COVID-19 exit: The (uncertain) “new normal” in Luxembourg from a legal perspective
Posted: 1st June 2020 10:08On 13 March 2020, the Government declared strict containment of the population until further notice from 16 March.On 18 March, the state of emergency has been decreed by the Prime Minister (Grand Ducal Regulation 18 March 2020 – the “GDR”). A law of 24 March 2020 has extended the state of emergency for a period of three months.
At of the time of writing, the lockdown measures have been lifted step by step since 4 May 2020. The second phase of deconfinement took place on 11 May. The third COVID-19 exit phase will start on 25 May, with the end of the suspension of primary schools and kindergarten activities, which has forced many to stay at home to take care of their children.
Since the GDR, the Government has undertaken far-reaching legislative measures to fight the spread of COVID-19 and simultaneously to ensure business continuity, meant to last until the end of the state of emergency. However, the legal landscape is moving very fast , on a nearly daily basis. It is difficult to ascertain what will be legally sound tomorrow as the COVID-19 crisis evolves.
What is certain, however, is that these measures are temporary, correlative to the emergency powers granted by the state of crisis to the Government, even (perhaps especially) dependent to governmental decisions, which may be taken before the end of the state of emergency. Thus, the temporary nature of the measures undertaken triggers the questions of their duration and expiration, in particular following the easing of the containment measures in the course of the Luxembourg "back to (new) normal" (Lockdown Exit) process.
What does the state of emergency imply? For how long? What are the main extraordinary measures undertaken by the Luxembourg government to fight the spread of the pandemic? What happens to the measures following the deconfinement phase? What will happen once the state of crisis will end?
State of Emergency
A state of emergency is an exceptional state described in Art. 32(4) of the Luxembourg Constitution. It can be declared in three cases if:
- an international crisis is ongoing,
- the interests of the population or part of the population are threatened, or
- there is an acute risk of a breach of public safety.
The state of emergency allows the government to take any regulatory measures that may derogate from existing laws, provided that these legal prescriptions are consistent with the Constitution and respect international treaties, that they are necessary and proportionate to the context of the crisis.
The state of emergency is initially valid for 10 days. If the state of emergency is to be extended, Parliament must accept a law, as was the case on 24 March. If Parliament considers that the crisis is over, it can also put an early end to the state of emergency.
At of the time of writing, the state of emergency will end on 24 June 2020. It may not be renewed. While the exit from containment should not be confused with the end of the state of crisis, the return to normalcy sometimes triggers the end of extraordinary measures, even though the Grand-Ducal regulations that provide for them specify that these measures will last until the end of the state of crisis.
Main temporary measures undertaken to fight the spread of COVID-19
1. Partial Employment
The short time working regime has been tailored to the COVID-19 crisis.
(i) Employers that have been forced to shut down are automatically eligible; and
(ii) those which activities are not subject to shut down decisions but experiencing difficulties due to COVID19 (i.e. whose suppliers can no longer deliver raw materials, or which are suffering a significant drop in customer demand, due to the pandemic, or which can no longer operate at normal speed or if one or more departments are completely at a standstill due to staff absences caused by external decisions) may be eligible.
Since the scheme had initially been introduced to prevent lay-offs for employers facing difficulties of a mainly cyclical and of a temporary nature, applicants to partial unemployment must undertake not to dismiss any employees of the company (including employees from another department not being on short-time work) on economic grounds during the entire period of partial unemployment. Termination for personal grounds remains possible.
The application is made via a dedicated online procedure, whereby employers may request the repayment by the Employers’ Fund of the compensatory allowance paid for the inactive hours (80% of the salary received) capped at a maximum of 250% of the minimum social wage for an unskilled worker (€5,354,975) and up to a maximum of 1.022 hours.
The scheme applies for employees, neither covered by a sickness leave, nor a leave for family reasons; or who can no longer be employed full time or no longer work at all. In practice, so far, the full salary  is paid by employers, who receive the advance payment without prior notice of any confirmation of the entitlement to the scheme (without prior analysis of the entitlement requirements but based on the sole COVID-19 lockdown). To date, applications for partial unemployment for the month of May and June 2020 must be submitted by 31 May at the latest, failing which, they will be time-barred.
2. Extraordinary leave for family reasons
As from 30 March, parents affiliated to the Luxembourg social security were enabled to benefit alternately on a shared basis from extraordinary leave for family reasons if they have to look after their child(ren) under 13 years of age.
This extraordinary family leave is assimilated to a period of incapacity for work due to illness, with regard to the employer and the social security. Consequently, during this leave, employees are protected against dismissal apart from serious misconduct.
Parents-employees are not entitled to the exceptional family leave if another means of care is available.
This leave cannot be combined with other measures allowing parents to stay at home (e.g. telework or partial unemployment) and may not to be mixed up with regular leave for family reasons.
