Article

Art.L. 125-1 (1) and Art.L-127-1 to L. 127-6

Description

The legislation on transfer of undertaking is applicable to private or public companies which are being transferred within the territory of the Grand-Duchy of Luxembourg. According to the national Labour Code (which comprises all labour laws), a transfer must involve an economic entity which transfers sufficient numbers of staff or technical means required to form its establishment, or at least a unit or centre of activities (whether a central or ancillary activity), and which maintains its identity after the transfer. In particular, a legal transfer, merger, succession or sale all constitute a transfer, however, this list is not exhaustive. The acquisition of interest or shares in a company is not enough to warrant a transfer. 

All employees (except civil servants) are covered by the labour legislation. An 'employee' is a person who works for an employer in a relationship of subordination and is remunerated for that work. This includes secondees and apprentices. All obligations arising from an employment contract (fixed-term or permanent contract) are automatically transferred to the transferee. This includes pension rights and liabilities. However, the transferor and transferee may be jointly liable for claims arising within one year of the transfer. Collective agreements are also transferred on as-is basis, and must remain intact until their expiry or until a new agreement is concluded. Employees continue to benefit by the collective labour agreement. Employee benefits are also transferred, however if the transferee is unable to provide the equivalent benefits as agreed upon by the transferor, small amendments to the contract are permitted with the agreement of the employee. 

Although employers retain the right to modify employment contracts in the normal course of business, any substantial modification found to be in direct relation to the transfer will be considered invalid. Similarly, employers retain the right to dismiss employees on economic or performance grounds. However, if such actions are found to be in relation to the transfer, they are considered invalid and the employer may be liable to compensate for the unfair dismissal or changes to employment. Only modifications which are seen to benefit the employee will be excepted from this rule. 

The transferee or the transferor may, together with the representatives of the employees and the national representative trade unions, agree to modify, to the extent that the current legislation or practice allows it, the working conditions of the employee to safeguard employment by the survival of the enterprise, establishment or part of the undertaking. If a transfer occurs within three months of, or in relation to insolvency proceedings, any contracts which were terminated in relation to such proceedings will be automatically renewed. An employee is not entitled to refuse a transfer. If an employee choses to oppose a transfer, the employee must decide to terminate the contract.

Commentary

Collective labour market agreements can introduce additional regulations to the existing legal framework. For example, the 2021-2023 collective agreement in the finance sector prohibited employee dismissals due to restructuring or reorganization, as well as any changes to employment contracts (unless agreed upon by the staff delegation) for two years following a transfer.

Additional metadata

Cost covered by

Companies

Involved actors other than national government

National government Works council

Involvement (others)

The national government stipulated the legal framework. The 2015 law on social dialogue in Luxembourg has suppressed the company works council and only staff delegations are in place at the company level. In the finance sector's collective labour market agreement, for example, the staff delegation has an important role to play during the transferral procedure. It is stipulated that an employment contract must not be amended (in the case of a reorganisation or restructuring in a transferral procedure), unless there is an agreement by the staff delegation.

Thresholds

Affected employees: No, applicable in all circumstances
Company size: No, applicable in all circumstances
Additional information: No, applicable in all circumstances

Sources

• Labour Code
• Le transfert d’entreprise