In the event of major business change, employers may consider cutting costs through planned staff redundancies.
However, redundancies are less common in France than the UK. This is for the simple reasons that the legal grounds are harder to define, and the process more complicated to pursue.
Redundancy = economic dismissal
In France, redundancies are termed as “dismissals for economic reasons”. Such a dismissal will happen for reasons completely unrelated to the affected employee’s behaviour, performance or productivity, no matter how unsatisfactory these may be.
Instead, a redundancy situation may arise from a suppression or transformation of the affected employee’s role, or a modified element of the employment contract that is deemed essential and that the employee has refused.
What are the legal reasons for economic dismissal in France?
As well as being purely economic, in France the basis for any redundancy must be genuine and serious. Non-exhaustive examples include:
- Economic difficulties within the company.
- Certain technological changes, such as the introduction of a new computer system that impacts employment.
- Necessary re-organisation of the company, for example to protect its competitiveness.
- Cessation of company activity (unless this is the fault of the employer).
If the company has experienced a “significant change” in economic activity, such as a decrease in turnover, redundancies may be legally justified.
However, it is worth noting that there is no broad legal definition of a “significant change” under these circumstances. Only a judge may specify the conditions that would justify an economic dismissal. Generally speaking, increasing profits using redundancies where there is no significant financial risk for the company of keeping the roles will not be sufficient justification.
How are “economic difficulties” defined?
Again, there is no set legal definition of economic difficulties for the purpose of employee redundancy.
However, published guidelines do state that these may exist if there has been a significant fall in the company’s orders or turnover when compared with the same period over the previous year, and that this fall has reached a minimum duration.
The fall’s duration varies by the size of the company, as follows:
- One consecutive quarter for companies with fewer than 11 employees.
- Two consecutive quarters for companies with 11-49 employees.
- Three consecutive quarters for companies with 50-299 employees.
- Four consecutive quarters for companies with more than 300 employees.
For example, a company with 40 employees can make at least one economic dismissal if it can prove a significant drop in turnover for two consecutive quarters, compared with the same period in the previous year.
Regardless, the employer must create a written document that describes the economic grounds for dismissal and explains in full how the above conditions are met.
Do you have questions about employing people in France?
If so, we would be happy to answer them. You can arrange a free initial consultation with our expert HR team simply by getting in touch.
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