The notion of economic dismissal
Sometimes, a company has no other choice than to dismiss an employee because either the employee’s position has become redundant in Luxembourg no alternative equivalent role could be found withing the company. It is deemed as an economic dismissal. Though then reasons seem to be objective and not related to the employee’s performance, does this mean that the employee is left powerless against such a dismissal?
Legal Basis
The employer is entitled to dismiss for reasons "based on the needs of the company, establishment or service" (articles L.124-11(1); L-124-5(2) of the employment code).
This dismissal must necessarily be made with notice
a) The Opportunity for dismissal
It has been regularly decided by the courts that the employer has a wide margin of manoeuvre and discretion in the organisation of his/her company.
The employer has the power to create, modify or close his/her business and to take the internal measures that the interests of the business require, even if these measures lead to dismissals.
Therefore, it is not for the courts to assess the appropriateness of a reorganisation measure, nor to substitute themselves for the employer in taking strategic decisions related to the fate of employment in the company.
However, there must simply be a link between the reorganisation measure and the position to be eliminated and the company must be able to prove whichever reasons it has come up with.
Indeed, in the event of a challenge to the dismissal, the courts will investigate, as in the case of any dismissal, whether the reasons for the dismissal were real, precise and serious.
b) The motivation of the dismissal
In case of dispute, the employer has to establish that the grounds for dismissal of the employee are precise, real and serious.
The grounds for dismissal must be sufficiently precise to enable the employee and the labour courts to know the exact nature of the grounds, to enable the employee to make a fully informed judgement on the appropriateness of legal action; the precision must be such as to prevent the employer from invoking afterwards grounds different from those indicated in his letter of dismissal and finally it must enable the judge to appreciate the seriousness of the fault or faults committed by the employee.
It has been ruled on many occasions that in the case of dismissal on economic grounds, the employer must indicate, at the employee's request, the concrete restructuring measures (Court of Appeal 11.11.1993, No. 14335) and their impact on the position being eliminated (Court of Appeal 15.05. 1997, No. 19897), and cannot be satisfied with summary reasons (Court of Cassation 16.01.1997, No. 1325), or vague reasons (Court of Appeal 22.05.2008, No. 32745), or stylistic formulas (Court of Appeal 19.10.2006, No. 30087), or the mere mention of the decrease in turnover (Court of Appeal 16.03.2006, No. 28845).
By way of example, we can mention Ruling No. 75/21 of 21 October 2021 of the Luxembourg Court of Appeal.
The Court recalled that in the case of dismissal for economic reasons, the reasons are "a guarantee for the employee against any arbitrary measure by the employer", who must indicate with sufficient precision the reason for dismissal, which must be real and serious.
In the case in point, it is clear from the letter concerning the reason for the dismissal that the employer detailed the financial losses resulting from a drop in turnover of around 30% over the first five months of 2017, with the subsequent drops implying a loss of business of EUR 79. 561.28 for the period from 1 January to 31 October 2017, as well as the decisions taken in relation to staffing, in particular the kitchen team, opening hours and savings to be made on supplies, in an attempt to reduce operating costs.
Furthermore, the need for, and impact of, the restructuring measures on the abolished position of 1st Chef de Partie was stated in the letter, according to which the appellant's responsibilities in the kitchen "will be divided between the Chef and the Chefs de Partie", rendering the position of 1st Chef de Partie unnecessary.
The employer indicated that, following the abolition of the position in question, the departure of Chef de Partie B and two kitchen assistants, C and D, the number of employees in the kitchen would have fallen from 11 to 7, a loss partially offset by the hiring of a half-task and two trainees.
Similarly, a receptionist position had also been eliminated, reducing the team from 3 to 2 people.
The Court noted from the wording of this letter that the employer had stated the reason for the economic dismissal with the precision legally required, for having detailed the reasons for the restructuring, the measures taken and their impact, both on the functioning of the company and on the workstations, more particularly in relation to the staff working in the kitchen.
On the basis of the documents in the file, the Court held that the grounds for dismissal were real and serious.
Ending
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