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A time of uncertainty concerning the application of the scale of compensation (“barème Macron”) for unfair dismissal introduced in the recent French employment reforms

Latest News A time of uncertainty concerning the application of the scale of compensation (“barème Macron”) for unfair dismissal introduced in the recent French employment reforms

The first decisions delivered by the French employment tribunals on the question of the compliance of the scale with international conventions have now been reported. The cases result in diverging positions which can only lead to legal uncertainty for employers.

The legal framework

In order to provide certainty on termination of the contract of employment, one of the measures provided for by the so-called Macron orders in September 2017 was to put in place a compulsory scale of compensation by the employer in the event of a finding of unfair dismissal or, in French terminology, a dismissal without real and serious grounds. The scale of compensation sets out minimum and maximum amounts in months of salary that vary according to the length of service of the employee and the number of employees within the company; the maximum would be 20 months’ salary for employees having at least 30 years’ length of service.

The scale set out in article L1235-3 of the French Employment Code was supposed to be binding on the courts with a dual purpose of

• allowing an employer to estimate the possible financial costs in the event of a dispute and

• reduce the volume of litigation.

The position of the Constitutional Council, of the State Council and of the employment tribunals

In its decision of 29 March 2018, the Constitutional Council validated the scale in terms of its constitutionality. The Constitutional Council found that it did not prejudice the constitutional requirement of a right to compensation for employees and notes that by setting out a compulsory scale of reference for the damages awarded by the courts in the event of a dismissal without real and serious grounds, the legislator had pursued a goal in the general public interest of reinforcing the predictability of the consequences of the termination of the contract of employment. It notes that the legislator was not obliged to set up a scale taking account of all criteria determining the loss suffered by the employee and specified that it was for the judge to take account thereof within the limits of the scale when the court determined the amount of the compensation due by the employer.

In December 2017 the State Council (Conseil d’Etat) also issued a finding on its compliance with international conventions and considered that no argument has been produced to put in serious doubt the legality of these provisions notably in terms of the fact that it would not be applicable in the case of a dismissal which is null and void and that it is always possible for the judge to take into account other criteria related to the specific circumstances of the employee.

Since then several actions have been introduced challenging the scales of compensation set out in article L1235-3 of the Employment Code. The actions are based, in particular, on international law, with reference to the instruments of the International Labour Organisation (ILO) and the European Social Charter.

Employees have attempted to challenge the scale considering that it is contrary:

• to article 10 of Convention N° 158 of the ILO which requires the payment of “adequate compensation or such other relief as may be deemed appropriate” in the event of unjustified termination;

• article 24 of the European Social Charter which establishes “the right of workers whose employment is terminated without a valid reason to adequate compensation or other appropriate relief”.

Whilst a certain number of Employment Tribunals have held that the scale is compliant with ILO Convention N° 158 (the Employment Tribunals in Le Mans and Caen) others, in a greater number so far, have disapproved the compulsory scale of reference considering that it is contrary to international convention (the Employment Tribunals in Troyes, Amiens, Grenoble and Lyons).

For the Employment Tribunal in Le Mans, (Conseil de Prud’hommes, Le Mans 26.09.2018 n°17/00538) the compulsory scale of reference is not contrary to article 10 of Convention N° 158 which notably requires adequate compensation.

For the Tribunal article L1235-3 of the French Employment Code complies with the compensatory principles set out by Convention N° 158 for the following reasons:

• the compensation set out by the scale is intended to compensate the loss resulting from the unjustified loss of employment per se. If the valuation of damages is indeed circumscribed by a minimum and a maximum the judge always has the possibility of taking into account all factors determining the loss suffered by the employee who has been dismissed when it makes a determination of the amount of the compensation within the limits of the scale;

• the scale is not applicable in the event of a dismissal which is null and void (breach of a fundamental freedom, an event of moral or sexual harassment, a breach of equality of employment between men and women etc.)

• the other losses relating to the dismissal and notably the circumstances in which it was notified may be the subject of separate heads of compensation on the grounds of civil liability insofar as the employee is able to demonstrate the existence of a distinct loss.

On the other hand the Employment Tribunal in Le Mans refused to reach a finding on the compliance with the European Social Charter holding that its provisions were not directly applicable by an employment tribunal.

In contrast to the position of the Employment Tribunal in Le Mans, the Tribunal in Troyes (Conseil de Prud’hommes, Troyes 13.12.2018 n°18/00036) refused to apply the compulsory scale insofar as it was held to be contrary to the ILO Convention and that it breached the European Social Charter.

It considers that the ceiling limiting the compensation to be awarded by an employment tribunal does not allow the members of the tribunal to take account of the individual circumstances, taken as a whole, of the employees whose termination is unjustified and to provide a fair compensation for the loss which they have suffered. In addition it notes that the scale cannot act as a disincentive for employers who decide to dismiss an employee without grounds and therefore it is contrary to the decision of the European Committee of Social Rights (under the auspices of the Council of Europe) whose role is to monitor compliance with European Social Charter.

For the Employment Tribunal in Troyes, the scale is of greater benefit for those at fault, by providing them with certainty, as opposed to the victims and therefore considers it to be unfair.

Since this decision the Employment Tribunals in Amiens and Lyons have also set aside the application of the scale introduced by the Macron employment reforms.

The future of the Macron scale of compensation

In order to circumvent the framework of compensation, employees and their advisers could be tempted, in order to obtain improved compensation, to argue that the dismissal is null and void by raising issues of harassment or by making separate claims for a distinct loss.

Such is the practice we can note to date while waiting for the position of the courts of appeal and ultimately of the Cour de Cassation on the compliance of the Macron scale with international conventions.

Finally the European Committee of Social Rights will also have to deliver an opinion on the French provisions as the French union Force Ouvrière (FO) has introduced a complaint on this point. FO has requested European Committee of Social Rights to reach a finding that the scale implemented by the order of 22 September 2017 is contrary to article 24 of the European Social Charter as amended.

We await the next instalment….

Jessica Ip Ting Wah

Partner at In Extenso Avocats