France: French Supreme Court Ruled that Settlement Agreements Signed with Employees can be Challenged for up to 5 Years

The French Supreme Court ruled that the statute of limitation which applies with regards to bringing an action challenging the validity of a settlement agreement is 5 years, regardless of whether the settlement agreement related to the performance or termination of the employment relationship.

There have been some debate since 2013 on the applicable statute of limitations with regards settlement agreements. This is because the statute of limitations with regards bringing claims related to the performance or termination of an employment contract had been gone from 5 to 2 years and then been further reduced to 12 months with regards termination.

The French Supreme Court ruled that the applicable statute of limitations was 5 years on the grounds that the general contractual statute of limitations set out in article 2224 of the French Civil Code applied and not the specific statutes of limitations set out in the Labour Code. It also ruled that this applied to settlement agreements relating to claims related to both the termination and performance of the employment contract.

For memory, settlement agreements may be deemed invalid if the compensation paid to the employee is deemed insufficient or, in the case of termination, the settlement agreement is signed before the dismissal is officially notified. In theory, the employee is supposed to return the compensation paid should the settlement agreement be deemed invalid.

Key Action Points for Human Resources and In-House Counsel

Ensure that all documentation with regards settlement agreements is kept for at least 5 years to be able to challenge any actions brought seeking to have them declared invalid.