Social security treatment of termination payments in 2019

The treatment of termination payments examined in the present article are those linked to the termination of an employment contract such as severance pay, compensation under a compromise agreement and damages for a dismissal without justifiable grounds.

Compensation for notice, compensation for paid holiday, non-competition indemnities and severance payments at the end of fixed-term contracts are expressly left aside as they are treated as if they were salary and thus entirely subject to ordinary social contributions.

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.

Protection of trade secrets

French law has adopted a new law on the protection of trade secrets (law n° 2018-670 of 30 July 2018)

The law is intended to transpose EU directive 2016/943 of 8 June 2016 on the protection of trade secrets into domestic law.

Under the definition set out in the French provisions, any type of information could be protected by trade secrecy. A trade secret is defined by reference to three criteria: the information is not generally known or easily accessible by persons familiar with this type of information because of their sectors of activity; it has an effective or potential commercial value because of its confidential nature; the holder of the information has taken legitimate and reasonable steps to protect its secret nature. The type of information protected is broad: for example, technological knowledge, know-how, and commercial data. It seems to exclude personal data, unless such data has a commercial value. The media upon which the information is carried can be of any type whatsoever.

A look in the corner of restitution

There is a small corner of the French law of obligations regarding quasi contracts, unjust enrichment and restitution which has been the subject of reform of the law of obligations in 2016 and to which little attention has been paid.

Under the heading “Other sources of obligations”, quasi contracts have seen their status raised within the structure of the civil code so that they now appear on the same level as contracts and the French law of tort.

Gilets jaunes : an exceptional bonus

The bill on urgent economic and social measures following the announcements made by the French President on 10 December 2018 in response to the protests by the “yellow vests” (in French “gilets jaunes”) has already been adopted and published on 26 December such that the measures can apply as from 1 January 2019.

The main provision is the possibility for employers to pay their employees an exceptional bonus (“prime exceptionnelle de pouvoir d’achat”] which is tax-free and not subject to social charges and contributions.


Brexit – The UK Government’s paper The Future Relationship between the United Kingdom and the European Union contains two central proposals for establishing a free trade area for goods but at the same time a new framework for control of movements of people.

These two issues represent some of the core reasons of the uncertainty about the future relationship between the European Union and the United Kingdom: whether or not there will be a hard customs barrier and what restrictions will there be on the movement of persons?

New Bill to simplify company formation

Draft law on the action plan for the growth and transformation of enterprises (PACTE) is to be put before the lower house of the French Parliament in September.

The draft provisions include measures to reduce restrictions on small and medium size business. Setting up new companies will be simplified in order to reduce costs and speed up the formation process. Currently companies are registered on each local company and commercial register where they have their registered office and branches. There are currently circa 1400 business formalities centres in France. Under the new proposal a single online service will be put in place to manage the registration of new companies.

Reform of the social model: the freedom to choose one’s professional future (in French “Liberté de choisir son avenir professionnel”)

The new bill for the freedom to choose one’s professional future, also referred to as the second part of the reform of the social model after the Macron orders and known as “Pénicaud II”, has finally been adopted by the French Parliament last 1 August 2018.

However, three actions have immediately been introduced before the Constitutional Council and thus the law will probably only be promulgated at the beginning of September 2018.