Procedures For Terminating the Agreement
Both the employer and the employee can terminate the employment contract.
The employer must follow specific procedures to terminate the employment contract but these procedures differ depending on the ground for termination (i.e. whether it is a personal or economic ground). The grounds for termination must be duly justified in the termination letter.
In most cases, there are certain minimum steps which must be followed before termination to avoid a lawsuit for unfair dismissal, such as: inviting the employee to a preliminary meeting and providing notice of the termination by registered mail letter within certain time limits.
Instant dismissal may be carried in cases of gross or serious misconduct, but even in such a case, the employer has to follow the correct procedure (see above).
Such procedure implies the compliance to strict time limits.
The employee is deprived of any dismissal indemnity, and any notice period.
Employees may resign but have to respect a notice period. The resignation does not entitle the employee to unemployment allowances.
French case law also provides that the employee is entitled to an “instant resignation” in cases of gross misconduct by the employer.
Termination On Notice
Termination on notice is possible if the procedure is respected. The notice depends on the type of professional qualification held by the employee, and varies between one and three months.
The notice period can be executed or not, depending on the employer’s will. Even if the employer does not want the employee to work during the notice period, the salary during this period must be paid (payment of an indemnity in lieu of notice).
The notice period may be extended by consent of both parties.
Termination By Reason Of The Employee's Age
An employee can be obliged to retire once he/she reaches the age of 70.
Automatic Termination In Cases Of Force Majeure
In very exceptional cases, “force majeure” can terminate the contract, provided three cumulative conditions are met: (i) the event is not foreseeable, (ii) it could not have been avoided and (iii) it is outside the control of the employer.
In practice, courts rarely apply force majeure.
See the part on specific rules for companies in financial difficulties (in France only economic difficulties can justify collective dismissals).
However, it should be noted that employers can use other schemes to reduce the workforce without resorting to or limiting the use of dismissal (voluntary redundancy plan, collective amicable termination). These measures are strictly regulated and can be implemented by collective agreement or unilateral decision of the employer validated by the labour administration.
Dismissal without real and serious cause
Often, when an employee is dismissed, he/she seeks to obtain before the labour court the reclassification of their dismissal as a dismissal without real and serious cause.
When this request is made, it is important to know that in France, there is a scale (“Barème Macron”) that allows the employer to determine in advance the amount that they will be required to pay the employee in the event of dismissal without real and serious cause. This amount is determined according to the employee's seniority and the company’s total headcount (it may vary between 1 month and up to 20 months’ salary).
In addition, when the employee requests the nullity of his/her dismissal (due to moral/ sexual harassment, discrimination surrounding the termination of his/her employment contract), this specific scale does not apply.
Termination By Parties’ Agreement
Employer and employee can decide to terminate their employment contract through the scheme of termination by mutual consent (“rupture conventionnelle”). This process, which allows the parties to terminate the employment contract without any dismissal procedure and without alleging any ground, entitles the employee to unemployment benefits.
This method of termination can also be collective and apply to several employees at the same time.
In any case, this scheme is also regulated by strict time-limits.
Directors Or Other Senior Officers
If the company’s bylaws allow it, when an executive officer of the company (e.g., directors, chief executive officer, member of the board of directors, General manager, president of the board etc.) is being dismissed, unlike an employee, he/she can be dismissed instantly and without any obligation on the company to either justify any grounds for dismissal or pay any indemnity.
French law does not consider executive officers to be employees. Therefore, disputes are brought before the Commercial Courts.
In some instances, executive officers may cumulate their corporate office with an employment contract. In that case, corporate office and employment contract comply with their own rules. Therefore, the termination of the corporate office should have no consequences on the employment contract and vice-versa.
Special Rules For Categories Of Employee
Approval from the French Labour Administration is necessary to dismiss an employee representative. Termination by consent must also be approved by the French Labour Administration.