Employers may not refuse family leave taken in the context of the pandemic and must continue to bear the remuneration due to the employees. The Employers' Mutual Fund will reimburse directly the employer. However, the family leave does not affect the remaining days of leave for family reasons.
Family leave is normally subject to a notification process towards the employer. COVID-19 has forced innovation and allowed the submission via an online form. In the context of the pandemic, this leave should last until the end of the state of emergency.
3. Teleworking and commuters
Telework should normally be voluntary based. Under COVID-19 context, employers may impose homeworking on employees based on the restrictions and duty to protect health and safety.
In normal circumstances, cross-border workers (non-resident taxpayers in Luxembourg) working from home are bounded by tax threshold under which they can remain fully taxable in Luxembourg. Belgian, French and German cross-border workers should not work more than a certain amount of days per year, if they do not want to be partially taxable in their country of residence.
Once the annual threshold (24 days for Belgium, 29 for France or 19 days for Germany) in the country of residence is exceeded, the cross-border employees’ part of salary (i.e. the number of days worked outside Luxembourg) should be exempted in Luxembourg.
As a result of the pandemic, the tolerance thresholds laid down by the tax treaties applicable between Luxembourg and the neighbouring country to avoid double taxation, in case of cross-border employees, have been unbounded.
As from 11 March 2020 for German cross-border employees and as from 14 March 2020 for Belgian and French ones, the days spent working from home will not be taken into account in the calculation of these thresholds. Yet, this tolerance will only last until further notice.
For instance, the Luxembourg-German amicable agreement applies from 11 March 2020 until 30 April 2020. The agreement should automatically extend from month to month until it is denounced by one of the competent authorities.
Besides, the short-term increase of the social security threshold of 25% of work activity in the country of residence will not be considered and correspondingly should not impact the country to which employees are affiliated for social security purposes.
Thus, working days during which employees are teleworking from their main residence may be considered as working days in the State where the activity would normally have been carried out.
Cross-border workers, on whom the Luxembourg economy relies on heavily, must however, when commuting, carry certificates at all times, which includes details of their home address and employer.
4. Other key measures – Deadlines suspensions
Trial periods have been suspended withregard to labour contracts entered into with companies forced to shut down because of the closure governmental decisions or to employees currently on partial unemployment due to the COVID-19 crisis, during the state of emergency.
This suspension applies as of the effective date of the government's decision to cease all or part of the commercial or craft activities (that are open to the public) or as of the partial unemployment of the employee concerned.
The remaining fraction of the trial period shall resume the day after the end of the state of emergency.
Furthermore, the application of the rules for incapacity for work due to illness have also been suspended and the correlative protection against dismissal enhanced; namely
- the mechanism for calculating the 78 weeks of incapacity for work due to illness is temporarily suspended during the period of the health crisis;
- sick leave taking place during the pandemicshall not be counted as part of the 26-week period of protection against dismissal in the event of incapacity for work, i.e. suspending the period during the state of emergency so that it cannot expire during the crisis and dismissals may only take place from the first day of the 27th week of protection.
Since 1 April, employers must no longer continue to pay, during the first 77 days of sickness leave, employees who are unable to work. The CNS directly pays the salaries.
After the end of the state of emergency, employers shall provide the employee concerned with a statement. This statement shall contain details of the remuneration that would have been due for the burden-sharing for sickness benefit period under the continued pay mechanism. If there is a difference with the compensation transferred by the CNS, the employer must bear it.
Besides, the Government and the Joint Centre for Social Security (“CCSS”) have decided to the temporary suspension of the:
- computation of default interests for late payments of social security contributions;
- recovery procedures of social security contributions;
- enforcement procedures of social security contributions by bailiffs;
- penalties for late filing of the form to be made by Luxembourg employers with the CCSS.
Again, these temporary suspension measures are applicable retroactively as of March 2020 until further notice.
COVID-19 exit process
The deconfinement has gradually started since 20 April 2020.
As of 11 May, all closed craft activities (e.g. health-hygiene), or commercial activities partially closed (e.g. customer reception and showrooms) were allowed to resume their regular activities on condition that they comply with all strict mandatory sectoral health conditions.
Only the following commercial activities are still prohibited:
- consumer lounges of the artisanal food sector;
- Horeca catering activities (i.e. restaurants, cafés and bars)
- the projection of cinematographic films (with the exception of open-air cinemas accessible by car and/or motorcycle);
- the activities of sports facilities or similar (fitness centres, swimming pools, sports halls, dance/yoga/Pilates studios, sports classrooms, etc);
- amusement parks and theme parks;
- gambling activities (casinos);
- trade fairs and exhibitions.
In principle, at the end of the state of emergency, all emergency regulations lose their validity. The return to normalcy, so much desired by the people and necessary for the global economy, raises numerous questions regarding the future of the far-reaching mesures undertaken by the Government to preserve business continuity.
