Two very recent Court of Appeal rulings mean that French employers carrying out redundancy exercises need to be careful to ensure the process is not rendered unlawful for the lack of an “economic motive”.
According to the Courts of Appeal in Paris and Reims, if the economic motive provided by the employer to the Works Council to justify the proposed redundancies is unfounded then the consultation process will not comply with the requirements of the French Labour Code and the entire redundancy procedure should be “cancelled”. In the case in Reims, a report prepared by chartered accountants on behalf of the Works Council which concluded that the employer’s economic motive was artificial was sufficient to persuade the Judges of this fact.
These cases are controversial, as they do not sit neatly with previous case law in this area. This said that the Courts are not allowed to interfere with the management decisions of an employer and that the relevance of the economic reason should only be judged at the date of dismissal. Furthermore, the French Labour Code provides that a redundancy procedure is only “cancelled” if a redeployment plan is not presented by the employer to the employee representatives, who must then meet and be informed and consulted with. In this case the redundancy procedure was found to be void for the lack of an economic motive, which is not one of the invalidating reasons set out in the Code.
The Paris decision has already been appealed to the Supreme Court. In the meantime French employers should be aware of the uncertainty in this area and exercise extreme caution to justify their rationale when implementing a redundancy procedure, as the judicial voiding of redundancies has become a significant risk in France.