Employee representatives, works council and trade union members: termination must be authorised by the French Labour Administration;
Pregnant women and women on maternity leave: termination is not possible except in cases of gross misconduct or absolute necessity to terminate;
Sick employees: termination is not possible on the grounds of illness except in cases where the absence of an employee is harmful to the company and provided the employment guarantee (minimum duration under which the contract must be maintained) provided for by the Collective Bargaining Agreement is respected.
Employees with a fixed term contract: termination is not possible except in cases of an agreement between the parties, gross misconduct, force majeure, if the employee is offered a contract for an indefinite term or in case of physical incapacity.
Professionalization contracts, which are linked to the employee’s studies, cannot be terminated except in cases of gross misconduct.
The principle of non-discrimination in the recruitment procedure is extended to whistleblowers who take the risk of denouncing certain serious facts of which they have become aware in the performance of their duties to their employer or to administrative or judicial authorities or to third parties.
The whistleblower may not be excluded from a recruitment procedure or from access to an internship or a period of professional training. Nor may he or she be subject to any sanction, dismissal or discriminatory measure because of his or her report.
Specific Rules For Companies in Financial Difficulties
There are specific rules which apply in case of financial difficulties.
First of all, there are different levels of financial difficulties, which may lead to two solutions:
- the continuation of the activity: in such case, redundancies are made by the legal representative of the company;
- in case of a winding up of the company, the legal representative is no longer in charge and a liquidator is appointed by the judge. In such case, redundancies are made by this liquidator.
In both case, redundancy rules have to be applied.
These rules are quite complex.
Redundancies must be made under a real economic and financial ground. This economic and financial ground is difficult to assess in general because court decisions regularly add criteria.
The procedure to be enforced depends on the number of employees in the company, the number of employees to be made redundant, the presence of employees’ representatives.
Pursuant to those criteria, different obligations have to be fulfilled, and delays to enforce the redundancies may change.
Special Rules For Garden Leave
Under French law, except for gross negligence or misconduct, the employee is entitled to notice in the event of termination of the employment contract. Such notice period may or may not be executed at the request of the employer or the employee.
- —When the employee carries out his/her duties during the notice period, he/she is paid normally,
- —When the employer requests an exemption, the employee is entitled to a compensation in lieu of notice,
- —When the employee requests an exemption, the employer is under no obligation to pay him/her.
In any case, the employer has the possibility of "neutralising" the employee from the very beginning of the employment contract by specifically stipulating in the employment contract a non-compete, non-solicitation or non-poaching clause.
Restricting Future Activities
It is possible to include in the contract a non-compete clause upon termination, to protect the interests of the Company.
Such clauses must be limited in terms of territory, duration of time (maximum of 2 years) and scope, and must also provide for a financial compensation to be paid to the employee after the termination of the employment agreement (generally between ¼ and ½ of the monthly salary, depending upon the Collective Bargaining Agreement, or the contract) for the duration of the restricted period.
Severance payments are calculated according to the Collective Bargaining Agreement or the law, depending on the seniority of the employee, the age of the employee and if more favourable, the terms of the contract.
Special Tax Provisions And Severance Payments
No social charges are charged on severance payments which are less than 82,272 euros (for 2021) or 2 years of salary. Such payments will bear a 9,7% tax (CSG / CRDS) beyond the amount of the legal severance payments due to the dismissed employee. If the amount of severance indemnities exceed the overall amount of 411,360 euros (for 2021), social charges are charged on the total amount.
Due to covid-19, the social security ceiling is maintained at its 2020 level.
In case of termination of the employment agreement by mutual consent, no social charges are charged in the above limits except a specific one of 20 % called “forfait social” to be paid by the employer.
Allowances Payable To Employees After Termination
Employers are not required to contribute to any allowances payable to employees after termination.
Time Limits For Claims Following Termination
For claims relating to the performance of the employment contract there is a time limit of 2 years.
For claims relating to the termination of the employment contract there is a time limit of 1 year.
Claims relating to the payment of salaries must be brought within 3 years.