At a glance: termination of employment in Luxembourg

Termination of employment

May an employer dismiss an employee for any reason or must there be ‘cause’? How is cause defined under the applicable statute or regulation?

An employer may not dismiss an employee for any reason. The decision to dismiss an employee must be based on valid grounds. Indeed, a dismissal is regarded as unfair and contrary to social and economic reasons if it takes place in breach of law or if it is not founded on real and serious grounds related to the employee’s aptitude or conduct, or arising from the operating needs of the business, establishment or department.

Dismissals in breach of law are notably dismissals:

• for legal strikes duly declared;
• notified during the protection period of an employee who is on sick leave;
• justified by the transfer of undertaking;
• in response to a complaint of sex discrimination or harassment;
• based on the employee’s refusal to accept part-time or full-time work;
• based on the part-time worker’s refusal to accept overtime work under other conditions than provided for in the employment contract; and
• based on the employee’s refusal to waive his or her right to early retirement indemnity.

In addition, in some special situations or to protect more vulnerable employees, the law expressly provides for the nullity of the dismissal (eg, dismissal of employees’ representatives, pregnant women, internal redeployed employees, disabled employees, victims or witnesses of sexual harassment, employees on maternity leave or parental leave, dismissal based on the wedding of a woman and dismissals prior to the conclusion of a social plan).

Must notice of termination be given prior to dismissal? May an employer provide pay in lieu of notice?

Notice of termination must be given prior to dismissal, except for dismissal for gross misconduct. The duration of the notice period depends on the length of service of the employee within the company.

In the case of employment for a period of less than five years, the notice period is two months. If the employee has been employed from five to nine years, the notice period extends to four months. In the case of employment for at least 10 years, the notice period is six months. These delays are reduced by half when it is the worker who terminates the employment contract.

The employer may not provide pay in lieu of notice. If the employer releases the employee from work during the notice period, it will have to continue to pay the monthly salary of the employee until the end of the notice period.

In which circumstances may an employer dismiss an employee without notice or payment in lieu of notice?

An employer may dismiss an employee without notice in the event of gross misconduct.

Is there any legislation establishing the right to severance pay upon termination of employment? How is severance pay calculated?

According to Luxembourg legislation, any dismissed employee or any employee who terminates his or her employment contract for serious misconduct by the employer, which has been recognised by a court’s decision, with at least five years of service is entitled to severance pay, except in the case of a dismissal for gross misconduct.

The amount is determined according to the length of service of the employee:

• from five to nine years: one month of gross salary;
• from 10 to 14 years: two months of gross salary;
• from 15 to 19 years: three months of gross salary;
• from 20 to 24 years: six months of gross salary;
• from 25 to 29 years: nine months of gross salary; and
• at least 30 years: 12 months of gross salary.

The seniority is assessed at the date of expiry of the employment contract (ie, the last day of the notice period in the case of a dismissal with notice even if the employee was released from work during this period).

The severance pay is calculated on the basis of the gross remunerations paid to the employee during the 12 months prior to the month of notice of the termination.

Are there any procedural requirements for dismissing an employee?

In companies employing at least 150 workers, the employer must arrange a meeting with the concerned employee prior to any notice of dismissal. Further, the dismissal must be notified by registered letter or delivered by hand against acknowledgement of receipt.

For dismissals with a notice period, the duration of the notice period will depend on the employee’s length of service. The notice period starts on the 15th day of the month in which the termination was notified in cases where the notification is prior to this date, or the first day of the month following the one during which the termination was notified in cases where the notification is later than the 14th day of the month. The employee may request by registered letter the communication of the reasons for the dismissal within a one-month period from the notice of the dismissal. The employer must then provide the employee with the reasons for the dismissal in a very precise and detailed way, within one month of the receipt of the employee’s request by registered letter. Otherwise, the jurisdiction seized would declare the dismissal as unfair.

For dismissal with immediate effect (in the case of a gross misconduct), there is no notice period to comply with, and the dismissal letter must immediately specify in a very detailed and precise way the reasons for the dismissal.

Usually, individual dismissals are not submitted to special permissions. However, certain protected employees cannot be dismissed except in cases of gross misconduct and upon the prior authorisation of the labour court (eg, employees’ representatives, pregnant women and women on maternity leave).

In what circumstances are employees protected from dismissal?

Employees are generally protected against unfair and unjustified dismissal. Employees’ representatives, pregnant women, employees on maternity leave, discriminated or harassed employees, employees on sick leave and parental leave, and employees who have been internally redeployed also benefit from greater protection.

Are there special rules for mass terminations or collective dismissals?

In the case of collective dismissals (if the number of envisaged dismissals amounts to at least seven employees within a period of 30 days or at least 15 employees within a period of 90 days), article L166-2 of the Labour Code provides that a social plan must be negotiated with the staff delegation and the trade unions for the companies bound by a collective bargaining agreement. The Labour Inspectorate must be informed about the outcome of the negotiations.

If no agreement is reached within 15 days between the parties, the minutes of the negotiations signed by the parties must be communicated to the Labour Administration and to the Labour Inspectorate. In addition, the parties must submit their disagreement to the National Conciliation Office to reach an agreement. The result of these negotiations is communicated to the Labour Administration as well as to the Labour Inspectorate.

Any notice of termination sent to an employee before the signature of the social plan or before the signature of a statement of non-conciliation at the end of the conciliation procedure before the National Conciliation Office is considered as void.

Further, at any time, the Economic Committee may ask the social partners to start discussion to establish an Employment Safeguard Plan and, at the latest, when the employer has notified five dismissals for reasons not inherent to the person of the employee during a reference period of three months, or eight dismissals for reasons not inherent to the person of the employee during a reference period of six months.

Are class or collective actions allowed or may employees only assert labour and employment claims on an individual basis?

No class or collective actions are allowed under Luxembourg law (ie, employees and former employees cannot bring claims on behalf of other workers). The plaintiff must have a ‘personal interest’ when filing his or her claim before the courts.

In the field of discrimination, claims relating to discrimination grounds may, nonetheless, be filed before the courts by a non-profit organisation or a trade union in the name and on behalf of the employee under specific conditions.

Trade unions can also introduce legal actions regarding the application or interpretation of collective bargaining agreements in the name and on behalf of the employee under certain conditions.

Does the law in your jurisdiction allow employers to impose a mandatory retirement age? If so, at what age and under what limitations?

Pursuant to article L125-3 of the Labour Code, the employment contract automatically ends the day the employee is granted a retirement pension or, at the latest, when the employee reaches the age of 65 if the employee is entitled to a legal retirement pension. The pension is granted if the employee has contributed at least 120 months to the pension insurance.

If no retirement pension is granted to the employee before the age of 65, and if the employee is not entitled to a legal retirement pension at 65, the employment contract is not automatically terminated. In such a case, the employer should not dismiss the employee on the sole fact that the employee had reached a specific age. In the event of litigation, such dismissal would, in principle, be considered as discriminatory pursuant to article L251-1 of the Labour Code and as such unlawful.