1. Partial Employment
The Government and the Unemployment Agency (“Adem”) have recently disclosed that,following to the deconfinement process and wish for return to normalcy, only employers that have not been allowed to resume their activities since 11 May 2020 will still get advance payments.
The other employers will only be reimbursed subject to the normal monthly request process for a partial unemployment scheme in the event of force majeure linked to the coronavirus.This means they must provide the Adem with a monthly detailed breakdown with all the off-hours and corresponding salary slips for short-time work after they have, allowing the calculation of the amounts exactly due by the State).
Under these conditions, and in other words, from 1 June onwards, for those companies allowed to resume their activities, short-time work schemes (due to force majeure COVID-19) as it has been set up to fight the pandemic will no longer allow automatic reimbursement of advance payment.
2. Extraordinary leave for family reasons
As of 25 May 2020, when the elementary school activities and kindergarten shall resume, the extraordinary leave will no longer be automatically granted.
In Luxembourg, schooling is compulsory from the age of four to 16. Thus, on 25 May, as long that the government does not decide otherwise, it must be understood that children over four years of age must return to school.
In exceptional cases, leave for family reasons may be granted until the beginning of the summer holidays (on July 15th), for the care of a vulnerable child or a child who couldn’t get a place in a childcare facility.
For children under the age of four, parents have the choice between taking a leave for family reasons or registering the child in a childcare facility.
For the others, they may either request for the normal leave for family reason (in case of child – under the age of 18 – illness or deficiencies of exceptional seriousness, subject to the notification of illness certificate to their employer, for a limited duration (five to 12 days) that may only be extended by the Social Security Medical control) or to the best possible extent agree with their employers for normal leaves as provided by the law.
3. Teleworking and commuters
On 19 April 2020, a petition was submitted to the Chamber of Deputies (Petition n°1556) in favour of the introduction of a right to telework. The author asks to allow employees to work from home for half of the daily or weekly working time determined by their employment contract. The place of work may be then considered to be the employee's home.
This petition has exceeded the threshold of 4,500 signatures, which guarantees that it will be debated in the Chamber of Deputies.
On 26 April, German Federal Minister of Labour announced that he is working on a draft bill to give employees the right to work from home even after the COVID-19 crisis. However, the willingness of many to continue teleworking will only be followed by action if Luxembourg agrees with its three neighbouring countries to relax the tax rules, which limit the use of teleworking by some 200,000 cross-border commuters.
Yet on Wednesday 13 May, France eased certain restrictions at its borders with European countries (European Union, Schengen Zone area, United Kingdom), allowing the exercise of the right to custody of a child or the visit of a parent. The closure of the Franco-German border is however envisaged until 15 June.
On 15 May, controls at the borders between Luxembourg and Germany were lifted.
The temporary commuting rules as well as the form and content of the certificates proving the need to cross the French and Belgian-Luxembourgish borders are likely to change rapidly.The same uncertainty applies for the agreed exceptional tolerance related to the tax and social security thresholds, while the Franco-Belgian-Luxembourg amicable agreements were temporary, justified by the compulsory containment and the closure of borders – but most importantly meant to last until further notice.
Deadlines suspensions were enacted to last for the duration of the state of emergency or until further notice or Government's decision.
Employment and trial period suspensions will resume the day after the state of crisis ends.
The commitment not to lay off employees for economic reasons may soon expire, with the return to normal, without partial unemployment, employers will recover their right to dismiss people for economic grounds.
Alike the decision taken by the Adem regarding partial unemployment, the tolerance and suspensions by theadministrationscan be expected to cease without warning. Despite the demands for continuation of the extraordinary measures undertaken by the Government after the end of the state of emergency, the gradual lifting of the confinement measures may accelerate their expiration and creates legal uncertainty.
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Jackye Elombois a co-founder of LEGALIS. Over the past 17 years, she has distinguished herself by helping clients rethink their dispute cases and providing responsive, cost-effective and efficient solutions. More than the ability to solve problems, she shares her resolution and determination to resolve.
Jackye has been qualified as a Luxembourg lawyer since 2003 and specialises in employment law and business litigation. Before LEGALIS Jackye was a Partner in a well-established Luxembourg law firm. Jackye is also an author in Luxembourg and French publications on corporate litigation, employment and contributes on Luxembourg case law.
Grand Ducal Regulation of 18 March 2020 introducing a series of measures in the context of the fight against COVID-19.
The GDR has been so far amended on 20 and 27 March; on 1, 3, 8, 17, 24 and 28 April, and on 6 and 11 May.
For the hours worked and for days-off.
Up to the age of 18 for a child with a disability.
Essentially fun, sport and entertaining activities, and Horeca sector activities.
On 4 May, secondary school students went back to school.
Children with chronic conditions (e.g. suffering from certain (i) chronic diseases of the respiratory tract, (ii) heart diseases, or forms of immune deficiency due to a condition or therapy).