Settlement Agreements in France: an overview

Sometimes, employment relationships simply don’t work for one or either party.  When this is the case, a quick and amicable employee exit can offer the best solution. 

How such exits are handled can be crucial for maintaining the company’s reputation as a fair and respectful employer, especially in an age when disgruntled employees can easily air their grievances on social media.

Yet before 2008, there were no means by which a mutually-agreed termination could be facilitated.  If an employer wanted to end a member of staff’s employment, they would have had to follow the company’s formal dismissal procedure or just wait for a letter of resignation.

A rupture transactionnelle was also possible: a solicitor-managed agreement under which the employee and employer would ‘make a deal’ to settle an existing or potential dispute arising from the termination of an employment contract.  The (usually high-ranking) employee would receive a lump sum payment, in exchange for waiving their right to take further action in court.

However, the rupture transactionnelle is not a means of termination in itself, since the agreement – and the resulting payment – can only be made following the employee’s departure.

So the 2008 introduction of the rupture conventionnelle by the French government is an interesting development.  It means that employers and employees can now mutually decide upon the conditions for terminating the contract that binds them.

Rupture conventionnelle literally translates to “breakage agreement”.

The agreement applies to permanent contracts only, and is intended to act as a viable, reasonably quick alternative to resignation or dismissal. 

This is especially advantageous for employees, since prior to 2008 their only termination options were to resign or get themselves dismissed.  Neither option was particularly beneficial: French employees do not receive unemployment benefits if they have resigned, while trying to get dismissed takes time and can be potentially damaging.  Yet the rupture conventionnelle entitles employees to unemployment benefits, as well as compensation at least equivalent to that paid in the event of dismissal. For this reason, it isn’t uncommon for employees to request one.

The rupture conventionnelle is also useful to employers, in that there is no need to try and establish serious grounds for the termination of the employee’s contract (as they would have to for dismissal).  There is even no need to specify which party has initiated the termination process, since it is assumed to be a joint decision.

What are the objectives of the rupture conventionnelle?

The French government set out to provide legal certainty for the termination of permanent contracts by introducing clearly-defined procedural formalities, which in turn would reduce the number of post-termination disputes.  The rupture conventionnelle also levels the termination playing field for employees, as it both recognises and addresses the subordinate nature of the employment relationship.

The second objective is to eliminate ‘false’ dismissals, which mask bitter-seeming resignations or terminations that were in fact consensual or mutually-negotiated.

Can we answer your questions about French settlement agreements?

If so, please get in touch to arrange a free initial consultation.  Our bilingual HR services cover both sides of the Channel and are specifically designed to assist British companies with a French presence.

We have also released some 2024 dates for our free online training workshops, which cover different aspects of employing people in France.  Find out more and sign up here.

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