The blurred line between freelancers and employees in Luxembourg

A Luxembourg court last month backed a delivery platform against drivers claiming they should be considered employees and receive the benefits of that status, but also in other sectors freelancers are warning that companies are trying to sidestep labour laws and extra costs.

Independent workers made up around 10% of Luxembourg’s workforce in 2023, according to World Bank data, while the Chamber of Commerce estimates that at least 35,000 self-employed professionals were registered at the House of Entrepreneurship in 2024. Sectors where freelance contractors are common include media, design, medicine, finance, consultancy, language teaching, public services, law and IT.

Freelancing promises flexibility, variety and digital nomad lifestyles, but independent workers also find themselves locked out of sick leave, paid holidays and other benefits, and at risk of financial instability or a lack of career progression.

Also read:Tax and social security for the self-employed

Employee or not?

The main difference between being self-employed and employed depends on a legal determination: whether the person is officially classified as an employee or as an independent worker, explained Guy Castegnaro, founding and managing partner of Castegnaro Ius Laboris, in an interview with the Luxembourg Times.

“If you are considered an employee, you are protected by the Labour Code and the social security system,” said the lawyer. “That means paid holidays, dismissal protection, unemployment benefits, overtime pay and more. If you’re self-employed, none of these rights apply.”

“Companies can end the relationship at any time, without notice or reason. From an administrative standpoint, it’s easier: the freelancer handles all tax and social security declarations,” explained Castegnaro. © Photo credit: Guy Castegnaro

“If you are considered an employee, you are protected by the Labour Code and the social security system,” said the lawyer. “That means paid holidays, dismissal protection, unemployment benefits, overtime pay and more. If you’re self-employed, none of these rights apply.”

Central to this issue is the lien de subordination [or subordination link]. “If you are an employee, you are under the company’s authority,” said Castegnaro. “They give instructions, control how you work, and have the right to sanction you.”

Courts called in to rule on labour disputes focus not on job titles or contracts but on the actual working relationship, he explained. They assess factors like autonomy over schedule, ability to work for other clients, and use of personal tools and equipment.

“If the answer to whether the person had autonomy is ‘no’, there may be a subordination link, and that could mean they are employees in disguise,” said Castegnaro.

Delivery service in court

In a recent case in May, a trade union representing workers for a food delivery platform had argued that the drivers were in fact employees in disguise. However, the court found no subordination link, noting the drivers choose their hours via a time-slot system, can reject jobs and work for other platforms, and use their own bikes and phones, also covering their own business expenses.

In addition, the applicants were registered as self-employed with the Joint Social Security Centre (CCSS) and were paid on the basis of invoices.

“There was no evidence of hierarchical control, exclusivity, or disciplinary sanctions. […] The court therefore rejects the reclassification, finding that the evidence presented by the plaintiffs – such as the alleged requirement for punctuality, the wearing of a uniform, or the monitoring of performance – pertained more to the organisation of a logistics service than to any disciplinary or hierarchical authority characteristic of an employment relationship,” the court’s ruling says.

It is not known which Luxembourg delivery platform was taken to court. © Photo credit: Shutterstock

“There was no evidence of hierarchical control, exclusivity, or disciplinary sanctions. […] The court therefore rejects the reclassification, finding that the evidence presented by the plaintiffs – such as the alleged requirement for punctuality, the wearing of a uniform, or the monitoring of performance – pertained more to the organisation of a logistics service than to any disciplinary or hierarchical authority characteristic of an employment relationship,” the court’s ruling says.

The drivers’ claims, notably for back pay, vacation pay and severance pay, were consequently rejected.

As of early June, the ruling remains anonymised and unappealed, though the deadline to appeal has not passed, confirmed a spokesperson of the judicial administration.

Freelancers’ blurred lines

For Anna*, the difference between freelancing and full-time employment is theoretical. On paper, she is self-employed. In practice, she works nearly full-time for a media company without the protections afforded to employees.

“I have a freelancing contract, like a lot of people on my team. But we do shift work, full working days, just like regular employees. My tasks include writing, editing, and being present during set hours. The only difference is that I don’t have job security,” she said.

