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The employment relationship

Country specific laws

What laws and regulations govern the employment relationship?

Individual employment relationships are governed in order of priority by:

  • EU regulations;
  • the Labour Code;
  • grand-ducal regulations, which regulate the modalities of execution and thresholds and standards that are subject to frequent modification;
  • collective bargaining and collective agreements, which are generally binding for a specific professional sector and therefore apply automatically to employment relationships that fall within their scope. Collective bargaining agreements generally cover employment relationships, general conditions of employment and all matters of negotiation (eg, conditions of employment and social guarantees), whereas collective agreements cover only one or more topics determined in collective bargaining agreements;
  • employment agreements;
  • internal regulations; and
  • common practices in certain circumstances.

Any matter not expressly provided for in an employment contract is generally governed by the Labour Code or collective agreements, if applicable.

As regards case law, there is no rule of precedent in Luxembourg. Courts are generally not bound by judicial decisions pronounced in other cases, even when they are comparable. Courts are also forbidden to rule by general disposition. Decisions must therefore be motivated and limited to the specific case on which a court is ruling.

Who do these cover, including categories of worker?

Luxembourg’s labour laws apply to any activity performed by any worker in Luxembourg, unless the parties have chosen another law which is more favourable to the employee.

Misclassification

Are there specific rules regarding employee/contractor classification?

Workers are classified based on:

  • the provision and performance of effective work or services;
  • compensation granted for work performed;
  • the subordination of the employee to the employer; and
  • the employer’s power of direction and control over the employee.

If one of these conditions is not met, the employment relationship may be qualified as a self-employment agreement (eg, a service or consulting agreement and mandate).

Differences exist between employees and senior executives, as the latter have:

  • a higher level of remuneration;
  • effective and real management power; and
  • significant independence in organising their work and an absence of constraints regarding working hours.

Contracts

Must an employment contract be in writing?

Employment contracts must be evidenced in writing and contain the following details:

  • the names of the parties;
  • the date of commencement of the employment relationship;
  • the place of employment (or employer’s address if there are various places of employment);
  • the nature of employment (eg, a description of the tasks involved);
  • the employee’s daily or weekly standard working hours;
  • the employee’s standard working schedule, if any;
  • the employee’s remuneration and bonuses;
  • the length of the employee’s paid holiday or the method for determining this;
  • the length of the employee’s notice period when the contract is terminated;
  • the length of the employee’s trial period;
  • any complementary provisions;
  • any collective bargaining agreements that govern the employee’s working conditions; and
  • any supplementary pension scheme.

In addition, fixed-term agreements must include details of:

  • the agreement’s aims, including the names of any absent employees (as the case may be); 
  • the termination date or minimum employment duration; and
  • any renewal clauses.

These general rules are subject to specific professional advice depending on the context.

Are any terms implied into employment contracts?

Employment relationships must respect the Labour Code and collective agreements, which are binding, even if they are not referred to in the employment contract. Any clause that aims to restrict the rights provided by the Labour Code or a collective agreement would be invalid.

However, employment agreements may include provisions (including foreign law provisions) which differ from the Labour Code without necessarily being null and void.

The Labour Code’s aim is to protect employees. Therefore, provisions included in an employment agreement must be examined with regard to their level of protection towards employees. Should a provision be less favourable to an employee than the Labour Code, such provision will be considered null and void.

The terms and conditions of employment relationships are also governed by the general principle of good faith, as provided for by the Civil Code.

Internal regulations, which cover internal policies setting out disciplinary rules and instructions and guidelines for the proper performance of work, also govern employment relationships.

Are mandatory arbitration/dispute resolution agreements enforceable?

Alternative dispute resolution (ADR), such as arbitration, is applicable to employment-related disputes, but is rarely used in Luxembourg labour law.

Alongside the labour courts, where the judge’s main role is conciliation, an individual conciliation service also exists at the Inspectorate of Labour and Mines (ITM). Further, the ITM has an informal mediation role. The Mediation Centre of the Luxembourg Bar offers the possibility of open mediation for labour law. Finally, arbitration is determined by the New Civil Procedure Code.

ADR is not a compulsory prerequisite to legal proceedings. However, parties may be obliged to have recourse to ADR depending on the provisions of the agreement or contract which defines their legal relationship.

As labour courts are competent to hear disputes between employers and employees, they also determine the enforcement conditions. Any infringement of an agreement (which is binding for the parties thereto) may be referred to the labour courts.

Arbitration sentences are binding and enforceable contrary to conciliation decisions and mediation agreements, which lack legal force and are not legally binding.

How can employers make changes to existing employment agreements?

Changes to an employment relationship that result in more favourable terms for an employee and do not automatically result in obstacles and amendments through addendum are possible. Unless agreed by mutual consent, the procedure to modify an employment relationship is quite demanding and formal.

Any amendment to the substantive terms of an employment contract which is detrimental to an employee must be notified to the employee in accordance with the dismissal with notice or serious grounds procedures. Contractual amendments that violate the aforementioned requirements will be deemed null and void.

Therefore, employees must follow a strict and formal procedure depending on the size of their workforce (ie, fewer or more than 150 employees), including:

  • a preliminary meeting (before notification of the amendment); and
  • a notice of modification to a substantive contract term.

In the event of the modification of an employment contract with notice, employers are not bound to specify the reasons for modifying an employment agreement by letter. Instead, the employee must request such reasons within one month of receiving notice. In contrast, a notification letter to modify a substantive contract term for serious grounds must provide a detailed explanation.

On receipt of such a request, the employer must provide extensive reasons that are consistent with the requirements under a statement of reason in the event of dismissal with notice.

The termination of employment resulting from an employee’s refusal to accept an amendment to his or her employment contract may lead to an unfair dismissal claim.

Foreign workers

Is a distinction drawn between local and foreign workers?

Any EU or European Economic Area citizen can move freely within the European Union and has the right to work and live anywhere in Luxembourg, but third-country nationals need authorisation to stay, as well as a residence and work permit.

Priority for vacancies is given to Luxembourg and EU nationals. It is therefore necessary to anticipate any steps relating to employing third-country nationals (ie, the migrant employee’s level of qualification, the need for a vacancy declaration to be made to the authorities, the need for visa authorisation and a work permit) before the start of an employment relationship.

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