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Luxembourg: Labour Regulation

Regulatory Environment

An employment contract is compulsory and generally permanent. Fixed-term contracts are regarded as an exception to this rule, and the circumstances in which it is possible to conclude a fixed-term contract are circumscribed by law.

All employers are bound by the minimum wage. Remuneration of most blue-collar workers and some white-collar employees is set by collective bargaining contract. Increases in the cost of living automatically trigger wage hikes. The remuneration of executives is set by negotiation.

Employees enjoy extensive protection. After an initial probationary period, it is difficult to discharge employees. Employees who have been discharged because the employer was experiencing economic problems are entitled to be the first to be rehired when the company expands. Acquired rights are protected by law in situations where a company is merged into or taken over by another.

The workforce has broad rights to information and consultation, and in some cases determination of company policies. Equal pay must be given for equal work.

The legal working week (five days) is 40 hours. The maximum working week (inclusive of overtime) is 48 hours. The statutory maximum daily working time is ten hours. In businesses with continuous operation or shift work, longer hours are permissible, but in most circumstances the permission of the Labour and Mines Inspectorate will be needed.

The statutory minimum wage supplement for overtime (at the time of writing) is 40% for all employees. Overtime rates for working on Sundays and public holidays are much higher. In some circumstances, time off must be given in addition to paying overtime.

EU labour law is of course of great and growing importance. Employment may be terminated in several ways:

  • Termination by mutual agreement (resiliation d'un commun accord). If the parties reach an agreement to terminate the contract, the only requirement is that the agreement must be confirmed in writing.
  • Termination with notice. Either party may terminate the contract by giving the required period of notice. In the case of dismissal by the employer, there must be reasonable and substantial grounds relating to the employee's conduct or competence or to the operational needs of the enterprise and the employee is entitled to receive, upon request, a written statement of these reasons (see statement of reasons for dismissal with notice ). In addition, an employee with at least five years' length of continuous service is entitled to severance pay. In enterprises with 150 or more employees, notice of dismissal may not be given until after a pre-dismissal interview.
  • Termination for grave cause (resiliation pour motif grave). Either party may terminate the contract without notice when there is grave cause deriving from an act or misconduct by the other party, with damages payable by the party whose act or misconduct has occasioned this summary termination ( resiliation immediate ). For the purposes of this provision, the circumstances deemed to constitute grave cause consist in any act or misconduct which renders continuance of the employment relationship immediately and permanently impossible. In the case of summary dismissal by the employer, for which the general rules on a pre-dismissal interview apply (see above), in assessing whether the employee's conduct constitutes grave cause the courts take into consideration all influencing factors such as a possible history of misconduct and the consequences of such dismissal for the employee, who loses the normal entitlement to severance pay. Notification of summary dismissal for grave cause must be given in writing, stating the act or misconduct invoked, within one month of the date on which it came to the employer's knowledge (the same time-limit applies to summary termination for grave cause by the employee). Pending the date of notification of summary dismissal, the employer may exclude the employee concerned from the enterprise by imposing immediate suspension with pay .

With both forms of unilateral termination of the contract by the employer, i.e. either with notice or without notice for grave cause, there are various circumstances in which the employee may claim unfair dismissal (resiliation abusive or licenciement abusif) on the grounds that the employer has failed to comply with the requirements of the law:

Where an employee has claimed unfair dismissal, the burden of proof rests on the employer. Compensation for unfair dismissal (reparation de la resiliation abusive) consists in an award for damages or, where the court deems it appropriate, a recommendation of reinstatement . If the employer refuses to agree to the latter (under Luxembourg law the employee's right to insist on reinstatement exists only in certain cases of wrongful dismissal), the court may order the employer to pay the employee compensation equal to one month's pay over and above the damages awarded.

A SA or SARL with at least 1,000 employees, a state equity participation of 25% or more or operating under a government concession must provide for one-third labour representation on the board of directors. A SA or SARL with 150 or more employees must establish mixed-works councils. All firms with more than 15 employees must have at least one labour delegate.



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