New compensation rules applicable in case of unfair dismissal – ILO

  • During his campaign, soon-to-be President Emmanuel Macron committed to reforming French labour law, which he considered to be too complex and ill-equipped the existing economic system and an obstacle to the long-awaited economic recovery in France. As such, the Labour Code was to be reformed and with it industrial relations in France.

    Four months after the elections, the new government has upheld its promise and enacted five ministerial orders, one of which is dedicated to the so-called ‘visibility and securing of working relationships’.(1)

    In its report to Macron, the government explained why the Labour Code must be amended – particularly regarding the compensation rules applicable in the case of unfair dismissal.

    A damages scale, which will be mandatory for the judge and parties, will be introduced to provide security and clarity regarding the consequences of potential litigation. While no entrepreneur – especially in small and medium-sized companies – recruits employees with the intention of dismissing them, the uncertainty regarding the cost of terminating an employment contract may discourage them from hiring employees on a permanent contract basis.

    This scale, through the predictability that it provides, is meant to remove this uncertainty and allow the creation of jobs in France in small and medium-sized enterprises.

    Ministerial Order 2017-1387

    Implementation of mandatory scale

    Ministerial Order 2017-1387 is intended to respond to the goal defined above: in the case of unfair or constructive dismissal, the damages owed to the employee will be determined by a scale based on the seniority of the employee and the size of the company. Therefore, the amount of damages will no longer be determined by the judge at his or her own discretion.

    The application of this scale concerns only damages due for unfair dismissal, without prejudice to other severance indemnities that could be owed to the employee by the employer.

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    Auteurs : Elisabeth Laherre, Ludivine Pons

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