Reform Macron: the new and advantageous predictability of the compensation to be awarded to the employee by the employment tribunal in the event of dismissal without real and serious cause

The “ordonnance” dated 22 September 2017 relating to the predictability and the safeguarding of working relationships has set up a mandatory compensation scale in the event of dismissal without real and serious cause.

In France, if the court considers the dismissal of an employee as without real and serious cause, it can:

• offer to the employee to be reinstated in the company. Nevertheless, the employer and/or the employee are free to refuse;
• or award the employee compensation to be paid by the employer. From now on, the court must apply the mandatory compensation scale and award compensation ranging from a minimum to a maximum amount depending on the employee's seniority.

For instance, an employee with 10 years’ seniority will receive compensation between a minimum of 3 months’ salary and a maximum of 10 months’ salary. An employee with 2 years’ seniority will receive compensation between 3 and 3.5 months’ salary but prior to the “ordonnance”, the labour code awarded the employee compensation at least equal to his last 6 months’ salary if he was employed in a company of at least 11 employees.

The “ordonnance” provides for lower minimum amounts for small companies that usually employ fewer than 11 employees, but the maximum stays the same.

The implementation of such a scale gives more predictability for companies for the cost of litigation related to the employee’s dismissal. It could lead to a decrease of cases before the employment tribunal particularly when the employee considers that the maximum compensation that he could hope to obtain would not be worth the litigation costs.

Nevertheless, this scale is not applicable if the court considers the dismissal as null and void, for instance in the event of moral or sexual harassment or of discriminatory dismissal. Thus, the employees’ lawyers will probably often try to demonstrate that this is the case.

Finally, the employer who negotiates with an employee a settlement agreement to end any dispute related to the grounds for dismissal should use the compensation scale to determine the amount of the settlement compensation to be paid within the framework of the settlement agreement. Why for example pay to an employee a settlement compensation which is higher than the maximum permitted by the compensation scale, a maximum that the employee would not even be sure to obtain if he wins the case after many months of proceedings? There is no doubt that there will be changes in the way that these settlement negotiations are conducted.