Luxembourg Strengthens Employee Protections in Cross-Border Restructurings with New Legislation

Luxembourg has rolled out new legislation that significantly enhances employee protections during cross-border mergers, conversions, and divisions. This move aligns the country with the EU’s Mobility Directive (Directive (EU) 2019/2121) and brings important changes for both companies and their workforces involved in cross-border restructurings.

What’s New for Companies and Employees?

If your business is planning a cross-border restructuring—whether a merger, conversion, or division—published on or after April 1, 2025, you’ll need to follow a much stricter process for informing and consulting employees. Here’s what’s changed:

• Companies must now formally notify shareholders, employee representatives (or employees directly if there’s no representation), and creditors about the planned restructuring. This notice must be given at least five working days before the shareholders’ meeting.
• Detailed explanatory reports, previously only required for shareholders, are now mandatory for employees as well. These reports must analyze the impact of the restructuring on employment relationships, outline any measures to safeguard jobs, and describe any significant changes to working conditions or company locations.
• These employee reports must be made available electronically to representatives or employees at least six weeks before the shareholders’ meeting, alongside the draft terms of the operation.
• Employees or their representatives can submit comments on the restructuring, which must be considered by shareholders and attached to the shareholders’ report. While these comments aren’t binding, they ensure employees’ voices are heard in the process.
• The rules for employee information and consultation, previously limited to cross-border mergers, now also cover cross-border conversions and divisions

Stronger Employee Participation Rights

The new law doesn’t just stop at information and consultation. It also expands employee participation rights:

• Employee board-level participation, previously only required for cross-border mergers, now extends to conversions and divisions.
• If a company has averaged at least 800 employees over the past three years, it must ensure employees have representation at the board or supervisory level.
• In cases where a cross-border operation involves a company already subject to employee participation, the new entity must either apply standard participation rules or negotiate a new framework with a special negotiating body.
• The outcome of these negotiations must be communicated to employees within three working days.
• If negotiations fail, default provisions ensure that employee participation remains at least at the previous level.
• Employee participation rights must be protected for four years after the restructuring, even if there are further mergers, conversions, or divisions during that period.

Imagine a Luxembourg-based company with 1,000 employees planning to merge with a company in another EU country. Under the new law, management can’t simply announce the merger and move on. Instead, they must prepare a detailed report for employees, allow them to submit comments, and ensure that employees are represented on the new company’s board for at least four years after the merger. This gives employees a real say and ensures their interests are protected throughout the process.

Actionable Steps for Companies

If you’re considering a cross-border restructuring, here’s what you should do:

• Start early: Begin preparing detailed employee reports and set up clear communication channels with employee representatives.
• Meet the deadlines: Ensure all notifications and reports are delivered within the required timeframes—six weeks for reports, five working days for comments before the shareholders’ meeting.
• Plan for participation: If your company meets the 800-employee threshold, be ready to negotiate board-level participation and protect those rights for at least four years.
• Consult legal experts: Given the complexity and strict requirements, seeking specialized legal advice can help you avoid compliance pitfalls and potential disputes

Why This Matters

These changes put Luxembourg at the forefront of employee protections in cross-border restructurings. They ensure employees are not left in the dark and have a meaningful role in shaping the future of their workplace. For companies, compliance isn’t just a legal box to tick—it’s a way to build trust and stability during times of significant change.

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