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Newsletter LWA Social : Dismissals for economic grounds in France – Overview

Par Sarah-Jane Mirou, Amélie d’Heilly, Simon Mattern, Schéhérazade El Behhar et Sylvain Verrièle

Paris, 9 April 2021

Redundancies for economic grounds are strictly regulated by French law. The purpose of this newsletter is to share with you the key principles so that you may provide some answers if one of your clients asks you for preliminary advice.

1. under French law, a dismissal is based on a valid economic reason the termination is the result:

  • of the cancellation or alteration of the employee’s position or change to the employment contract which the employee refuses; and,
  • of the company’s economic difficulties*, technological changes, reorganisation necessary to safeguard the competitiveness of the company or of the business sector of the group to which the company belongs, or cessation of business.

Economic difficulties are characterized either by the significant change of at least one economic indicator such as a drop in orders or sales, operating losses or a deterioration in cash flow or gross operating surplus, or by any other factor that can justify these difficulties.

A significant decrease in orders or revenues is constituted when the duration of this decrease is, compared to the same period of the previous year, at least equal to:

  • 1 quarter for a company with less than 11 employees;
  • 2 consecutive quarters for an enterprise with at least 11 employees and less than 50 employees;
  • 3 consecutive quarters for an enterprise with at least 50 employees and less than 300 employees;
  • 4 consecutive quarters for a company with 300 or more employees.

In the absence of a valid economic reason, dismissals may be carried out (except in specific situation where the Labor Inspection must give its prior authorization) but will entitle the employees to obtain compensation from the labor courts.

2. any termination, the employer must try to reclassify the employees whose position is cancelled or modified, by seeking hiring opportunities within any entity of the Group implemented in France before launching the termination process. Failing this, the termination will be unfair and the employees could obtain damages.

The employer must also set criteria of dismissal if only certain positions of a professional category is cancelled or modified. The selection of the employees who will be dismissed will indeed result of the application of criteria (i.e. employee’s age, length of service, family situation, disability and professional quality) and not of a choice by the employer.

3. The termination process itself requires to follow a number of mandatory steps (invitation to a preliminary meeting, the meeting itself, the proposition of the redeployment scheme and the termination letter) and the implementation of a number of measures aiming at supporting the concerned employees (redeployment scheme, social plan).

4. It also requires to consult the staff representative bodies and inform the Labor Administration.

This newsletter is for general information purposes only and does not constitute legal advice from the firm

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