Luxembourg court of appeal: proven employee misconduct insufficient to justify dismissal with immediate effect
In a judgment delivered on 5 February 2026 (role : CAL-2023-01125) the Luxembourg Court of Appeal sitting in labour law confirmed a first-instance decision declaring an employee’s dismissal with immediate effect unfair and upheld the employer’s condemnation to pay notice compensation, severance pay and damages.
The dispute arose following the dismissal with immediate effect of a long-serving employee in December 2018. The employee challenged the dismissal before the labour court, which, in October 2023, held that the dismissal was abusive and awarded compensation exceeding 100.000 euros. Both parties subsequently appealed the judgment.
The employee, who held the position of department manager, was accused of repeatedly reducing the sale prices of certain products and subsequently purchasing those items herself at the discounted prices.
The employer alleged that these actions circumvented the internal procedures governing employee purchases and markdowns, thereby constituting an abuse of her managerial functions and a breach of the company’s internal rules.
While the Court acknowledged that the employee had committed certain procedural breaches in relation to a limited number of purchases, it reiterated that the mere existence of misconduct does not automatically justify a dismissal with immediate effect.
Taking into account (i) the nature of the proven breaches, (ii) the employee’s more than thirty years of service and (iii) the overall circumstances of the case, the Court concluded that the misconduct did not reach the level of seriousness required to make the continuation of the employment relationship impossible.
The dismissal was therefore held to be unfair.
The Court further upheld the compensation awarded by the labour court, including notice compensation, statutory severance pay and damages for both material and moral harm.
This decision serves as a reminder that, under Luxembourg employment law, even proven misconduct may not necessarily constitute a sufficiently serious breach to justify a dismissal with immediate effect.
Employers must therefore carefully assess not only whether misconduct occurred, but also whether its gravity is such as to render the continuation of the employment relationship immediately and definitively impossible.
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