“There are people on my team who work 35 to 40 hours a week. But we don’t have paid holidays or sick leave. You can be let go at any time, for any reason, and you won’t get unemployment benefits.”

Anna juggles other gigs on weekends to make ends meet, and says she has felt on the brink of burnout. “My main job expects near-permanent availability,” she said. “We’re asked to attend unpaid meetings outside shifts. We’re expected to stay up to date on team developments.”

No matter how much work she puts in though, “there’s no career progression, no annual reviews, little collaboration,” she said. “It’s not a job you can grow in, and you often feel at risk.” Team morale, she said, has suffered as a result.

Also read:Many Luxembourg employees turn up for work when sick

Jasmine*, a graphic designer, faced a similar situation at a creative agency that wasn’t registered as a company at the time. She was told she needed to become a freelancer to work there.

“It was my first job out of school,” she said. “I was required to go to the office every day from 9am to 6pm, and there was friction every time I arrived at 9:15 or finished at 17:30.”

Without a work contract, Jasmine said she “told them multiple times that if they wanted someone doing the ‘9 to 5’, then they might want an employee that they could register as such, but not me.”

Being paid by the day made it hard to prove income when applying for housing. The full-time schedule also prevented other freelance gigs. Jasmine eventually reduced her days to three per week before quitting. When she left, she was asked to give three months’ notice.

Now she works from home for several clients and values the flexibility. “I don’t know if politicians are aware of this in general. When I was going through this, I was really craving to find a helping resource, but it was super difficult to find a place where I could get information or learn what to do,” said the graphic designer.

An association for independent workers – championing the rights and interests of freelancers – wasn’t established in Luxembourg until last year.

Some progress has been made in recent years to help freelancers benefit from social services traditionally reserved for employees, such as access to special family leave to care for children or dependent relatives during the lockdown-related closures of schools and day care facilities.

After initially being left out of Covid-19 support measures, the Luxembourg government eventually introduced a comprehensive aid package to help self-employed individuals manage the pandemic fallout. This included direct financial aid, such as non-repayable grants of up to €4,000 and access to state-backed loans of up to €500,000, along with repayable advances to cover operating costs, as well as tax deferrals and exemptions.

However, by February 2021, discussions about introducing a state-supported minimum income for self-employed individuals were put on hold, amid concerns over the sustainability of funding sources.

Why companies choose freelancers

While using freelancers as substitute employees comes with legal risks, “the big advantage is flexibility,” said Castegnaro. “Companies can end the relationship at any time, without notice or reason. From an administrative standpoint, it’s easier: the freelancer handles all tax and social security declarations.”

“Of course, it’s a way for employers to get around higher costs and employee benefits,” said Clara Moraru, CEO and founder of the Union of Independent Workers. Moraru added that, in her experience, the relationship between freelancers and the employer’s expectations can vary significantly depending on the nature of the job.

Wage laws also don’t apply to self-employed workers. “You can pay a freelancer less than the minimum wage, which you couldn’t do with an employee,” Castegnaro noted.

Gig economy

The rise of platform work has further blurred the lines. Courts in several countries have ruled that platform workers must be classified as employees.

“In France, the Court of Cassation ruled in 2020 that Uber drivers were employees due to lack of freedom. They had to accept routes and pricing and were sanctioned by the platform,” said Castegnaro. Spain’s 2021 “Rider Law” similarly granted employee status to platform workers.

In Luxembourg, change has been slow. A 2024 EU directive on platform work is still in the process of being transposed into national law. That will require further inter-ministerial consultation, a Labour Ministry spokesperson said, with a with a draft law expected by the end of the year.

“The bill, however, will not introduce a third legal status between employee and self-employed,” the spokesperson said.

“Luxembourg wants things black or white. Either you are an employee or not,” said Castegnaro. “A third status would create legal uncertainty. That’s not the direction the government wants to take.”

However, it is not clear how the new bill will eventually safeguard workers in situations similar to Anna and Jasmine. Ultimately, the Labour Court will continue to evaluate cases individually. “Maybe the bill will define subordination more clearly in the Labour Code,” he continued. “But I don’t expect major changes.”

Also read:Is sharing really caring? How Luxembourg has adopted the sharing economy

*The interviewees’ names have been changed at their request to protect them possible negative ramifications with their clients.