Grounds for Termination
Grounds for termination of employment contracts include: Mutual agreement; Resignation with notice by the employee; Resignation by the employee for gross misconduct of the employer; Dismissal during the trial period; Dismissal with notice for real and serious cause based on the employee’s attitude; Dismissal for gross misconduct; Redundancy; Closure of business; Retirement; Employee’s work incapacity; Death of one party.
The collective redundancy procedure must be applied by an employer who intends to dismiss for reasons that have nothing to do with the employee’s attitude at work, at least 7 employees over a period of 30 days or at least 15 employees over a period of 90 days. The collective redundancy procedure in Luxembourg contains 4 main stages:
- Inform the National Employment Administration (ADEM) and the staff representatives or the employees directly if the business regularly employs less than 15 persons and provide the staff representatives or, if required, the employees, with a copy of the notification sent to ADEM.
- Negotiate a social plan; the negotiations must concentrate on preventing or reducing the number of redundancies and limiting the consequences by means of internal redeployment in the company; retraining; reintegration on the job market; or a more favourable financial compensation than established by law. A minimum notice period of 75 days must be respected.
iii. When the social plan is approved, the employer may begin to implement collective redundancies. He/she must notify each employee impacted by the redundancy in writing either by registered letter or by giving the letter to the employee in person against acknowledgement of receipt.
- Request tax exemption for voluntary departure or severance pay, if applicable.
A preliminary interview to discuss the reasons for the planned dismissal with the employee is required for employers who employ 150 persons or more. The employer may terminate the employment contract with immediate effect if the employee’s actions or behaviour qualify as gross misconduct
Is severance pay required?
Employers must pay a legal severance indemnity to any employee dismissed with notice with at least 5 years of service in the company. Entitlement to severance pay depends on the employee’s length of continuous service with the same employer. The severance pay for employees who have received a notice of dismissal can amount to a maximum of one year’s salary. This payment becomes due when the notice period expires. The severance pay is not applicable in case of termination for gross misconduct. Businesses employing less than 20 employees may pay a severance indemnity or extend the notice period of the dismissed employee.
Is a Separation Agreement required or considered best practice?
A lot of settlement agreements are concluded in Luxembourg in order to avoid a court claim. The settlement agreement shall serve to create a secure legal basis between the parties in terms of their claims.
Remedies for employee seeking to challenge wrongful termination
If an employee considers his/her termination as unfair, he/she can introduce a claim for moral and material damages to cover the financial loss he/she has sustained with the Luxembourg labour courts. In practice, unfair dismissal cases are often settled out of court. The parties are free to negotiate the content of the settlement agreement and the employer will often agree to pay a voluntary indemnity equal to one or several months of salary.
Luxembourg’s laws provide protection for employees who report acts of corruption, of which they are victims and/or of which they are aware. In case of corruption, protection is only due in case of an alert to the “superior” or “competent authorities”. To encourage employees to report the facts of which they are aware, the legislator has provided for a lighter burden of proof: the employee simply advances the facts and it is up to the employer to prove that the facts have not been proven. If the employee is dismissed following his denunciation, he can appeal to the labour court to be reinstated.