What are the methods for amicably resolving a dispute surrounding the termination of an employment contract?

The amicable resolution of the dispute surrounding the termination of the employment contract is not without difficulties for both employees and their employers.

Indeed, the gradual reduction of social exemption ceilings for severance payments since 2011 (2 times PASS in 2018, i.e. €79,464), combined with the new rules on the specific deferred compensation (recently reduced from 180 days to 150 days by the latest unemployment insurance agreement of April 14, 2017), has ultimately discouraged many employees from entering into a negotiated termination of their employment contract.

It is appropriate to provide an overview of the various amicable dispute resolution methods relating to the termination of the employment contract, with the advantages and disadvantages they present.

The contractual termination of the employment contract:

Widely praised by both employees and employers (over 420,900 approved terminations in 2017), the mutually agreed termination is the most secure and flexible amicable termination method for each party.

The conventional termination makes it possible to avoid sources of litigation surrounding the grounds for termination of the employment contract. Furthermore, it leads to a rapid exit of the employee from the company, as the parties are not bound by a notice obligation.

The conventional termination indemnity, when it does not exceed the amount (minimum mandatory due) equivalent to the legal redundancy payment, is also advantageous with regard to the social security regime that applies to it, being exempt from social charges and CSG-CRDS, but also with regard to unemployment insurance, in that it does not entail any deferral of compensation.

The only downside (mitigated by the recent increase in the legal severance indemnity) is that any compensation paid above the minimum legal threshold is subject to CSG (which recently increased by 22.66% on January 1, 2018, from 7.5% to 9.2%) and CRDS, as well as social security contributions when the exemption ceiling (€79,464) is exceeded. In addition, it triggers a specific deferral of coverage by Pôle Emploi, whose 150-day cap is reached very quickly (from €13,890 in supra-legal compensation paid).

The settlement after the termination of the employment contract:

The transaction remains commonly used when the employee contests the termination of their employment contract and claims compensation on this basis.

The advantage of the settlement over the conventional termination lies in the fact that its validity is not subject to a minimum amount like the conventional termination and that the amounts paid, if subject to CSG-CRDS and social charges beyond €79,464 paid (in 2018), do not bear an additional social flat rate charged to the employer.

It is often the deferral of compensation from Pôle Emploi that leads many employees to question the relevance of quickly concluding a transaction after the termination of their employment contract.

Conciliation in the conciliation and orientation office (BCO):

The possibility of paying a flat-rate conciliation indemnity before the BCO of the Labor Court deserves to be recalled in view of its advantages related to unemployment insurance and CSG-CRDS contributions.

The fixed conciliation indemnity paid, provided it remains within the scale provided for by Article D. 1235-21 of the Labor Code (slightly more favorable than the "Macron" scales for employees with long seniority), is indeed exempt from the specific deferral of compensation according to Unédic circular No. 2017-20 of July 24, 2017.

Furthermore, this compensation is exempt from CSG-CRDS, within the limits of the amounts provided for by the aforementioned article D. 1235-21 and the total amount excluded from the contribution base (€79,464 in 2018) and is not subject to income tax.

On a procedural level, the parties may also voluntarily appear before the conciliation and orientation board to have a conciliation report drawn up before the advisors, offering the advantages mentioned above.

Business law