Any dismissal for economic reasons must be justified by a real and serious cause. The economic motive is defined by the Labor Code as a reason not inherent to the employee’s person, resulting from a deletion or transformation of employment or a modification, refused by the employee, of an essential element of the employment contract and consecutive of economic difficulties as technological changes, the cessation of activity of the undertaking or an reorganization of it necessary to safeguard its competitiveness.
In other words, the dismissal is motivated by economic reasons, originating either in the abolition or transformation of the employment of the employee concerned, or a modification of an essential element of the employment contract refused by the employee.
Economic reasons for a dismissal procedure.
The economic reasons that the employer can invoke are the following:
- economic difficulties (there is an economic difficulty when the company experiences a significant change in at least one economic indicator such as a decrease in orders or turnover for the last quarters, operating losses or deterioration in cash flow or gross operating surplus or any other element likely to justify economic difficulties),
- technological changes,
- the need to safeguard the competitiveness of the company,
- or the cessation of business activity (unless it is due to fault of the employer).
Concerning economic difficulties, the French case law does not require that the business situation be catastrophic; it’s sufficient that the difficulties encountered be real and serious (Cass Soc 9-7-1997 n ° 95-43.722 P: RJS 8-9 / 97 n ° 960).
French case law
Concerning the technological changes the introduction of a new technology with an impact on employment is an economic cause of dismissal even if the competitiveness of the company is not threatened (Cass, 9-10-2002 n ° 00-44.069 FD : RJS 12/02 No. 1373, 15-3-2012 No. 10-25.996 FD: RJS 6/12 No. 532). The acquisition of new machines allowing the automation of the tasks (Cass.Soci 14-5-1998 n ° 96-43.797 P) or the implementation of a new computer software leading to the suppression of a large part of the attributions of the employee (Cass, company 17-5-2006 n ° 04-43.022 FD: RJS 8-9 / 06 n ° 934) can justify an economic dismissal. On the other hand, the change of software in an enterprise already accustomed to computer technology does not constitute an evolution that can be described as technological innovation and cannot therefore justify such a dismissal (Cass, company 13-5-2003 n ° 00 -46.76 FD: RJS 11/03 No. 1135).
Concerning the reorganization of the company, when not linked to economic difficulties or technological changes, can constitute an economic reason for dismissal for itself if it is carried out to safeguard the competitiveness of the enterprise (Cass, 5-4-1995 n ° 93-42.690 PB: RJS 5/95 No. 497; 31-5-2011 No. 09-67.045 FD: RJS 8-9 / 11 No. 719) or the sector of activity of the group to which it belongs (Cass. company 10-12-2003 n ° 02-40.293 FD: RJS 2/04 n ° 187; 9-7-2015 n ° 14-16.009 FS-PB: RJS 10/15 n ° 627).
The reorganization decided to prevent future difficulties linked to technological developments and their consequences for employment is an economic motive (Cass.Sc. 11-1-2006 n ° 04-46.201 FS-PBRI: RJS 3/06 n ° 322, 27-3-2012 n ° 11-14.223 FS-PB: RJS 6/12 n ° 533) or the emergence of new players in the market threatening competitiveness (Cass. Soc. 2-2-2011 no. 09-69.520 FD) but not the one only directed for making additional profits (Case company 29-5-2001 n ° 99-41.930 FS-D: RJS 8-9 / 01 n ° 1002; 09-43.183: RJS 2/12 n ° 120), to improve the margins (Casss company 13-9-2006 n ° 05-41.665 FD: RJS 11/06 n ° 1161), or to reduce the social charges (Cass 12-11-1997 n ° 95-43.605 P, 28-3-2012 n ° 11-10.109 FD) as soon as the company is prosperous (Cass, company 29-1-2003 n ° 00-44.962 FD: RJS 4/03 No. 428).
Nor is it justified by any economic motive the decision to transfer production from France to other countries because of attractive financial and fiscal incentives (Cass, 18-9-2007 n ° 06-42.401 FD: RJS 11/07 n ° 1170).
This article has been prepared for informational purposes only. It is not a substitute for legal advice addressed to particular circumstances. You should not take or refrain from taking any legal action based upon the information contained herein without first seeking professional, individualized counsel based upon your own circumstances. The hiring of a lawyer is an important decision that should not be based solely upon advertisements.
Information by ALARIS AVOCATS