Dismissing an employee due to economic difficulties is extremely delicate in France. A law dated 8th August 2016 has specified the definition of the economic grounds for dismissals, providing that economic difficulties are, in particular, characterized by a significant evolution of an indicator such as a significant drop of turnover, a significant drop in purchase orders, operating losses, worsening of cash flow or gross operating profit or any other elements which can evidence such economic difficulties.
Case law imposes a very strong obligation on employers before envisaging any redundancy and the main applicable principles regarding employees’ individual rights have not been subject to any major changes, in spite of the numerous courts decisions and the multiple laws passed over the last few years. To summarize briefly:
- Employers are required to establish objective criteria as set forth in relevant legislation or by the applicable collective bargaining agreement and apply them to each category of affected positions for the purpose of determining which employees will be subject to the dismissal procedure. The French Supreme Court has recently held that when applying the selection criteria, the companies need to take into account all relevant criteria, and no criterion may be neutralized;
- Employers are required to consider re-deploying any potentially redundant employees elsewhere in the company and the group. The redundancy can only be notified after the employer has studied all the redeployment possibilities within the company and the group;
- The employees dismissed on economic grounds are also entitled to several benefits and indemnities related to the termination of their employment contract (notice period, severance payment, paid holidays indemnity etc);
- Moreover, employees also benefit, depending on the company’s / group’s headcount, from a personalised redeployment leave financed by the State or from a redeployment leave financed by their employer, the goal of which is to support the employees in order to help them find another job or retrain;
- Also, a re-hiring priority is applicable during a period of one year following the expiry of the employment contract: if the employee so requests, the employer is required to offer the employee any position available in the company following the economic dismissal compatible with the employee’s qualifications.
Employees who are dismissed in the context of a collective redundancy procedure generally also benefit from additional rights (indemnities, assistance from outplacement agencies, etc.) resulting from the employer’s obligation to implement a job saving scheme (“plan de sauvegarde de l’emploi”), when the termination of at least 10 employees is contemplated in a company employing at least 50 employees. Such scheme should be negotiated with union representatives or decided unilaterally, and is subject to approval by the labor authorities. The purpose of a job saving scheme is to avoid or limit the effects of any dismissals.