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Dismissal for economic reasons

Dismissal for economic reasons

Through this presentation, we will show you the main rules that an employer must know when starting a dismissal procedure for economic reasons.
We will limit ourselves here to only the cases concerning small and medium-sized enterprises for dismissal procedures not including more than 9 people. We will therefore also not deal with the job protection plan (P.S.E.) which is only compulsory for dismissals of at least 10 employees over a period of 30 days in companies with at least 50 employees.

I – Definition of the economic reason

In this case, the dismissal is made by an employer for reasons unrelated to the employee himself, which must be justified by economic reasons originating from:

  • Either a suppression or a transformation of the employment of the concerned employee;
  • Either a modification of an essential element of the employment contract refused by the employee.

The economic reasons that the employer must justify are as follows:

  • Economic difficulties such as the drop in orders or turnover, operating losses or a deterioration in cash or gross operating surplus or any other factor likely to justify economic difficulties;
  • Technological changes;
  • Need to safeguard the competitiveness of the company;
  • Cessation of activity of the company (unless it is due to a fault of the employer).

II – Order of dismissals and prevention

1. Order of dismissals

In all cases, the employer must determine the employee or employees likely to be dismissed.
In the absence of an applicable collective agreement or labor agreement, the employer defines the criteria used to fix the order of dismissals, after consulting the Social and Economic Committee (CSE). It must take into account particularly:

  • Family responsibilities, in particular those of single parents;
  • Length of service in the establishment or company;
  • The situation of employees with social characteristics making their professional reintegration particularly difficult;
  • Professional qualities appreciated by category.

This list is not exhaustive and the employer can add other criteria.

The employee can ask the employer by registered letter the criteria selected within 10 days from the date of his departure from the company.

2. Prevention

In addition to preparing a layoff plan, the employer must:

  • Make adjustments so that the employee keeps his job;
  • Make adjustments in order to reclassify the employee.

The procedure also includes accompanying measures such as:

  • The professional security contract (CSP);
  • The constitution of a reclassification unit.

III – The individual dismissal procedure

After observing the employee’s reclassification and dismissal order procedures as we saw them above, the employer must take the following steps.

1. Inviting the employee to a prior interview before any decision

Before any dismissal decision, the employer must summon the employee to a prior interview by registered letter or hand delivery against discharge which mentions:

  • The subject of the interview clearly and unequivocally stated;
  • The date, place and time of the interview. It cannot take place less than 5 working days after the presentation of the registered letter or the hand delivery of the convening letter;
  • The statement specifying the possibility for the employee to benefit during the maintenance of assistance either from a person of his choice belonging to the staff of the company, or from an adviser of the employee outside the company (if there are no employee representatives in the company).

During the interview, the employer must indicate to the employee the reason(s) for the planned dismissal decision and collect the explanations from the person concerned.
He must also inform the employee of the content and the methods of implementing the specific reclassification systems from which he can benefit.

2. Notification of dismissal

After the interview, a period of 7 working days (or 15 working days for an executive employee) must be observed before sending the dismissal letter.
The dismissal notification is sent to the employee in the form of a registered letter with acknowledgment of receipt. It obligatorily specifies:

  • The precise economic reason which motivates the dismissal;
  • The priority of re-hiring which the employee can benefit from.

Within 15 days of notification of the dismissal, the employee may, by registered letter with acknowledgment of receipt or delivery against receipt, ask the employer for details on the reasons stated in the dismissal letter.

3. DIRECCTE information

Within 8 days of notification of the dismissal to the employee, the employer is required to inform the Regional Directorate for Enterprise, Competition, Consumer Affairs, Labor and Employment (DIRECCTE) by registered letter with acknowledgment of receipt.

4. Notice period

The end of contract period begins on the day of the first presentation of the notification letter. Its duration is at least:

  • 1 month for seniority between 6 months and 2 years;
  • 2 months for a seniority equal to or greater than 2 years.

More favorable provisions may appear in the employment contract or in the collective agreement applicable to the company. In addition, specific provisions apply when the employee chooses to benefit from a personalized reclassification agreement.

During the notice period, the employment contract continues normally. It is possible, under certain conditions, to exempt the employee from doing notice period in whole or in part.
Except in the case of paid leave, industrial accident during notice period, maternity or adoption leave, the employee’s absence does not extend the notice period.

IV – Procedure for economically dismissal from two to nine employees

The main difference in procedure between the dismissal of 2 to 9 employees over a period of 30 days and the individual dismissal is in the information of the Social and Economic Committee (CSE).
Thus, the employer who plans to proceed with such a dismissal reunite and consults the CSE in companies with at least eleven employees. If necessary, the CSE may be assisted by an expert for the study of this project.
The CSE must give its opinion within a period which cannot be greater, from the date of the first meeting during which it will have been consulted, to one month.

The employer gives the employee representatives a document which specifies:

  • The economic, financial or technical reason(s) for the layoff project;
  • The number of dismissals envisaged, the professional categories concerned and the criteria proposed for the order of dismissals;
  • The number of employees employed in the establishment;
  • The planned layoff schedule;
  • The economic measures envisaged.

Regarding the following operations:

  • Inviting each employee concerned to a prior interview;
  • Notification of dismissal;
  • DIRECCTE information.

It is possible to refer to the previous chapter.

V – Negotiated break for an economic reason 

An employee can negotiate his departure with his employer in the event of economic difficulties. In this case, the employment contract is broken without dismissal procedure, under certain conditions and with the consent of the employee.

This rupture can take place in the following cases:

  • Provisional management of jobs and skills agreement (GPEC)
  • Job safeguarding plan (PSE)
  • Voluntary departure plan (PDV).

The employee’s consent must be obtained without ambiguity. In addition, he should not be pressured or deceived about the real scope of his engagement.

The legal obligations provided for in terms of economic redundancy must be respected by the employer (except prior interview, fixing of order criteria and notification of redundancy).
The employee must receive compensation for termination of the employment contract. Its amount is set either directly by the employer and the employee, or by collective agreement.

VI – Termination benefits

The employee must receive at least the statutory dismissal indemnity as soon as he has at least 8 months of uninterrupted seniority in the company on the date of the notification of the dismissal. It must be paid at the end of the notice, whether it is executed or not.
Statutory compensation is not cumulative with any compensation of the same nature: severance or retirement compensation, contractual termination indemnity.

Calculation: The compensation is calculated on the basis of the reference salary.
The calculation most favorable to the employee must be retained:

  • Either the monthly average of the last twelve months preceding the dismissal, or when the employee’s seniority is less than twelve months, the monthly average of the remuneration of all the months preceding the dismissal;
  • Or a third of the last three months.

The severance pay may not be less than the following amounts:

  • A quarter of a month’s salary per year of seniority for years up to ten years;
  • A third of a month’s salary per year of seniority for years from ten years.

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