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Luxembourg

January 15, 2021

By Anke Istace, Kris De Schutter, Farah Sophia Jeraj, Patrick Ries and Sabrina Martin

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Luxembourg

KEY DEVELOPMENTS FOR 2021


 

Collective bargaining agreement on remote working

The two main unions and employers' representatives entered into a new collective bargaining agreement on remote working on 20 October 2020. The new agreement which was reached in the context of changing work conditions due to the COVID-19 pandemic, clarifies the rules on remote working and provides for more flexible and less onerous conditions.

It distinguishes between occasional and regular remote working. Remote working is defined as being "occasional" if it is performed in reaction to unforeseen circumstances or if it does not exceed 10% of the annual working time. A written agreement is only required for regular remote working, it being noted that remote working shall always be mutually agreed between the employer and their employee. In the case of regular remote working, the employer needs to provide the relevant equipment and needs to bear the costs resulting from the remote working.

It is expected that the agreement will be declared to be generally applicable to all employees by means of a Grand-Ducal Regulation. A major challenge for remote working in the Luxembourg market could however not be addressed by the collective bargaining agreement. This challenge results from the fact that nearly half of the labour force of Luxembourg is composed of workers who commute from the neighbouring countries (Belgium, France and Germany), which leads to problems concerning taxation and social security payments. During the COVID-19 pandemic, Luxembourg and its neighbours have exceptionally negotiated exemptions from the rules that would ordinarily apply, but it seems doubtful that these flexible solutions will continue to be applied after the end of the pandemic.


 

New rules for posted workers

Luxembourg has implemented Directive (EU) 2018/957 of 28 June 2018 which amended the Posted Workers Directive of 1996 via a law of 15 December 2020. The aim of the reform is to strike a new balance between the freedom to provide services and the protection of posted workers, bringing about social convergence in the EU. The principle governing the rules on posted workers is that the posted worker, i.e. a worker who normally works in another State than the Member State to which they are posted, remains bound by their employment contract and subject to the labour law of the State in which they normally work, except for certain provisions of the Member State to which they are posted (including minimum wage and holiday requirements, regulations on working hours, health, and safety and non-discrimination) which apply immediately to the posted worker's employment relationship. If the regulations of the Member State are less favourable than the rules of the State of origin of the posted worker, the rules of the State of origin will continue to apply.

In addition to several minor changes and enhanced notification and information requirements the reform of the Posted Workers Directive contains two major changes. First, workers posted in a Member State by temporary work agencies are now also covered by the rules governing posted workers. Second, after 12 months of posting (a period which may be increased to a maximum of 18 months via a motivated notification to the Labour Inspectorate), Luxembourg law will apply in its entirety to the employment relationship of the posted worker. The rules contain an anti-avoidance clause since the periods of subsequent postings of different workers for the same assignment are added together for the purpose of the 12/18 month threshold.

The reform has maintained a de minimis exemption for workers in the case of initial assembly or installation of goods where this is an integral part of a contract for the supply of goods and necessary for taking the use of the goods supplied which is carried out by skilled or specialist workers for a period which does not exceed eight days.


 

Increase of the minimum wage, but no indexation

As of 1 January 2021, the minimum wage in Luxembourg has been increased, as follows:

  • standard adult rate—€12. 7279 per hour corresponding to €2,201.93 per month (full time); and
  • skilled adult rate—€15. 2735 per hour corresponding to €2,642.32 per month (full time).

It is noted that according to the Luxembourg National Institute of Statistics and Economic studies no mandatory increase of salaries (salary indexation due to cost of living rises) is expected for the year 2021 in view of the current economic situation.

With thanks to Anke Istace, Kris De Schutter, Farah Sophia Jeraj, Patrick Ries and Sabrina Martin of Loyens & Loeff for their invaluable collaboration on this update.

 

KEY DEVELOPMENTS FOR 2020


 

Right to disconnect

The Luxembourg Court of Appeal has recently held that employees have a right to disconnect during any period of paid leave. This is the first time that such a right has been recognised by a Luxembourg Court.

The case that led to this decision concerned a restaurant manager on annual leave, who had been contacted by his supervisor regarding minor problems in the restaurant. The employee first reacted by stating that the supervisor should contact someone else but when the supervisor insisted, the employee replied in a harsher manner. His 'aggressive' reaction was then used as one of the grounds to dismiss him. The Court of Appeal held, however, that the employee's reaction ought to be placed in its proper context. Since the employee was on annual leave and had the right to disconnect during that time, his reaction could not be deemed 'aggressive' and could not justify his dismissal.

It should be noted that there are no legislative provisions enshrining the right to disconnect during paid leave as yet. However, the Government has stated in its coalition agreement that it intends to legislate on the subject.


 

Increase of minimum salary and paid annual leave

A Bill reforming the Labour Code recently came into force and has increased the minimum salary by 0.9% retroactively as of 1 January 2019. The minimum monthly salary was later increased again to 2,141.99 EUR gross as of 1 January 2020, due to the automatic indexation of salaries.

In addition, a further Bill reforming the Labour Code has been implemented, which increased the minimum number of paid holidays per year to 26 (formerly 25) and added a new bank holiday on 9 May (Europe-Day). These modifications were deemed effective as of 1 January 2019.


