Is Paris Burning? France Considers Whether Damages for Employee Dismissals Should Be Capped

The latest version of Article L. 1235-3 of the French Labor Code, based on the “Macron Ordinances,” has recently been the subject of major dispute, with several labor tribunals issuing conflicting decisions.

The article limits a judge’s ability to determine compensation for an employee whose dismissal has been recognized as having no “real and serious” cause. It caps the damages awarded at an amount between 0.5 months’ salary (for an employee with less than one year of continuous service) and 20 months’ salary (for an employee with more than 29 years of continuous service).

However, this system is not applicable in a number of cases, particularly where the dismissal is declared null and void because, for example, of a “violation of a basic human right,” an “act of harassment,” or its “discriminatory” nature.

By introducing this new system, the government intended to “remove uncertainty” about the “cost of a termination” by allowing the employer to anticipate the risk incurred if the dismissal was found to be without real and serious cause (Report to the President of the Republic on Order No. 2017-1387 of 22 September 2017 on the predictability and security of labor relations).

However, in a series of decisions issued in December 2018 and January 2019, labor courts have ruled that this system conflicts with several international conventions applicable in France.

Even if the Constitutional Council had approved, both in principle (C.C., 2017-751 DC of 7 September 2017) and in its implementation (C.C., 2018-761 DC of 21 March 2018), the concept of a cap on compensation for damage caused by the fault of an employer, it is not up to the Council to ensure compliance of this system with the international agreements ratified by France.

It is judges who are responsible for checking that the system established by the labor tribunal complies with the international conventions applicable in France.

However, Article 10 of Convention 158 of the International Labour Organization stipulates that a judge who finds that a dismissal is unjustified, but does not propose reinstatement of the employee to his or her original position, must be able to order the “payment of adequate compensation or such other relief as may be deemed appropriate.” Similarly, Article 24 of the European Social Charter provides for the “the right of workers whose employment is terminated without a valid reason to adequate compensation or other appropriate relief.”

Considering these stipulations, two labor tribunals (Le Mans and Caen, the latter being ruled by a professional judge) adopted the applicable scale, considering that it provided for “appropriate” compensation for damages.

By contrast, the labor tribunals of Troyes, Amiens, Lyon, Grenoble, and Angers decided, in highly publicized decisions, not to apply the mandatory scale stipulated by Article L. 1235-3. As a result, they granted compensation in excess of the legal maximum. None of these five cases fell into the provided categories allowing a judge to exceed this maximum.

At present, while other councils could follow this reasoning, the impact remains limited. The Administrative Supreme Court has already been called upon in urgent situations to rule on the validity of these measures. It considered that because of the possibility of deviation from the scale when the dismissal is deemed null and void, so that the scale is compliant with the stipulations of the conventions (CE, 7 December 2017, CGT, N° 415243).

It will be up to the Courts of Appeal and then to the Court of Cassation, France’s Supreme Court, to decide whether it is appropriate to continue to apply this system or whether the international conventions ratified by France require that it be overruled.

Pending these decisions, the possibility that the scale is inapplicable may divide the courts and create judicial uncertainty in labor tribunal disputes. The underlying objective of legal certainty is therefore, at least temporarily, severely compromised: neither employees nor employers can use this scale to assess with certainty the chances of profit or the risks involved when making a decision on any given dismissal.

A rapid resolution would be desirable. To this end, referral to the Court of Cassation for a legal opinion in accordance with the provisions of Article L. 441-1 of the Code of Judicial Organization and Article 1031-1 of the Code of Civil Procedure (referral for an opinion) might have seemed particularly appropriate if the Court of Cassation had not recently refused to grant such an opinion regarding the compliance to conventional rules of another legal text (Cass, avis, 12 juillet 2017, 17-70.009).

Thus, it can only be hoped that a litigant whose rights are “imperiled” by a ruling requests that a Court of Appeals set a day for a priority hearing (Article 917 of the Code of Civil Procedure). Such proceedings would reduce the delay before the appeal hearing and would provide a finer outlook on the future of the mandatory scale.

Jean-Marc Albiol is a partner in the Paris office of Ogletree Deakins.

Thibaud Lauxerois is a law clerk in the Paris office of Ogletree Deakins.