Responses by David Jonin from French law firm Gide Loyrette Nouel
Is there a requirement for employers to legally justify redundancies and if so, what reasons do they need to provide?
All dismissals for economic reasons must be justified by real and serious grounds. For example, if economic grounds are the reason behind the dismissal then, under the French Labour Code, it must “for one or more reasons that are not related to the employee, and where it results from the elimination or transformation of a position, or a modification, refused by the employee, of an essential element of the employment contract, notably due to economic difficulties or technological changes”
What’s more, if an employer decides to invoke economic difficulties, it must prove that these relate to the entire company, rather than a local subsidiary or site. If a company belongs to a group, then the financial problems need to be assessed at a group level, based on its line of business and the different countries in which it operates. Companies in carrying out the same line of business abroad are therefore taken into account in the case of international groups.
Based on current case law, a redundancy may be also be based on the need to safeguard competitiveness.
What is the statutory minimum notice period for redundancies (if any)?
Usually, the duration of the notice period is one or two months for non-executive employees and three months for executive employees. However, it also depends on the employee’s length of service within the company.
The notice period is usually determined by something called Conventions Collectives de Travail – or Collective Bargaining Agreement (CBA) in English – which sets out in great detail the scope of the relationship with employer and employee, and can be either set out at a national or local level in France. Failing that, then employment law provisions come into play.
What is the statutory minimum calculation for redundancy payments (if any)?
Employees made redundant are entitled to the following indemnities:
Severance pay, orindemnité conventionnelle de licenciement is dependent on length of service and provisions set out in the relevant CBA and is based on the employee’s average salary during their final three or 12 months in employment – depending on which is better for the employee. Both salary and bonuses are considered when calculating average pay. If this arrangement is less than the statutory minimum severance pay [which is?], then this applies instead.
It’s also worth noting that when more than 10 redundancies are announced, an employer needs to offer a job preservation plan (plan de sauvegarde de l’emploi – PSE), which demonstrates how an employer has taken all action to avoid job losses such as reorganizing work, or job-sharing. Severance pay is also discussed, which generally means in practice that employees receive more under such a plan.
If an employer decides to release an employee from their notice period, then they’re required to pay them a full salary for the time they would have worked. Similarly, indemnity for any accrued holiday days that are not taken must be paid.
According to law, what are the main steps that employers must take during a redundancy process?
They need to fulfil various obligations towards the Works Council, the local labor authorities (Direction Régionale des Entreprises, de la Concurrence, de la Consommation, du Travail et de l’Emploi, i.e.Regional Directorate for Companies, Fair Trading, Consumer Affairs, Labor and Employment - which is known as ‘DIRECCTE’) and the employees concerned.
Basically, the employer must consult the Works Council on the reasons of the contemplated restructuring.
Where the collective redundancy of ten employees or more within a same 30-day period is contemplated in a company employing 50 people or more, the Works Council will be informed and consulted on the proposed scheme and the draft job preservation plan that needs to be submitted by the employer.
At the various stages of this consultation process, the DIRECCTE must be notified and informed, as it ensures compliance with legal requirements.
An employer must also consider redeploying employees within the organisation, regardless of its headcount or the number of redundancies.
Notice of redundancy can only be sent to the employees after completion of the consultation process and after a minimum waiting period following the date of first notice to the DIRECCTE.
What are the consequences for employers who fail to comply with redundancy laws? What kind of compensation can employees claim, and is the amount capped?
Employees made redundant have the possibility of filing a claim before the Employment Tribunal.
An employee can base their claim on the absence of real and serious grounds for redundancy. A redundancy that is not based on real and serious grounds is considered unfair and gives rise to the payment of damages to the employee. In companies with at least 11 employees (and for staff with at least two years’ service) the damages amount to at least six months’ salary. Where the employee has less than two years’ service or the company employs fewer than 11 employees, damages are also awarded, but there is no minimum set amount.
In practice, the amount of damages depends on the employee’s situation at the time of the court decision and on the employee’s age, length of service and employability. And, where the employer fails to comply with the redundancy procedure, the court could decide to award the employee damages for the loss incurred.
In companies with at least 11 employees and for employees with at least two years’ service, the damages amount to one month’s salary. Where the employee has less than two years’ service or the company employs fewer than 11 employees, damages are also awarded, but again there’s no minimum set amount.
Significantly, the judge can also decide to cancel the redundancy, usually when the affected employees were laid off in the absence of a job preservation plan or in application of an invalid plan. In such cases, the employees are entitled to be reinstated to their former job or, failing that, to an equivalent position, unless the reinstatement proves physically impossible. Failing reinstatement, the employees will be granted damages in compensation.
In addition, particularities of the redundancy procedure may entail specific penalties. For instance, failure to consult the staff representatives may result in civil penalties (nullification of the proceedings) or criminal penalties. The employer may be sentenced for non-compliance with the rules governing the selection criteria for the order of the redundancies or for non-compliance with the job preservation plan.
Statutory minimums aside, what is the standard practice for making redundancies and calculating payments at banks in your market?
There are specific rules on severance pay in the banking sector, which date back to February 2000.
If the employee is entitled to a redundancy indemnity, the amount will be calculated as follows:
- Half a month’s salary per full quarter of service within the company before January 1, 2002;
- A quarter of a month’s salary per full quarter of service within the company after January 1, 2002.
It’s worth noting that the CBA for the banking sector states that the amount of severance pay is capped, but this ceiling depends on the employee’s date of hire and his/her classification.