Since December 1, 2016, Article L. 1233-3 of the French Labor Code has set out objective criteria enabling companies to demonstrate whether economic difficulties are such as to justify redundancy.
Economic difficulties can be characterized by a significant change in at least one economic indicator, such as a decline in orders or turnover, operating losses, or a deterioration in cash flow or gross operating surplus.
However, law states that economic difficulties may also be justified by any other factor that could justify them.
Thus, in a Court of Appeal ruling, the judges did not ground their decision on the economic indicators expressly listed in the Labor Code, but on other factors that could characterize economic difficulties:
- a decline of more than 10% in turnover in the second half of 2020 compared to the second half of 2019, whereas the law requires quarterly declines to be demonstrated ;
- a decline of nearly 30% in operating income for 2020 compared to 2019, but without strict operating losses;
- a reduction in the company’s workforce and the waiver of rent from July to December 2020 by the employer’s landlords.
In conclusion, the Court of Appeal ruled that the economic difficulties that led to the termination of the employee’s employment contract in January 2021 were demonstrated.
In a ruling dated September 17, 2025, the Court of Cassation upheld the reasoning of the Court of Appeal and reiterated that, in accordance with Article L. 1233-3 of the Labor Code, the judge may assess the reality of the economic difficulties without necessarily relying on economic indicators relating to a decline in turnover or orders, or operating losses. The judge may indeed take into account other factors that characterize these difficulties.