ones. Against that background, the recommendation for the future is to make sure that any internal rules or procedures on disciplinary aspects impose no, or only light, obligations/formalities upon the employer. The commented decision also confirms the general trend resulting from recent case-law positions that, if internal policies on disciplinary aspects exist, they need to be carefully worded (please see our newsletter dated 15 June 2017 about a decision of 30 March 2017 by which the Luxembourg Court of Appeal annulled a disciplinary sanction taken against an employee after concluding that the wording used for the sanction in the applicable document was too vague and unclear).