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07. Termination of Employment Contracts
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07. Termination of Employment Contracts

Grounds for Termination

In the case of an indefinite-term employment contract, there should be real and serious grounds for dismissal. There are two types of valid grounds: personal grounds and economic grounds.

a. Personal Grounds

Personal grounds can include:

  • poor performance or unsatisfactory professional skills;
  • inability to perform the assigned tasks;
  • misconduct within the company; and
  • an employee’s repeated absence or absence over a long period of time (which is not related to a work-related accident or illness) which, in certain circumstances, can also constitute valid grounds for dismissal.

b. Economic Grounds

The Labour Code allows two main economic grounds for dismissal:

  • economic difficulties facing the relevant business sector at a group level in France; and
  • technological changes.

As the above list is merely indicative, case law allows other economic grounds for dismissal, namely where it is necessary to safeguard the competitiveness of the relevant business sector at group level and in the case of cessation of business activity.

The company must implement measures to prevent the dismissal of the employee. Therefore, before or during the process, the company is required to implement various preventive measures, support and reclassification of the employee.

Collective Dismissals

a. Common Rules

The common rules that apply to collective dismissal procedures are:

  • order of dismissals;
  • redeployment efforts;
  • informing the labour authorities.

The redeployment efforts should be carried out throughout the group in France. The employer should offer individual and precise offers to the targeted employees.

In case of failure to comply with these rules, the dismissal may be considered unfair by the Labour Courts.

b. Procedure

The procedure will vary in function of the number of employees made redundant over a period of 30 days.

c. Less than 10 redundancies over 30 days

In collective redundancies involving companies of less than 50 employees, the company should consult the workers’ representatives (i.e. workers delegates for companies of less than 50 employees and Works Council in companies of 50 or more) on the redundancy project. In practice, an economic note will be handed in to the workers’ representatives presenting the reasons for the redundancies and the measures to be taken.

The employees will be individually convened to a pre-dismissal meeting where the project will be described and the economic motives detailed. The employer will also have to present information on a redeployment scheme (i.e. “Contrat de Sécurisation Professionnelle” (CSP) or redeployment leave, depending on the size of the company).

The employer will have to inform the Labour Authorities in writing of certain details of the redundancies, within 8 days of the sending of the dismissal letters.

d. At least 10 redundancies over 30 days

Here again, the procedure will vary in function of the size of the company.

e. In companies employing 50 employees or more

A new system of collective redundancies applies as a result of the law of 14 June 2013 on the security of employment (“loi de la sécurisation de l’emploi”). As such, in companies of more than 50 employees dismissing at least 10 employees, the employer should undertake the following steps:

i) Establish a “Job Preservation Plan” (“PSE”)

The PSE should provide concrete, accurate and detailed measures and, notably, any alternative to redundancy such as the reduction of working time, redeployment opportunities or training.

The employer may then formalise the PSE by:

  • entering into an agreement with the relevant unions; or
  • where this is not possible, make a unilateral decision.

In both cases, the plan must be approved by the Labour Administration.

ii) Consult the Workers Representatives and Provide Information

The employer should meet with the Works Council to announce the proposed plan and inform it in writing of the reasons for the restructuring project and of the number and the category of workers to be made redundant.

The consultation procedure is now limited to:

  • 2 months where the number of redundancies is less than 100 employees;
  • 3 months if the number of redundancies is between 100 and 250 employees; and
  • 4 months if the number of redundancies is above 250 employees.

iii) Seek the Approval of the Labour Administration

The agreement or unilateral decision on the PSE should be approved by the Labour Administration.

Time limits are imposed on the approval of the Labour Administration:

  • 15 days where an agreement has been reached; and
  • 21 days where a unilateral decision was made.

In the absence of any response, approval by the Labour Administration is deemed to be given.

iv) Notify Affected Employees

Once the PSE has been authorised, the employer should make every effort to find employees facing redundancy another position within the same company or group, worldwide. If the internal redeployment is not possible, the employer should give each of the affected employees notice of his/her dismissal and indicate in each letter the reason for the redundancy.

It is important to note that there is a specific procedure for the dismissal of “protected employees”, including staff representatives, trade union representatives, candidates to professional elections, and former staff representatives. Regardless of the type of procedure under way (for personal or economic grounds), the employer should, in most cases, inform and consult the Works Council (where one exists) and request the prior authorisation of the Labour Inspector for the proposed dismissal.

Companies employing less than 50 employees

The employer should consult the workers delegates on the project after having provided an economic note detailing in particular the economic motive, as well as the measures to be implemented to prevent or limit the number of redundancies and to facilitate the redeployment of employees made redundant.

Workers representatives hold at least two meetings separated by a period that cannot exceed 14 days.

As the case may be, the employees should be informed of their right to benefit from the CSP at the end of the second meeting with the workers representatives.

Individual Dismissals

Once an employer believes that there is a valid ground for dismissal, it should send a letter giving the employee five working days’ notice of a meeting. This letter should set out the time and place of the meeting and the employee’s right to be accompanied by a fellow employee or a third party.

