LINARI LAW

Luxembourg Supreme Court clarifies end date of redeployment compensation rights

In a significant judgment dated 5 February 2026 (No. 41/2026), the Luxembourg Supreme Court set aside a decision of the Higher Social Security Court concerning the duration of compensatory indemnities (indemnités pécuniaires de reclassement) payable in the context of internal professional redeployment.

The case concerned an employee in the banking sector who, at the time of her dismissal, was subject to an internal redeployment measure. Upon termination, she benefited from an extended four-year notice period, resulting from the combined application of the sectoral collective bargaining agreement applicable to the banking sector and a company-level agreement. As she remained under internal redeployment during that period, she continued to receive financial redeployment compensation throughout the full duration of the notice period.

ADEM, the national employment agency, considered that the employee remained entitled to compensatory redeployment indemnities only until the expiry of the statutory notice period on 31 May 2020. It therefore discontinued payment as from that date and sought reimbursement of the amounts paid for the period thereafter. While the “Commission spéciale de réexamen” and subsequently the Social Security Arbitration Tribunal upheld the continuation of payments beyond the statutory notice period, the Higher Social Security Court later reversed those decisions and ordered repayment.

The key legal issue arose under Article L.551-2(6) of the Labour Code, which provides that payment of the compensatory indemnity ends upon, inter alia, termination of the employment contract. The Supreme Court held that the appellate judges could not lawfully stop the indemnity at the end of the statutory notice period without first determining the actual date of termination of the employment contract.

By focusing exclusively on the alleged non opposability of the company agreement and settlement towards the State, the Higher Social Security Court failed to address the legally decisive question: did the employment contract continue until the end of the extended notice period? Because that factual and legal determination was missing, the Supreme Court set aside the ruling.

This decision is important beyond redeployment matters. It reaffirms a broader principle of Luxembourg employment law: where statutory rights are tied to the existence of the employment contract, courts must assess the effective contractual end date, even where extensions result from settlements, company agreements or collectively negotiated arrangements.

For employees subject to internal redeployment, the decision confirms that the relevant trigger for the end of compensatory indemnities is the actual termination date of the employment contract, which must be assessed in light of any validly agreed extension of the notice period.

The Supreme Court further declared the appellate decision null and void and remitted the case to the Higher Social Security Court, sitting in a different composition, for reconsideration of the contractual end-date issue.

Do not hesitate to contact us for more information on this matter and visit our website and social media.

 

Photo – A. Sánchez

PREVIOUS NEXT

Related posts

Browse All

New CSSF eDesk Notification Requirements for Redemption Suspensions (LMT Rules)

From 21 September 2026, the CSSF requires certain Luxembourg funds — UCIs, SIFs and SICARs governed by the amended Law of 17 December 2010 — to notify the activation and deactivation of redemption suspensions exclusively through the "LMT activation" module on the CSSF eDesk platform. The measure forms part of…

Luxembourg Business Register: Enforcement phase begins

The Luxembourg Business Register has entered a new enforcement phase targeting companies with incomplete or outdated information in the RCS or RBE. Non-compliance may become visible on public register extracts and can ultimately result in financial penalties and administrative strike-off. Companies should ensure that their annual accounts, registered office details…

A sovereign bond on DLT: Luxembourg sets its sights on a European first

On 16 September, Luxembourg Finance Minister Gilles Roth announced the country's intention to issue a sovereign bond on distributed ledger technology (DLT). The Minister framed it as a European first for a sovereign bond of benchmark size — and potentially a world first, depending on its final size, maturity, distribution…

CSSF supervisory fees set to rise

The Luxembourg government has published a draft Grand-Ducal regulation to replace the December 2022 fee scale and align CSSF supervisory fees with the regulator's rising costs. Most fees would increase by around 22%, though the change varies by entity and reaches up to 150% in limited cases, while preserving the…

Trusts and foundations in a company’s ownership chain: LBR clarifies who must be registered with the RBE

Circular LBR 26/01 clarifies how beneficial owners should be identified for Luxembourg companies held through trusts or foundations. According to LBR, the beneficial owners of the underlying trust or foundation should be reported to the RBE by applying the specific rules under Article 1(7)(b) and (c) of the 2004 AML…

Career Opportunity: Avocat à la Cour (Luxembourg)  Associate – Commercial and Civil litigation

Career Opportunity: Avocat à la Cour (Luxembourg) Associate – Commercial and Civil litigation
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