The legal context
Remuneration is a fairly sensitive matter in France. Although the determination of the level of remuneration of employees is not strictly regulated (only minimum levels of remuneration are provided by the law and by the relevant collective bargaining agreement), the freedom of employers is limited by the “equal job, equal pay” principle and by the prohibition of discrimination on remuneration.
More specifically, case law now requires that variable pay based on performance should be set on the basis of objective criteria and calculation methods fixed at the beginning of the relevant performance period, and communicated clearly in writing (and in French) to the employees. Until recently, however, there had been very little litigation on salary increases.
In a recent case, dated 6 May 2015, an employee had been declared disabled by the occupational health physician in August 2009, and had been dismissed on such grounds in December 2009, as the employer had not been able to find alternative suitable positions to be proposed to the individual.
The year prior to the employee’s dismissal, negotiations had been engaged by the employer with unions, and it had been agreed that a specific budget would be dedicated to individual salary increases. The employee, considering that he should have received an individual pay increase, filed a claim before the employment court to obtain retroactive pay.
The employer argued that the agreement negotiated with the unions did not provide for a general pay increase applicable to all employees, but had only determined a budget which could be freely allocated.
The Supreme Court confirmed the decision of the Court of Appeal which held that the employer had failed to provide evidence of the criteria it had relied on to justify the fact that the employee had not received any pay increase. In the present case, the employer alleged only that the pay increases had been awarded on the basis of performance criteria and that no other employee in the employee’s department had received a pay increase, due to the poor results achieved by such department. He did not, however, supply any evidence to support this position. The Supreme Court therefore sanctioned the employer for not being able to provide evidence that the pay increase was based on verifiable objective criteria, and more particularly to show the reasons why the employee had not receive any pay increase.
This decision is an application of the equal job, equal pay principle, but it is also an extension of the position taken by case law on variable pay. Remuneration, whatever its form (variable / fixed pay, pay increase), cannot be discretionary, and employers need to be in a position to provide evidence of the rationale for the fixing of such remuneration, obviously taking into consideration the equal pay principle.