Article L.1233-3 of the French Labour Code provides a list of grounds on which redundancies can be considered valid under French law. Those listed grounds are as follows:
- Economic difficulties,
- Technological changes,
- The necessity to safeguard the company’s competitiveness,
- The closing-down of the company (meaning, according to established case law, that the whole company ceases its activity).
The French Labour Code provides details on the criteria which may be used to demonstrate economic difficulties, including what is required to substantiate a decrease in turnover or revenue as well as the period over which such difficulties must be evidenced.
The length of this period depends on the company’s headcount. E.g. for a company with 50 to 300 employees, economic difficulties must last at least 3 consecutive quarters and for companies of more than 300 employees at least4 consecutive quarters.
In a decision dated June 1, 2022, the French Supreme Court had to define how far the notice of termination can be from the period over which the economic difficulties are evidenced.
Indeed, in the case at hand, the employee challenged her termination for redundancy arguing that her employer had failed to demonstrate any genuine economic difficulties at the time she was actually terminated. On the contrary, she showed that, after several quarters of actual losses, the company’s turnover was slightly increasing (0.5%) in the quarter before she was sent her redundancy notice.
The Court of appeal had considered that the employee’s claim had no merits since this slight increase could not characterize a viable economic situation of the company, which had suffered losses for several years.
Conversely, the French Supreme Court upheld the employee’s claim considering that the company had failed to evidence economic difficulties over the statutory four consecutive quarters immediately preceding the notice of redundancy.
This decision may have strong impacts, especially in case of reorganizations implemented over several months if the company’s financials improve before the last redundancies are notified.