Dismissals and Termination of Employment in Luxembourg

In the past, the law in Luxembourg distinguished between ‘blue-collar workers’ and ‘white-collar workers’. This distinction no longer exists. Luxembourg Labour Law provides for the following legal framework for the dismissal of any employee.

The employer needs to provide specific reasons for termination in the case of a dismissal with immediate effect for serious misconduct. The employer must indicate the reasons for the dismissal in a registered letter. The employee may be able to claim an ‘indemnity’ for an ‘abusive dismissal’.

In case of a dismissal with notice, the employer is not obliged to indicate a specific reason for the dismissal in the registered letter, unless the employee officially requests this during the month following the dismissal letter. In such a case, it is important that the employer provides the employee with their reason within a month; otherwise, the dismissal will automatically be seen as abusive.

If the employment contract is terminated during the probationary period, the employer is not obliged to provide specific reasons for the dismissal.

If the business employs fewer than 150 staff members, the employer may serve the dismissal directly.

If the business employs at least 150 staff members, the employer must invite the employee to a preliminary interview in writing before dismissing him / her.

In all cases of dismissal (i) dismissal within the probationary period, (ii) dismissal with notice and (iii) dismissal with immediate effect for serious misconduct), notice must be given in writing (either by registered letter or by giving the letter to the employee, who then acknowledges receipt by countersigning a copy of the letter). In case of dismissal with notice or in case of dismissal within the probationary period, the notice letter must specify the length of the notice period, and the day on which the notice period begins.

The notice period is the same for all employees.

The following notice periods are applicable to all employees according to their seniority:

If the employee is dismissed during the probationary period, the notice period for each party depends on the duration of the probationary period. Where the duration of the trial period is indicated in weeks, the notice period corresponds to as many days as the trial period has weeks (e.g. three weeks is three days’ notice).

Where the duration of the trial period is indicated in months the notice period corresponds to four days per month of trial period without being shorter than 15 days and without exceeding one month.

Involvement of the staff delegation

The staff delegation has no right to be informed prior to an individual dismissal, unless it is for economic reasons.

The trade union delegation has no right to be informed prior to an individual dismissal.

In case of a collective dismissal, the state authorities have to be involved in the information and consultation procedure, but state authorities do not have to approve the dismissal(s). In case of economic dismissal, the state authorities have to be notified of the dismissal at the latest on the day of the dismissal (for information purposes only, not for approval).

Specific rules apply to collective dismissals or closures. An information and consultation procedure has to be respected prior to the decision to carry out the collective dismissal or closure. Employees are entitled to specific indemnities in case of a closure for bankruptcy reasons. There is a legal obligation for social partners to negotiate and conclude a social plan.

Dismissals with immediate effect are only possible when the termination is the result of serious misconduct, such as theft, insult, etc. The employer can decide to place the employee on ‘gardening leave’, which means that the employee does not have to attend work. During gardening leave, the employer continues to pay the employee until he is notified of his dismissal. The dismissal notification can be given the day after the gardening leave has begun at the earliest,   and eight days after the gardening leave has begun at the latest.

If the requirements are not met the employee can launch an action for abusive dismissal and ask for damages. Damages are of two types:

• material damages corresponding to the loss of income experienced through a certain period of time (reference period) and caused by the abusive dismissal. This reference period notably depends on the age and professional background of the employee. These damages usually correspond to the difference between the salary paid to the employee at the time of the dismissal and the unemployment benefit he receives during the reference period determined by the judge,
• moral damages, whose amount depends on the circumstances of the dismissal (i.e. how the employee has been treated, his length of the service within the company etc.). Moral damages aim to compensate the violation of the employee’s dignity caused by the dismissal.

The following amount of severance pay is applicable to all employees (but not due in case of summary dismissals) according to their seniority:

A non-competition clause in the employment contract is only valid if:

• the scope is limited to similar activities exercised as a self-employed worker; and
• the scope is limited to a well-defined geographic area in which competition may exist within the Luxembourg territory; and
• the duration of the clause does not exceed 12 months after termination of the employment agreement.

Not applicable.

In Luxembourg Company Law, the mandate ‘manager’ is used for the directors of a private limited liability company (‘SARL’) appointed by the shareholders of such company. ‘Managing director’ is used as a title for the director of a public limited liability company (‘SA’) who has been given the mandate of day-to-day management.

In Luxembourg, the managing director can have an employment contract within a company for the execution of specific tasks combining this employment relationship with a non-remunerated or remunerated mandate within the company as managing director.

This table differentiates between (I) a manager of a SARL, appointed by the general meeting of shareholders, and (II) a managing director of an SA, appointed by the board of directors.

1. The mandate of the manager of a SARL can only be revoked for legitimate reasons by the general meeting of shareholders, unless the articles of association provide otherwise.
2. The mandate of the managing director of an SA can be revoked by the board of directors in accordance with the articles of association.

If the latter remain silent on the issue, the revocation of the mandate is governed by the rules of mandate, meaning that the mandate can be revoked ad nutum (i.e. at any time and for any reason).

A decision from the general meeting of shareholders is required. The revocation must be published in the Luxembourg Register of Commerce and Companies.

Normally none, unless provided for in a contract.

No involvement.

No involvement.

Not required.

Not applicable.

Not applicable.

A company can still be considered to be bound by the actions of a dismissed managing director (SA) or manager (SARL) unless the dismissal is officially published in the Luxembourg Register of Commerce and Companies.

None, unless the revocation is persecutory or otherwise provided for in a contract.

None, unless such non-competition clauses are provided for in a contract. Such non-competition clauses are only valid if they meet certain requirements (i.e. they are of limited duration, limited geographical area and the competing business is clearly identified).

Not applicable.