'13th month' payment as common practice under Luxembourg Law?
While it is quite common for employers to grant a ’13th month’ payment in Luxembourg, whether such payments could be owed by the employer due to ‘common practice’ was unclear until a recent Court of Appeal ruling. We lay out the general guidelines defined in that ruling below.
Which guidelines did the Labour Court of Appeal apply?
In a recent case, the Labour Court of Appeal set out the boundaries of principles to be applied in the area of “common practice”. In the case in question, one of the employee’s claims was 13th month payment, on the grounds that she had been entitled to such payment every year for the past five years. Indeed, according to the employee the 13th month payment had become a “common practice”, while such payment met the three criteria required by case law, which are:
- Generality: payment/award to all staff members;
- Constancy: regular practice;
- Rigidity: the benefit should have certain rigidity both as regards the conditions under which employees may claim it, and as regards its calculation methods.
Further details of the ruling
The employer contested the claim by arguing that the 13th month payment did not constitute an acquired right as it did not feature in the employment contact or in the collective agreement, and that it did not meet the three above-mentioned criteria to constitute “common practice”. The Court of Appeal, to which this claim was referred, firstly reiterated the principle, according to which “although in principle a bonus is deemed to be a gift dependent solely on the employer’s good will, it is accepted that the employee may turn this assumption on his/her head by proving that on the contrary, the bonus represents a salary supplement as set out by the individual or group employment contract, or resulting from common practice within the company or profession.”
The Court then reiterated that it was incumbent upon the employee to demonstrate “common practice”, and ruled that “the generality of the bonus does not mean that it is paid to all of the employees within a company. The fact that it is simply paid to employees with the same circumstances is sufficient to show that it is not of an exceptional nature.” Further, the Court held that “the payment of a bonus for two consecutive years which matches the salary for the final month of the year is sufficient to establish the constancy and rigidity of the bonus.”
In the case in point, after having reiterated the principles and having noted that the payslips did not refer to the 13th month payment as a “gift or exceptional bonus”, the Court of Appeal upheld the original judges’ ruling, deeming that 13th month pay by the employer for an amount which varied very little from one year to the next, for five consecutive years, constituted an acquired right for the employee. The Court of Appeal therefore ruled in favour of the employee’s claim to 13th month pay and declared it to be well founded.
Court of Appeal, 15 January 2015, case no. 40682 on the roll