 

New rules on dismissal of employees on sick-leave

In accordance with a new law reforming the Labour Code and the Social Security Code, the employment of an employee on sick leave will now automatically be terminated once the employee's salary has been paid by the National Health Fund for more than 78 weeks (formerly 52 weeks) within a period of 104 weeks. This change was enacted after pressure from civil society and unions.

In addition, the new law provides that:

  • An employee on sick leave may commence a phased return to work with the consent of their employer, even while their salary is still being paid by the National Health Fund; and
  • To reduce the financial impact of employees on sick leave, employer will only need to pay an employee on sick leave for 77 days during a period of 78 weeks (formerly 52 weeks) before the National Health Fund starts to pay the employee's salary (up to a capped amount).

 

KEY DEVELOPMENTS FOR 2019


 

Stock-options and warrant schemes

The Luxembourg tax authorities released a new circular letter which sets out amendments in relation to tax treatments of transferable options. Options granted to employees on or after 1 January 2018 will be taxed at 30% of the value of the underlying shares.

Warrant schemes may be only be offered to employees who are considered to be senior executives (cadres supérieurs) within the meaning of the definition provided for in the Labour code and under certain additional conditions. Senior executives are considered to have a salary that is significantly higher than that of non-executive employees, taking into account the time required for the performance of their duties and the real power they have for effective management.


 

Amendments to the law on supplementary pension schemes

A Bill reforming the law of 8 June 1999 on supplementary pension schemes came into force on 21 August 2018. The law has modified the existing rules applicable to supplementary pension schemes, including those applicable in case of a transfer of an undertaking. The main amendments are the following:

  • supplementary pension schemes: supplementary pension schemes are now open to independent workers and changes to a scheme are now expressly allowed if mutually agreed between the members and the employer;
  • time-frame for vesting pension rights: the total length of time may no longer exceed 3 years of service. Employees hired after 20 May 2018 will benefit from the pension rights after 3 years and employees hired before 21 May 2018 will benefit from the pension rights after 10 years;
  • tax: no inequalities between internal and external pension schemes with respect to the tax treatment.
  • access to information: the right of access to information has been adapted to comply with the Mobility Directive requirements which provide for a wider obligation to provide information;
  • transfers: the transfer of employees’ rights has been strengthened; and
  • departures: there is an allocation of vested rights.

 

New rules on the appointment of staff representatives

Grand-ducal regulation dated 21 September 1979 on the electoral process for the appointment of staff representatives has been repealed by the new grand-ducal regulation dated 11 September 2018, which came into force on 22 September 2018. The main changes are as follows:

  • for staff delegations which are renewed in full between 1 February and 31 March every five calendar years, the Labour and Mines Inspectorate must, at least two months before the date on which the elections are due, send the companies concerned a registered letter informing them of their identification code. This identification code can be used by the companies in order to access the government interactive platform for appointing staff representatives;
  • when elections are organized outside the above-mentioned period, the identification code is sent to the companies concerned within fifteen days of their request;
  • there is no longer any difference made between the electoral lists of blue collar workers, white collar workers and young workers;
  • the employer can now advertise the lists of candidates electronically; and
  • a copy of the report regarding the electoral process and the vote results drawn up by the main polling station and by the additional polling stations, if this is applicable, must be sent to the trade union which presented a list.

 

KEY DEVELOPMENTS FOR 2018


 

The GDPR – Reform of Data Protection Rules

Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) will enter into force on 25 May 2018.

The new legal framework will establish a single set of data protection rules within the European Union and will replace Directive 95/46/EC and the Luxembourg law on data protection of 2002.

It is of importance that companies’ decision-makers be able to assess the effect of the new provisions and be prepared to implement policies within their organization.


 

Introduction of Significant Changes to Luxembourg Labour Code - Equal Pay

A new Chapter V relating to equal pay between men and women has been introduced in the Labour code under which employers are obliged to ensure equal pay between women and men for performing work of the same function or of equal value.

If a company breaches equal pay provisions, the following sanctions shall apply:

  • nullity of the provision(s) which is/are in breach of the principle on equal pay between women and men;
  • automatic substitution of the more higher salary; and
  • fines in the range of EUR 251.- and EUR 25,000 - which may be doubled in the case of reoffending within 2 years.

 

Criminal Record Check

As of 1 February 2017, employers’ right to request a criminal record check are strictly limited to the recruitment process

The potential employer will only be able to request a criminal record excerpt in writing and shall justify the reasons for such a request in view of the role requirements. The requirement to provide a criminal record excerpt should be indicated in the job offer.

A criminal record excerpt obtained in the recruitment phase can only be kept for one month starting from the signature of the contract. If the candidate is not hired, the excerpt must be destroyed.

During the course of employment: The employer will only be able to request a new criminal record excerpt if the employer is permitted by law to request a criminal record excerpt or, the employee’s post will change and the new role required a new verification of character.

With thanks to Sabrina Martin, Patrick Ries, Annie Elfassi and Solène Benet of Loyens & Loeff for their invaluable collaboration on this update.

Contributors

Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department

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