Law firm specialising in employment law
and social security law.
Law firm specialising in employment law
and social security law.
An employer which encounters difficulties may consider resorting to redundancies for economic reasons in order to continue operating. When the company is no longer able to continue its operations, the only solution may be to launch such a procedure.
The laws are nevertheless complex to grasp especially for non-lawyers.
What procedure should you choose? What time limits must be observed? What accompanying measures should be offered? All of these questions must be asked in advance in order to correctly implement the procedure.
We accompany our clients through the main stages of this type of procedure and draw your attention to the crucial points that should not be overlooked.
This is the first step required for any redundancy for economic reasons.
In accordance with Article L.1233-3 of the French Labour Code, only four reasons may be accepted to launch such a procedure. An economic reason can be justified by:
While the French Labour Code helps employers to understand the reason of economic difficulties, the same does not apply to other reasons that will require all necessary supporting documents to justify them. The employer must consequently collect the relevant financial, accounting and operational documents to prove that the reason put forward exists.
These documents must appear in a clear and precise memorandum, which is then presented to the employees whose redundancy is being considered and/or the employee representatives when they must be consulted.
Under the French Labour Code, the redundancy must then result from a termination or transformation of employment or amendment to the employment contract, which is refused by the employee.
It is these two aspects (economic reason and impact on employment) that must be formulated in such a way as to win the conviction of the judge in the event of a dispute. To do this, it is necessary, if not essential, to hire a lawyer to draft the documents in accordance with requirements in litigation.
One of the main questions to be asked when implementing redundancy for economic reasons is the number of envisaged redundancies.
The French Labour Code provides for different procedures depending on the number of employees whose redundancy is envisaged, depending on whether a single redundancy is envisaged (Articles L.1233-11 et seq.) and whether at least two employees are concerned by redundancy over the same 30-day period (Articles L.1233-8 et seq. and Articles L.1233-21 et seq.).
At this stage, the procedure is even further subdivided since, for collective redundancies of at least 10 employees over the same 30-day period, the final procedure will also depend on the company headcount and whether or not employee representatives have been appointed. These two criteria also depend on whether or not an employment protection plan ("PSE", also known under the former term of "social plan") is compulsory (Article L.1233-61 et seq.).
This stage of selecting the procedure is particularly important because it will trigger a whole series of more or less reinforced obligations vis-à-vis the employer and it limits employees’ rights, particularly in financial terms.
Depending on which procedure is decided, the CSE will also be involved to a greater or lesser extent. In the same way, depending on the case, the CSE may appoint an expert to analyse the envisaged restructuring and economic reason.
Finally, depending on the procedure implemented, the labour inspectorate will be more or less involved, benefiting either from a simple option to pass on observations to a power of validation or approval of the documentation presented by the employer. This is also one of the most important points of these procedures.
We help our clients to foresee all of these issues in order to be best prepared from the outset and to fully understand the issues, risks and benefits of a given procedure.
Unlike dismissal for personal reasons, which must be based on a reason inherent to the employee's person, redundancy for economic reasons is based on an objective situation unrelated to the employee: the employer cannot designate the person or persons concerned by the redundancy (in accordance with Articles L.1233-5 of the French Labour Code et seq.).
As a first step, in order to determine which employees will actually be affected by the redundancies, the employer must determine the professional categories existing in the company. In this respect, it must follow the fundamental steps by pooling employees in categories of interchangeable positions, regardless of their job title (Court of Cassation, Employment Division, 13 June 1996, no. 93-43.298). This is sometimes a complex but crucial step in the procedure since the labour inspectorate, the employee representatives or even the employee may question the selection carried out by the employer of the employees. The more the categories are numerous and restricted, the higher the risk and the case must be substantiated to justify that the pooling in categories has been properly carried out.
The criteria for determining the order of redundancies will then be applied to these categories, which is intended to score the employees by allocating a certain number of points. In this respect, the French Labour Code has set a certain number of legal criteria which may not be waived (age, family dependants, employee situation, professional skills - Article L.1233-7 of the French Labour Code) but which it is possible to supplement.
It is necessary to be cautious with regard to these criteria and in particular the final criterion of "professional skills". This is the criterion for which subjectivity is the greatest and this subjectivity is often penalised in litigation. Therefore, a case supported by written documents justifying the scoring allocated to the employees made redundant will be necessary, if not essential.
The procedure is still not yet complete when all these steps have been carried out.
The employer must try to limit the impact of the procedure for employees and must try to reclassify the employee to an available position before any redundancy (Article L.1233-4 of the French Labour Code).
To do this, the employer must search for all available positions in the same category as the employee’s category or on equivalent position with an equivalent salary in the company or group to which it belongs, if there are sites in France (Court of Cassation, Employment Division, 5 April 1995, no. 93-42.690; Court of Cassation, Employment Division, 17 May 2017, no. 15-29.436).
This obligation applies regardless of the number of employees in the company or the number of employees concerned by the redundancies. Redeployment must be sought as soon as redundancy is considered and until notice is given.
Some conditions exist with regard to the drafting of redeployment offers and time frames, and it is necessary to refer to provisions of the law or even collective agreements in this area to ensure that these requirements are met.
If no redeployment position can be proposed, or if the employee refuses, notice of redundancy can be given.
Nevertheless, a specific outplacement measure must be offered to the employee, which differs depending on the number of employees in the company.
In short:
This step is an integral part of the procedure and it is essential not to forget it.
Note: the costs incurred by this type of mechanism can be high. Before any implementation of the procedure, an estimate of the costs must be carried out. We also provide advice on this type of subject.
Finally, employees made redundant for economic reasons benefit from a one-year rehiring priority starting from the end of their notice period (whether worked or not), provided that they ask to benefit from it (Article L.1233-16 of the French Labour Code).
This priority, when activated, requires the employer to offer the employee any position which is compatible with the employee's qualification that becomes available before the end of the one-year period.
As you will have understood, given the complexity of the various procedures and the many important points to be checked, a redundancy procedure should not be carried out alone. Contact us to benefit from personalised support throughout the various stages.