New French Law Simplifies Termination Procedures
By Roselyn S. Sands
Ernst & Young Société d’Avocats
A new French law passed this summer simplifies termination procedures and significantly reduces litigation exposure in terminating employees.
Prior to the enactment of this law, basically two ways existed for employment to terminate: either 1) employee resignation; or 2) dismissal of the employee by the employer. In the former case, the employee received no payment from the employer. In the latter case, the employee was entitled to payment of a dismissal indemnity in accordance with the terms of the applicable collective bargaining agreement. In addition, an employer would be exposed to litigation risk if the dismissed employee sought damages for unfair dismissal as a dismissal needs to be justified.
Under the new law, the parties may terminate employment by mutual consent. Subject to certain procedural safeguards, the employee and the employer agree to the end of the employment relationship. The employee is still entitled to receive a termination payment (of an amount equivalent to that of the existing dismissal indemnity) and unemployment benefits. Moreover, the employee may well attempt to negotiate additional monies. However, there is no litigation risk for unfair termination.
That being said, the procedural safeguards are strict: a discussion meeting, the signature of an agreement, and approval from the Labor Inspector. Specific waiting periods need be complied with during which either party can rescind the agreement. Employees would still be able to bring claims for violations of the procedure or for vitiated consent.
Mutual termination of employee with special protections, such as works council members or union representatives, is more complicated as prior written authorization of the Labor Inspector is required.
It will be interesting to observe whether this new method becomes the predominant way for employee termination in France.