LINARI LAW

Luxembourg Court of Cassation invalidates excessive reimbursement clause hindering resignation rights

Luxembourg’s Court of Cassation reaffirmed the principle that an employee’s right to unilaterally terminate an open-ended employment contract (CDI) cannot be indirectly hindered by disproportionate financial penalties in a Decision No. 45/2025 of 20 March 2025 (Case No. CAS-2024-00113)

 

An employee, recruited in 2019 from Mauritius as a senior consultant, had agreed to reimburse certain relocation expenses if he resigned within 36 months.

The employer covered administrative and relocation costs, including temporary housing, work permit processing, and moving expenses, totaling approximately €3,149. In addition, the contract annex imposed a penalty clause of €25,000, intended to cover internal costs related to work permit procedures.

The employee resigned after only eight months. The employer demanded reimbursement of €28,149, including the €25,000 penalty.

The Labour Tribunal partially upheld the claim, reducing the penalty to €5,000.

The Court of Appeal later invalidated the penalty clause entirely, citing it as an unjustified restriction on resignation rights. The employer appealed to the Court of Cassation.

The Court of Cassation confirmed the Appeal Court’s reasoning, emphasizing two key legal principles:

  1. Penalty clauses must not obstruct resignation rights

The Court ruled that contractual clauses which indirectly prevent resignation by imposing excessive penalties are null and void. The €25,000 lump-sum was deemed disproportionate given the employee’s annual salary (€52,000) and vague justification. As such, it violated the employee’s right to resign at will, a fundamental public policy right under Article L.124-1.

  1. Contractual freedom is limited by public policy

The Court also dismissed the employer’s argument based on contractual freedom (Article 1134 of the Civil Code), stating that freedom of contract cannot override mandatory employment protections.

The appeal to the Court of Cassation was fully rejected.

Representation before the Court of Cassation requires comprehensive knowledge of procedural rules and legal principles, a high level of drafting skill, and the mandatory assistance of an Avocat à la Cour.

LLF can assist you if you are involved in a cassation appeal, whether as a claimant or as a defendant. Do not hesitate to contact us for more information on this matter.

PREVIOUS NEXT

Related posts

Browse All

Luxembourg issues first digital treasury certificates on blockchain

On June 16, 2025, Luxembourg made history by issuing its first Digital Treasury Certificates (DTCs) via blockchain. This €50 million issuance marks a key milestone in the country’s digital finance strategy. By leveraging distributed ledger technology, the government is modernizing public debt with enhanced transparency and efficiency.

Sick leave and immediate dismissal: a clear line from the Court of Appeal

A recent decision from the Luxembourg Court of Appeal brings clarity to the legal limits of sick leave protection. On May 22, 2025, the Court ruled on a case involving the immediate dismissal of an employee during medical leave. The ruling draws a firm line between procedural missteps and actual…

Pension reform in Luxembourg: longer working lives ahead!

Luxembourg is reshaping retirement with a new pension reform that’ll make working longer the norm—without raising the official retirement age. By gradually extending contribution years and adding flexible retirement options, the plan balances tradition with modern needs.

Tokenisation: paving the way in Luxembourg’s financial sector

Tokenisation is revolutionising Luxembourg’s financial sector by enabling digital representation of real-world assets on the blockchain. It streamlines processes like fund share issuance, reduces costs, and improves transparency with auditable records. With automated compliance features such as KYC and AML, tokenisation also enhances regulatory adherence.

Know Your Assets: Strengthening ML/TF compliance for registered AIFMs

As regulatory scrutiny grows, Know Your Assets (KYA) is becoming essential for registered AIFMs managing ML/TF risks. This article outlines what KYA compliance means in practice and how AIFMs can strengthen their approach, especially for unlisted assets.

Court of Appeal clarifies the grey zone and sets out employment relationship rules

In a key judgment on April 3, 2025, the Luxembourg Court of Appeal clarified a common labour law question: when does a role qualify as employment versus a corporate mandate? The case involved claims of abusive dismissal and severance pay but ultimately hinged on the test of subordination. The ruling…
Browse All

A LEGACY OF LAW. A FUTURE OF INNOVATION.
25 years of legal excellence – the journey continues.

Contact Info

+352 27 11 60 10

UP