The legal background

One of the main concerns of a business is to ensure its employees’ commitment and to encourage employees’ initiatives in order to fuel innovations and business growth. This is one of the reasons which motivates companies to pay their employees variable remuneration based on their performance.

Such remuneration is generally permitted under French employment law provided that it is based on objective criteria beyond the sole control of the employer, does not result in payment below the minimum wage and complies with the general principle of equal pay for equal work.

The applicable case law also requires the employer to communicate in the French language the manner in which variable remuneration is calculated (in particular the objectives assigned to the employee) at the beginning of the relevant performance period, and to ensure that such objectives are actually feasible. Failure to do so will generally result in the employer being required to pay the employee the full target variable remuneration provided for in the employee’s employment contract.

The facts

In a decision dated April 2, 2014, an employee, whose variable remuneration had been cancelled following his refusal to sign a letter prepared in English setting out his targets, lodged a claim for constructive dismissal, i.e. equivalent to unfair dismissal.

The Court of Appeal ruled against the employee and held that the employer was not at fault. In support of this ruling, the Court of Appeal noted in particular that the employee was familiar with working in both French and English languages, and had signed prior letters setting out his targets, also prepared in English. The Court of Appeal consequently dismissed the argument alleging that the objectives were unenforceable against the employee on the sole basis of the fact that they were prepared in English.

The Supreme Court’s decision

The Supreme Court flatly reversed the decision of the Court of Appeal, holding that, since the documents setting the objectives were written in English, the objectives were unenforceable against the employee. As a result, the employee was entitled to refuse to sign the letter setting out his objectives and the subsequent cancellation of his contractual variable remuneration constituted a breach of the employment contract, allowing the employee to claim constructive dismissal.

This decision is particularly interesting as it has shed some light on the consequences of non-compliance with the obligation to prepare the objectives in French. Not only did this result in the employee being entitled to claim payment of his full target variable remuneration, but it also entitled the employee to claim the equivalent of constructive dismissal for breach of contract. The only possible recommendation following such a ruling would be to ensure that documentation setting forth the employees’ remuneration always be written in the French language (even if the relevant employee is perfectly fluent in English).

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