Facts of the case :
As part of a corporate reorganization aimed at preserving its competitiveness, the company proposed to eight employees, employed as sales representatives, a modification of their employment contracts concerning both the geographical distribution of their territories and their remuneration.
The employees refused the proposed contractual modifications.
The employment protection plan (“PSE“ in French) was approved by the labour authorities, and the employees were dismissed on economic grounds on 18 November 2016.
The employees subsequently brought a claim before the Employment Tribunal (“Conseil de Prud’hommes“in French) challenging the legitimacy of their dismissal, contesting in particular the existence of a genuine threat to the company’s competitiveness at the time of the dismissals.
Position of the Court of Appeal:
The Aix-en-Provence Court of Appeal dismissed the employees’ claims.
The court held that the company had demonstrated a significant loss of market share in mainland France between 2002 and 2016.
It further noted that, over the same period, the deterioration of the company’s position on the French market had not been offset at group level by its other European subsidiaries.
The Court of Appeal identified the following factors as contributing to the loss of competitiveness:
- intensification of competition in the relevant business sector;
- underperformance in key markets;
- failure to launch new products;
- lack of adaptation to changes in the French pharmaceutical market, particularly with respect to commercial strategy.
Response of the French Supreme Court:
The French Supreme Court upheld the Court of Appeal’s reasoning, confirming that, pursuant to former Article L. 1233-3 of the French Labour Code, a reorganization constitutes a valid economic ground where it is intended to avoid anticipated difficulties. In this case, there existed a serious threat to the competitiveness of the business sector to which the group belonged, which was sufficient to justify the company’s reorganization in order to prevent such forthcoming economic difficulties.