Economic redundancy: grounds and procedure

Vous souhaiteriez engager une procédure de licenciement économique mais ne savez pas comment procéder ? Peut-être que votre entreprise subit des difficultés économiques, notamment, à cause du récent « mur énergétique » (l’augmentation exponentielle des charges en raison des coûts d’exploitation) ou vous envisagez de supprimer un ou plusieurs postes, ou de réorganiser votre entreprise pour sauvegarder sa compétitivité  ?

The Labor Code sets out the conditions allowing an employer to dismiss an employee for economic reasons. A brief overview of the recognized economic grounds and the dismissal procedure.

 

What is a redundancy for economic reasons?

Unlike dismissal for personal reasons, dismissal for economic reasons is based on a cause external to the employee. The reason invoked by the employer must result from economic difficulties encountered by the company. This reason may also result from innovations or technological changes that force the company to adapt.

If the employee contests the dismissal, the judge will assess the reality and seriousness of the economic grounds.

          On economic grounds:

The employer may invoke various grounds to support a dismissal for economic reasons, listed in Article L. 1233-3 of the Labor Code:

• Economic difficulties;
• Technological changes;
• A reorganization of the company necessary to safeguard its competitiveness;
• La cessation d’activité de l’entreprise.
  

  On economic difficulties:

Economic difficulties are assessed through:

• The significant drop in orders or turnover;
• Operating losses;
• The deterioration of cash flow or gross operating surplus.

This decrease is assessed by comparison with the same period of the previous year over a period whose duration depends on the company's workforce:

a) One quarter for a company with fewer than eleven employees;

b) Two consecutive quarters for a company with at least eleven employees and fewer than fifty employees;

c) Three consecutive quarters for a company with at least fifty employees and fewer than three hundred employees;

d) Four consecutive quarters for a company with three hundred or more employees;

 

          On technological changes:

This criterion can be invoked within a financially healthy company. It is an autonomous cause of dismissal for economic reasons.

These changes are characterized by the introduction of a manufacturing process or the acquisition of new tools requiring the implementation of new working methods.

 

On safeguarding the company's competitiveness requiring reorganization:

This economic reason is not an autonomous cause for dismissal: the reorganization of the company must be invoked as necessary to safeguard the company's competitiveness in its sector of activity.

 

          On cessation of activity:

This cessation must be total and definitive, independent of any fault or blameworthy carelessness of the employer, so that the economic dismissal is not deemed abusive (Cass. Soc., March 17, 2021, n° 19-10.237).

 

The elimination or transformation of the position

As a mandatory prerequisite for implementing a dismissal procedure, the reason invoked by the employer must result in the modification or elimination of the employee's job. The employee's departure from the company is merely a consequence of this job elimination or transformation. This job elimination must be objectively established: the employee's departure cannot therefore lead to a simultaneous hire for the same position. However, distributing the tasks of the dismissed employee among other employees is permitted.

In the case of a job transformation motivated by a new competitive context (technological innovations, risk of loss of competitiveness for the company, etc.), the employer can only dismiss the employee if they do not have the required skills for this new position.

 

What framework for assessing economic difficulties?

As provided for in Article L. 1233-3 of the Labor Code, economic difficulties, technological changes, or the need to safeguard the company's competitiveness are assessed at the level of that company if it does not belong to a group.

In this case, the company must be considered as a whole to assess the economic reason: all establishments and sectors of activity of the company will be taken into account in this operation.

If the company at the origin of the dismissal for economic reasons is part of a group of companies, this reason will be assessed at the level of the business sector common to the company and the companies of the group established on the national territory.

The judges have nevertheless reserved the case of fraud to broaden the scope of assessment of the economic reason at the international level.

 

How does an economic dismissal procedure work?

The employer must proceed individually, respecting the economic dismissal procedure for each employee.

This procedure will nevertheless have specificities depending on whether the dismissal concerns:

• Fewer than 10 employees over a period of 30 days;
• Au moins 10 salariés sur une période de 30 jours ;
• And depending on whether the company has more or less than 50 employees (in which case, redundancies will be carried out within the framework of a job protection plan or PSE).

 

Common steps for all situations:

          Determining a dismissal order

When an employer reduces its workforce, it must apply a dismissal order based on criteria that assign scores to employees and define a departure order.

These criteria are: family responsibilities, length of service, the situation of employees or their professional qualities (Article L. 1233-5 of the Labor Code).

The prior search for a redeployment position

The employer must attempt to find a redeployment position for the employee affected by a job elimination.

This search is carried out within the company, on national territory, or within the companies of the group to which it belongs, where applicable.

Reclassification is carried out to a position of equivalent category, with equivalent remuneration. It can also be carried out to a position of a lower category, with the express agreement of the employee

Failure to comply with this obligation deprives the dismissal of the concerned employee of real and serious cause (Cass. Soc., November 19, 2008, no. 07-44.416).

           Consultation of the Social and Economic Committee (CSE)

This consultation is required in the event of economic dismissal of at least 10 employees within 30 days, in companies with a CSE (with more than 11 employees).

It also applies in companies with more than 50 employees if the dismissal measure concerns a protected employee.

The preliminary interview

The employer must summon each employee to a preliminary dismissal interview by letter with acknowledgment of receipt, given to the employee at least 5 working days before the date of the interview.

This letter contains the date, time and place of the interview, the economic reason justifying the employee's dismissal, the possible assistance of an external advisor to the company or another employee, the contact details of the town hall or the labor inspectorate in the absence of a staff representative in the company.

          The proposal of a professional security contract or CSP

The CSP must be offered by any company with fewer than 1,000 employees resorting to economic dismissal, in order to promote its outplacement, by allowing it to benefit from support and accompaniment actions from Pôle Emploi.

This CSP is offered to the employee during the preliminary interview, who has 21 days to accept or refuse it.

          Acceptance of the professional security contract

If accepted, the employment contract is terminated 21 days after the preliminary interview.

The employee benefits from 12 months of reinforced support combined with a professional security allowance also equal to 75% of their daily reference salary.

In return, the employee does not receive their notice pay, which is directly paid back to Pôle Emploi.

The notification of dismissal

In the event of refusal or lack of response to the professional security contract proposal, the employer notifies the employee of their dismissal by registered letter with acknowledgment of receipt, with a minimum period of seven days for employees, 15 days for managers after the preliminary interview.

This letter must contain:

• The grounds for dismissal;
• The employee's right to request clarification of these reasons within 15 days;
• The impossibility of reassignment;
• The priority of rehiring open to the employee for 12 months;
• The deadline to contest this termination is open for 12 months.

If applicable, this letter will also include:

• Where applicable, the lifting of the non-compete clause;
• Un rappel du délai restant à courir pour l’acceptation ou le refus du CSP, lorsque cette lettre est émise à titre conservatoire.
  

  Notice period

An employee dismissed for economic reasons is required to respect a notice period, the duration of which is provided for by law or the applicable collective bargaining agreement.

The employer may expressly waive it. The employee will also be exempt if they have accepted the CSP or have taken a reclassification leave or a mobility leave.

Can the employee challenge their dismissal?

An employee dismissed for economic reasons may challenge their dismissal within 12 months and refer the matter to the industrial tribunal if they believe the economic grounds are not established or in the event of a procedural defect.

 

You wish to dismiss for economic reasons? Or one of your employees is contesting their dismissal? Me Benoît Sevillia, Me Aliénor du Foussat and Me Patricia Franc, lawyers specialized in labor law, will assist you throughout the procedure.

 

Article written with the assistance of Wassila EZZAOUI, apprentice jurist.

 

Corporate law