During the meeting, the employer should state why it intends to dismiss the employee and take note of the employee’s explanations if the dismissal is based on the employee’s performance or misconduct.

The employer must notify the employee of its decision and, if appropriate, specify the grounds for dismissal in a letter delivered by registered post.

The employee may request additional information on their dismissal within 15 days. The employee may dispute the grounds for dismissal before a Labour Court.

If the contemplated dismissals are based on economic grounds, the employer should elect which employees to make redundant by considering:

  • the number of the employees’ dependants (especially for single parents);
  • the employees’ length of service;
  • potential difficulties that the employees may face in finding new employment (such as age or disability); and
  • the employees’ professional skills.

The employer should also make every effort to find employees facing redundancy another position within the same company or group, worldwide. It should also ensure that employees can adapt to the changes in their job position by way of training programs. Non-compliance with these rules may render the redundancy unfair. The employer should inform the Labour Administration of its decision to make the employee redundant within 8 days of the formal notice of dismissal.

Is Severance Pay Required?

The employee made redundant will receive a dismissal indemnity calculated based on the employee’s years of service, as well as any accrued and untaken paid vacation.

Separation Agreements

The legislator imposes that a separation agreement, other than a dismissal or resignation, should be done through a specific procedure called the “rupture conventionnelle” (mutually agreed termination), which is subject to specific regulations and conditions.

Hence, the “rupture conventionnelle” is the only method to terminate an employment contract by mutual agreement.

a. Is a Separation Agreement required or considered best practice?

The employee who signs a conventional break with his employer receives a termination indemnity, which cannot be less than the dismissal indemnity the employee is entitled to had he been dismissed.

A specific homologation or approval procedure applies to the “rupture conventionnelle”. Once signed, the employee as well as the employer has a right of withdrawal of 15 calendar days, after which either party will send the form to the Labour inspector for homologation or authorisation. The Labour Inspector will have 15 business days from the reception of the form to homologate or authorise. In the absence of response, the form is deemed homologated or authorised.

This method of separation will allow the employee to be entitled to unemployment benefits (if they meet general allocation conditions).

b. What are the standard provisions of a Separation Agreement?

A specific governmental form called a Cerfa should be filled out, either by hand or online. The form requests basic information on the parties, and will require the following provisions:

  • date of the meetings between employer and employee and whether they were assisted during these meetings;
  • termination indemnity amount (which cannot be less than the dismissal indemnity that the employee would have received in case of dismissal);
  • date of signature of the form;
  • date of projected end of the work contract (which cannot be earlier than the day following the authorisation by the labour inspector).

c. Does the age of the employee make a difference?

The age of the employee may affect the amount of the specific termination indemnity, as certain collective bargaining agreements provide for specific additional indemnities depending on the employee’s age.

d. Are there additional provisions to consider?

Additional provisions may be considered and indicated directly on the form, such as waiving of non-compete clauses.

Remedies for Employee Seeking to Challenge Wrongful Termination

When seeking remedies, the employee may request before the Labour Courts:

  • the nullity of the dismissal (only possible where a text provides for a nullity, such as harassment or discrimination): as appropriate, reinstatement within the company or compensation of unfair dismissal;
  • damages for unfair dismissal (e.g. insufficient economic grounds or insufficient redeployment efforts in a redundancy, or gross misconduct not demonstrated): these damages are now set out in a binding grid containing minimum and maximum amounts, based on the employee’s length of service;
  • damages for irregularity of the dismissal (i.e. the dismissal procedure was not correctly followed): damages equal to a 1-month salary maximum in the event that the dismissal is considered as grounded;
  • damages for any additional demonstrated prejudice.

Please note that when entering into a “rupture conventionnelle”, the remedies are limited. The employee may only challenge the mutually agreed termination in Court within a year of the homologation or authorisation and only on the grounds that he did not consent to signing the agreement.

Whistleblower Laws

The new “Sapin II Law” (otherwise known as the “Law on Transparency, the Fight against Corruption, and for the Modernisation of Economic Life”) puts in place new rules for whistleblowing in France. The Sapin II expands extra-territorial reach for French prosecutors and is applicable to corruption by French companies overseas and foreign companies that have a presence in France.

Further, the law creates new obligations for companies to take an active role in preventing corruption. Companies with over 500 employees and/or an annual turnover in excess of EUR 100m must put in place a framework to allow for accountability.

The law puts in place eight mandatory measures for a corruption prevention program. So far, these include a code of conduct to be integrated into the internal regulations of the company; an internal whistleblowing mechanism; ongoing risk assessments; due diligence regarding clients, suppliers and intermediaries; internal and external controls; training; a roster of disciplinary sanctions; and an internal audit of the program.

The law creates a new national anti-corruption agency called Agence Française Anticorruption (AFA). The law requires all companies with more than 50 employees to establish a whistleblower mechanism and provide protection against retaliation guaranteeing confidentiality. The system is different from its UK and US counterparts and only applies to disinterested parties. Whistleblowers receive immunity from criminal prosecution. Whistleblowers must first use the internal whistleblowing channels before blowing the whistle to the public authorities and the press.

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