The French system of severance pay has been completely overturned. Before September 24, 2017, an employee with more than 2 years of seniority and whose dismissal was "without real and serious cause" (hereinafter WRSC) could claim, if the company had more than 11 employees, a minimum of 6 months' salary, with no ceiling on the amount. This could result in large or even very large amounts.
Compensation Ranges
Since that date, one of the "MACRON Orders" has replaced this rule with a scale of compensation, calculated in months of salary, varying according to the employee's seniority in the company, within a range between a minimum and a maximum. Thirty-one compensation brackets have been created. There are two sets of scales, one for companies with 1 to 10 employees, the other for companies with more than 10 employees.
The compensation ceilings rise almost continuously - and independently of the number of employees - from 1 month's gross salary for an employee with less than 1 year's seniority to 20 months' gross salary for 19 years' seniority or more.
Thus, an employee with 4 years of seniority can expect to obtain damages between :
3 to 5 months of gross salary in a company with 11 or more employees;
1 and 5 months gross salary in a company with less than 11 employees.
Compared to what existed previously, the new "scale" provokes a significant reduction in compensation for unlawful dismissal, especially for employees with low seniority. This has resulted in a collapse of the employment-related disputes by approximately 50%, the parties generally agreeing on compensation in accordance with the scale, without the intervention of a judge.
The purpose of the reform was to make compensation for unjustified termination of the employment contract more predictable, in order to reassure employers and revitalise the labour market. However, the new system is not without difficulties.
How can the calculation of WRSC severance pay be adapted to each individual's situation when the difference between the minimum and maximum compensation does not exceed 2 months' gross salary (up to 3 years' seniority)? However, the more limited the range, the more it leads to overvaluing the employee's seniority in the calculation of the indemnity, whereas this is only one factor among others.
Age, disability, family situation (single parent, dependent children), qualifications, difficulties in finding a job, economic and financial consequences or the deleterious circumstances of dismissal are meaningful factors that are unfortunately neglected by the new system. As a result, multiple attempts to question its legal force have been introduced before trial judges.
Constitutionality of the New System
The French Constitutional Council replied that the new mechanism is in conformity with the Constitution insofar as it does not disproportionately infringe the rights of employees. It achieves this feat by :
making the labour market more flexible while at the same time making it more secure;
neutralizing the compensation ranges in presence of dismissals based on a cause of nullity referred to in Article L1235-3-1 of the Labor Code, such as the violation of a fundamental freedom, harassment or discrimination;
and determining the brakets according to compensation averages observed in the previous practice of labour judges - Conseils de Prud'hommes (hereafter CPH) and Courts of Appeal.
Conventionality of the New System
The "Macron Scales" have been - and are still - attacked from the perspective of their conventionality, i.e. the conformity of the law with international conventions.
The stratagem consists in asking the courts to determine whether the new regime laid down by Article L1235-3 of the French Labour Code is in conformity with Convention No. 158 of the International Labour Organisation (Article 10) and the revised European Social Charter (Article 24), both guaranteeing the right of every employee dismissed without cause to obtain "adequate compensation" or any other "appropriate remedy".
Since international conventions take precedence over domestic laws, the law can be neutralized by this means. But how assessing the conventionality of a law? In the light of the first judgments and rulings handed down on this point, it has to be said that the answer depends above all on the method of control adopted.
To sum up, three different methods are used:
The "abstract" or "in abstracto" method, which evaluates the rule by comparing it with other rules rather than with its concrete consequences and thus tends to validate - apply - the new system;
"de facto" control, known as "concrete" or "in concreto", which evaluates the concrete consequences of the rule rather than the rule itself and thus tends to invalidate - reject - the new mechanism;
Mixed control, which tries to articulate the two previous types in the best possible way and tends to validate the new system in law, subject to the proportionality of its de facto consequences.
The Court of Cassation, consulted for advisory opinion, validated the mechanism in abstracto. Several CPHs and the Paris Court of Appeal have also adopted this approach. However, its generalisation effect loses sight of the particular difficulties the new law presents for employees with low seniority.
Adopted by other CPHs, the "in concreto" approach is also unsatisfactory for the opposite reason. Its individualisation effect loses sight of the general difficulties the new law presents when dealing with employees with high seniority.
Finally, several decisions have developed an hybrid method combining the first two. The CPH of Grenoble and the Courts of Appeal of Paris and Reims have validated in principle the conventionality "in abstracto" of Article L1235-3 of the Labour Code, while reserving as exceptions unconventionality judgments "in concreto" according to the relevant facts of each case.
In other words, these courts have held that trial judges may rule out the application of the ranges of compensation on a case-by-case basis when the balancing of the available elements would result in an inadequate amount of compensation.
The question now is what solution the case law is going to favour. Upcoming decisions of the Court of Cassation shall be of paramount importance for the settlement of this controversial matter.