1. Dismissal of employees

1.1 Reasons for dismissal

In case of a dismissal with immediate effect for gross misconduct, the employer must provide serious grounds for termination. The employer must state the grounds of dismissal in the letter notifying the employee of the dismissal. The employee may be able to claim compensation before the Court in case of ‘abusive dismissal’.

In case of a dismissal with notice, the employer is not obliged to state the grounds of dismissal in the dismissal letter, unless the employee officially requests them during the month following the receipt of the dismissal letter. In such case, the employer must provide the employee with the grounds of dismissal within a month following the request; otherwise, the dismissal will automatically be considered as abusive.

If the employment contract is terminated during the trial period, the employer is not obliged to provide specific grounds.

1.2 Form

If the company has fewer than 150 employees, the employer may serve the notice of dismissal directly without any prior measures/procedures.

If the company has at least 150 employees, 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 trial period, (ii) dismissal with notice and (iii) dismissal with immediate effect for gross misconduct, notice must be given in writing (either by registered letter or by handing the letter to the employee, who acknowledges receipt by countersigning a copy of the letter).

In case of dismissal with notice or in case of dismissal within the trial period, the notice letter must specify the length of the notice period, and the day on which the notice period begins. If the employee is exempt from work during the notice period (garden leave), this must also be mentioned in the letter of dismissal.

1.3 Notice period

The following notice periods apply to all employees, in accordance with their seniority:

Employee's seniority Notice period
 By employerBy employee
Less than 5 years2 months1 month
More than 5 years but less than 10 years4 months2 months
More than 10 years6 months3 months

If the employee is dismissed during the trial period, the notice period depends on the duration of the trial 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.

1.4 Involvement of employee representatives

The staff delegation has no right to be informed or consulted prior to an individual dismissal.

If the company has at least 150 employees, the staff delegation has the right to co-decide with the employer concerning the establishment or modification of general criteria for personal selection in the event of economic dismissals. However, this competence of the staff delegation is limited to the definition of these criteria, and the staff delegation has no control over the employees designated for dismissal. This choice is at the sole discretion of the employer.

In the event of collective dismissals, the staff delegation must be consulted by the employer prior to any decision, in order to negotiate a social plan aimed at minimising the planned dismissals and their consequences. 

1.5 Involvement of a union

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

1.6 Approval of state authorities necessary

In case of a collective dismissal, the Luxembourg Agency for the Development of Employment (“ADEM”) and the Labour and Mines Inspectorate (“ITM”) have to be informed of the conduct and outcome of negotiations with the staff delegation on collective dismissals, but do not have to approve the dismissals.

In case of economic dismissal, the Economic Committee (“Comité de conjoncture”) has to be notified of the dismissal at the latest on the day of the dismissal (for information purposes only, not for approval).

1.7 Collective redundancies

Specific rules apply to collective dismissals. An information and consultation procedure must be respected prior to the decision to carry out the collective dismissal.

Employees are entitled to specific indemnities in case of collective dismissals. There is a legal obligation for social partners to negotiate and conclude a social plan.

1.8 Summary dismissals

Dismissals with immediate effect are only possible when the termination is the result of gross misconduct. The qualification of gross misconduct must be analysed on a case-by-case basis.

The employer can decide to suspend the employee which means that the employee does not have to attend work. During the suspension period, the employer continues to pay the employee until he/she is notified of his/her dismissal.

The dismissal letter or the invitation to a preliminary interview (for companies with at least 150 employees) can be given at the earliest on the day after the start of the suspension and at the latest eight days later.

1.9 Consequences if requirements are not met

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.

1.10 Severance pay

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

5 to 10 years:1 month
10 to 15 years:2 months
15 to 20 years:3 months
20 to 25 years:6 months
25 to 30 years:9 months
As from 30 years:12 months

1.11 Ristrictive covenants

Non-compete clause

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

  • the employee has at least a gross annual salary of EUR 64,382.45 (current index 944.43);
  • the scope is limited to similar activities to those carried out by the employer ;
  • 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 contract.

However, such clause does not apply where the employer has terminated the employment contract with immediate effect in the absence of serious grounds or without having respected the notice period.

The purpose of such a clause is to cover cases where the employee intends to compete with his/her former employer by becoming self-employed.

In addition, the Court also allows such a clause if the employee intends to sign an employment contract with a direct competitor of the former employer. However, such a clause must be subject to adequate financial compensation for the employee to be valid.

Exclusivity clauses and concurrent employment

Clauses prohibiting an employee from holding another employment relationship with one or more employers outside the normal working hours agreed in the employment contract are null and void.

An exception to this prohibition is made where multiple employment is incompatible for objective reasons, such as health and safety at work, the protection of business confidentiality, the integrity of the public service or the prevention of conflicts of interest.

1.12 Miscellaneous

Not applicable.

2. Dismissal of managing directors

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.

2.1 Reasons for dismissal

  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 (allowing, for example, dismissal ad nutum (without justification of grounds, without notice and without indemnity).
  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).

2.2 Form

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

2.3 Notice period

Normally none, unless provided for in a contract.

2.4 Involvement of employee representatives

No involvement.

2.5 Involvement of a union

No involvement.

2.6 Approval of state authorities necessary

Not required.

2.7 Collective redundancies

Not applicable.

2.8 Summary dismissals

Not applicable.

2.9 Consequences if requirements are not met

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.

2.10 Severance pay

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

2.11 Restrictive covenants 

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).

2.12 Miscellaneous

Not applicable.