Compensation for dismissal without any “real and serious” grounds

Newsletter - June 2018

Order no. 2017-1387 dated 22 September 2017 reformed the rules concerning compensation for dismissals without any “real and serious grounds.” Additionally, it also amended the rules that apply to the redress for certain irregularities and for invalidity of the termination. These measures relate to dismissals that were made since 24 September 2017.

Application to dismissals without any real and serious grounds

It is possible for each dismissed employee to dispute the validity of the grounds for her/his dismissal and to claim compensation for loss arising out of the lack of any real and serious grounds. It must be noted that to be justified in legal terms, any dismissal must rely on facts that are empirical and sufficiently serious.
Until now, it was the role of the judge to determine the value of the indemnity owed to the employee as compensation for the loss sustained, while the employer had no estimate of this amount in advance. Over time, case law has provided guidance to judges and indications to employers, while not ensuring a certain level of indemnity.

What the order contributes

The judge is now required to follow a scale of mandatory compensation in the event of dismissal without real and serious grounds. Hence, in the event of a litigated case, if the employer or the employee refuses to have the employee accepted back into the company (which remains a remedy where the judge acknowledges that the dismissal had no grounds), the judge must grant the employee an indemnity, the value of which relies on the employee’s length of service.

In a company with more than eleven (11) employees, the scale calls for a range of indemnities depending on the number of years of service, and the judge retains her/his discretion (employee’s age, employability, expertise, etc.). Article L.1235-3 of the Labour Code explains the scale in which the amounts are expressed in months of gross salary. As examples, let us cite:
– 2 years of service: 3 months minimum indemnity; 3.5 months maximum
– 10 years of service: 3 months minimum indemnity; 10 months maximum
– 20 years of service: 3 months minimum indemnity; 15.5 months maximum
– 30 years of service-: 3 months minimum indemnity; 20 months maximum

In companies with fewer than eleven employees, only the minima are amended, which for the first ten years of service ranging from 0.5 months (up to two years of service) to 2.5 months (10 years of service).

Failing any refinement in legal or regulatory terms, the method for calculating the reference gross salary remains unknown. It seems reasonable to assume that the judge would use an average of the last salaries paid, to take into account any premiums paid to the employee over a given period.

Calculating indemnities

Up to the limit of the maximum amounts set by the scale, the indemnity for dismissal could be aggregated with other indemnities that are called for in the case of infringement of the rules that apply to dismissals on economic grounds, such as:
– the indemnity that relies on the loss sustained in the event that the employer failed to comply with the procedures concerning consultation of the staff representatives or notification to the administrative authority (Art. L.1235-12 of the Labour Code);
– the minimum indemnity of one month of salary in the event of lack of compliance with the re-hiring priority (Art. L.1235-13 of the Labour Code);
– the minimum indemnity of one month of salary where there are no staff representatives, even though the company is required to fulfil this obligation, and that no failure report was drawn up (Art. L.1235-15 of the Labour Code).

Furthermore, settled case law of the Cour de Cassation specifies that the judge has the discretion to decide to allocate additional legal damages to the indemnity for dismissal without real and serious grounds where the employee is dismissed under brutal or vexatious conditions. The legal damages should be able to be aggregated with the dismissal indemnity determined by the scale.

Invalidity of the termination

The scales determined by the Order are not meant to apply where the judge finds that the dismissal is invalid. In such a case, the employee is empowered to claim an indemnity that is at least equal to the salary payments of the last six months.

A dismissal is deemed invalid where it is made against an employee who has committed offences including the following:
– s/he suffered or reported acts of harassment, whether psychological or sexual;
– s/he was the target of or brought suit in court after an act of discrimination;
– s/he brought suit in court in a matter of professional equality between men and women;
– s/he reported a crime.

We are entirely available if you have any further queries about the issues discussed in this newsletter or about any other accounting, tax, social security or law related topic.

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