Dismissal on economic grounds

Date of update

 

France offers various means of preventing the economic difficulties that may be encountered by companies located within its territory. However, companies may experience difficulties such that one or more dismissals cannot be avoided.

When employees are dismissed for reasons unrelated to their behaviour at work, their performance or their productivity, the dismissal is deemed economic. Such dismissal must have a genuine and serious economic basis.

To protect employees, the employer must implement training, rehabilitation and redeployment measures prior to any dismissal. If dismissal is still inevitable, a specific procedure must be followed.

An economic dismissal is deemed individual if it concerns just one employee in the company. From two to nine employees, it is referred to as a “small” collective dismissal. If it concerns more than ten employees over a 30-day period, it is a “large” collective dismissal.

This fact sheet focuses on individual economic dismissal.

For more information on the other forms of dismissal, please go to investinfrance.fr.

 

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Grounds for economic dismissal

 

An economic dismissal is never caused by the actions of one or more employees, be they wrongful or not, but by one of several statutorily defined reasons, namely:

  • Economic difficulties (a decline in orders or revenue, operating losses, etc.).
  • Technological changes.
  • The company ceasing to operate.
  • Reorganization of the company to safeguard its competitiveness.

These reasons must be genuine and serious, and have repercussions on the employment of one or more employees, namely:

  • The loss of one or more jobs.
  • Significant changes in one or more jobs.
  • The amendment of one or more employment contracts, rejected by the employee(s) concerned.

Preliminary steps

 

Before proceeding to dismiss an employee on economic grounds, the employer must take the following steps:

  • Define the criteria for deciding which employee will be dismissed (order of dismissals established in consultation with staff representatives).
  • Explore the possibility of redeploying the employee concerned.

Any redeployment offer must be put in writing to the employee(s) and must be precise.

Procédure

If redeployment is not possible, or if the employee rejects the redeployment offer, the employer must observe the following procedure:

  • Invite the employee to a preliminary interview (by registered letter with acknowledgement of receipt or hand delivery with receipt).
  • Preliminary interview (at least five working days after acknowledgement of receipt of the invitation): offer the employee an employability package (contrat de sécurisation professionnelle) or redeployment leave.
  • Notification of dismissal (by registered letter with acknowledgement of receipt or hand delivery with receipt), at least seven to 15 working days after the interview.
  • Inform the DIRECCTE electronically.

Template for individual economic dismissal letter

 

To ensure greater legal certainty and reduce litigation risks, the Ministry of Labor has provided companies with standard letters of invitation to a preliminary interview and standard letters of dismissal, which the employer can adapt according to the employee’s individual circumstances and the applicable agreements and contracts.

 

Disputing dismissal

 

The employee may refer the matter to the Industrial Tribunal within one year of dismissal. If the dismissal is considered to be without genuine and serious cause, the employee will be compensated according to a compensation scale that the judge is obliged to accept.

The amount of compensation varies depending on the employee’s length of service and the number of employees in the company. This amount may not be lower than a minimum amount or greater than a maximum amount established by the scale in question.

If the dismissal is justified but there has been a procedural error, the compensation may not exceed one month’s salary.

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Termination payments

 

When the employment contract is terminated, the employer pays the redundant employee severance pay and compensation in lieu of paid leave.

Severance pay

An employee is entitled to severance pay if certain conditions are met. Severance pay is due to permanent employees who have been dismissed on economic grounds.

It will be calculated based on the employee’s gross salary (from eight consecutive months of service, except in the event of gross or serious misconduct), and will amount to:

  • At least a quarter of a month’s salary per year of service for the first ten years.
  • Then a third of a month’s salary per year from the 11th year. A different method of calculation may be used, which is more advantageous for the employee, according to the provisions set out in the collective agreement or the employment contract, or the practices in force in the company.

Compensation in lieu of paid leave

Compensation in lieu of paid leave is due when, on the date of termination of their contract, an employee has not taken all the paid leave to which they were entitled.

It is due even in the event of dismissal for gross misconduct, retirement, resignation and termination of the employment contract during the trial period.

To calculate the amount due, several factors must be considered:

  • Basic salary and salary increases.
  • The salary the employee would have received had they not been on maternity leave, paternity leave or sick leave following a workplace accident, for example.
  • Holiday pay for the previous year.
  • Seniority bonus, monthly attendance bonus and on-call bonus.
  • Expatriation bonus.
  • Benefits in kind.

However, the end-of-year bonus, the incentive bonus, the profit-sharing bonus, professional expenses and the 13th month’s pay are not considered when calculating the due amount of compensation in lieu of paid leave.

Unemployment

 

Redundant employees may be eligible for unemployment benefits, provided they meet all the necessary criteria.

The back-to-work allowance (Allocation de retour à l’emploi – ARE) is an income maintenance benefit provided by Pôle Emploi under certain conditions. It is intended for registered job seekers who are out of work through no fault of their own. Payments will cease if the redundant employee returns to paid employment.

 

You can calculate the amount of unemployment benefits you are entitled to on the Pôle Emploi website:

Check Pôle Emploi website

Impact on right of residence

 

All nationals of non-EU and non-EEA countries – with the exception of Switzerland and the United Kingdom – who wish to live and work in France for more than three months must have a residence permit.

Where a foreign employee is considered to have lost their job through no fault of their own, their situation will depend on the type of residence permit they have.

Holders of a residence permit authorizing the exercise of any professional activity

 

The residency rights of persons whose residence permit authorizes them to engage in any professional activity will not be affected by the termination of their employment contract. This includes persons with a temporary or multi-year “private and family life” residence permit, a “family member of a European national” resident permit, a permanent residence permit, a “(family) talent passport”, etc.

Holders of a temporary residence permit marked "Employees"

 

  • If the interested party finds a job before their residence permit renewal date, their new employer must apply for a work permit from the DIRECCTE.

 

  • If they are unable to find a job before their residence permit renewal date: In the event of involuntary termination of the employment contract, and on presentation of the Pôle Emploi declaration established by the employer upon termination, the residence permit will be extended for one year.

 

At the next renewal date:

  • If the interested party has found a new job, they must apply for a work permit from their local Prefecture, which will forward the application to the DIRECCTE for assessment.
  • If they are still out of work, they will receive a new, temporary residence permit for employees, valid until their unemployment insurance rights expire.

 

Holders of a general, multi-year residence permit for employees may engage in any salaried professional activity without observing any particular formalities.

Holders of a “Talent Passport” multi-year residence permit

 

  • If the interested party finds a job before their residence permit renewal date:
    • Prior to the end of the second year of validity of the residence permit, the new employer must consult the Prefecture that issued the residence permit. If the holder no longer meets the conditions for granting a “Talent Passport”, they must apply to change their status at the Prefecture.
    • If they find a job after the end of the second year, a “Talent Passport” for skilled employees or a European Blue Card will allow them to engage in any salaried activity subject to compliance with the conditions of issuance. Failing this, a change of status will be necessary.

 

  • If they are unable to find a job before their residence permit renewal date:

If they have a “Talent Passport” that allows them to undertake salaried work, and if they are unemployed on the renewal date through no fault of their own, the permit will be renewed until their eligibility for the back-to-work allowance (ARE) expires.

To renew the permit, the holder must provide the Prefecture with the following:

    • The employer’s declaration for Pôle Emploi .
    • The certificate from the organization paying the unemployment benefits, showing the remaining period of coverage.