The recently introduced Omnibus Law has amended many provisions of the Labor Code, including sick pay entitlement, terminations caused by an employer’s bad conduct, and circumstances in which the state is entitled to reimbursement for unemployment benefits paid to an individual who has lost his or her job.

The main changes introduced by the Omnibus Law are as follows:

Full Maintenance of Salary During Sickness Absence

One amendment distinguishes between employees who received their work schedule at the commencement of their sick leave and those who did not. While employees in the first category are paid as if they had worked according to their predefined work schedules during their periods of illness, employees in the second category are paid a daily allowance corresponding to their average daily salaries over the last six months.

Employees paid by performance or by the task as well as those with less than 12 months’ seniority are entitled to a daily allowance corresponding to the average daily salary calculated over the last 12 months or during the period of employment, if shorter (non-periodic benefits, including incidental work, overtime, and bonuses are not taken into account).

Sick pay in Luxembourg is maintained for a maximum period of 52 weeks over a reference period of 104 weeks.

Increase to Working Hours Applicable to Students

The maximum number of hours a student may work during the school year has increased from 10 to 15 hours per week on average, calculated over a period of one month. This limit does not apply to work carried out during school holidays.

Right to Compensation for an Employee Resigning Due to the Employer’s Gross Misconduct

Taking into account recent case law of the Constitutional Court, the Omnibus Law gives some employees who quit because of their employers’ misconduct, the same compensation to which other employees are entitled. Specifically, an employee who resigns effective immediately because of his or her employer’s gross misconduct (known as “constructive dismissal” in many countries) is entitled to the same compensation to which an employee is entitled if the Labor Court had declared his or her dismissal (effective immediately) to be abusive.. In both cases, the affected employees are entitled to compensation in lieu of notice and, where applicable, severance pay.

Reimbursement of Unemployment Benefits

Where the resignation of an employee results from the employer’s serious misconduct (such as nonpayment of wages), the employer is required to reimburse the state Employment Fund all unemployment benefits that it had paid to the employee for the period covered by any compensation award that the employer is required to pay pursuant to the judgment. On the other hand, if a dismissal is justified or if the Labor Court declares an employee’s resignation for fault of the employer unjustified, the employee must reimburse the unemployment benefits that he or she received.

A new article has been added to the Labor Code specifying that if an employee initiates but subsequently withdraws certain legal claims, the employee is then required to reimburse the Employment Fund for any unemployment benefits received. This applies to claims brought (but then withdrawn) relating to (1) a dismissal for serious reasons, (2) a resignation motivated by an act of sexual harassment, or (3) an employer’s serious act or fault. If an employee withdraws a legal claim because it has entered into a settlement agreement with his or her employer, then the employee is required to reimburse half of the unemployment benefits he or she has received, and the employer is required to reimburse the other half.

Other Changes

The Omnibus Law has also

1. changed the calculation of notice pay for the purposes of claims against the Employment Fund on an employer’s bankruptcy;
2. introduced new rules relating to temporary reemployment assistance (“aide temporaire au réemploi”); and
3. reduced the duration of the tax credit (from 36 months to 12) available to employers for hiring an unemployed person and increased the length of time that an individual was required to be unemployed (from three months to six) in order for the employer to qualify for the tax credit.

Comment

These laws will likely affect many Luxembourg companies as they deal with areas of individual and collective labor law that have wide applicability. Employers may therefore want to carefully examine these laws and adopt the necessary measures to comply with them.

Written by Harmonie Méraud and Anne Morel of Bonn Steichen & Partners and Roger James of Ogletree Deakins