Covid-19 : economic dismissal procedure (less than 10 employees) under French labor Law.

The health crisis -that the World is facing- questions employers, notably those implanted in France. The applicable procedure is particularly complex. Overview.

Version française de cet article ici.

1/ Economic reason justifying an economic dismissal.

Economic difficulties are characterized either by a significant change in at least one economic indicator, such as a decline in orders or sales, operating losses or a deterioration in cash flow or gross operating surplus, or by any other element which justifies these difficulties [1].

A significant decline in orders or revenues is constituted when the duration of this decline is, in comparison with the same period of the previous year, at least equal to :
- 1 quarter for a company with less than 11 employees ;
- 2 consecutive quarters for a company with at least 11 employees and less than 50 ;
- 3 consecutive quarters for a company with at least 50 employees and less than 300 ;
- 4 consecutive quarters for a company with 300 or more employees.

In addition, an economic dismissal shall be motivated by technological changes, a necessary / mandatory reorganization of the company to safeguard its competitiveness or the cessation of the company’s activity.

Of course, Covid-19 does not, in itself, constitute a ground for dismissal. The employer must justify being confronted with one of the above-mentioned situations in order to validly initiate such a measure.

In this respect, the historical decline in France’s GDP (estimated at -8.2% in 2020) leaves little doubt as to the economic consequences that companies and employees will suffer from.

By way of illustration, a survey published on April 10, 2020 by “Syntec Numérique”, reveals that nearly three quarters of the digital sector’s managers anticipated a drop in their forecast turnover for the second quarter of 2020 of 23% on average.

This situation is worrying since companies in this sector have better abilities to adapt to a context of health crisis (e.g. highly compatible with telework).

2/ Scope of assessment of the economic reason.

Economic difficulties, technological changes or the need to safeguard the competitiveness of the company can be assessed :
- at the level of the company if it does not belong to a group ;
- and, in the opposite case, at the level of the sector of activity common to this company and to the companies of the group to which it belongs, established on the national territory, except in the case of fraud.

The economic cause of a dismissal can never be assessed at a level lower than that of the company [2].

Moreover, the economic difficulties must always exist at the date of termination of the employment contracts [3].

3/ Attempt at prior reclassification.

Prior reclassification is a real condition for the justification of any dismissal for economic reasons [4].

Indeed, dismissal can only take place when all efforts of training and adaptation have been made and when the employee’s redeployment cannot be carried out on available jobs located on the national territory in the company or other companies of the group to which the company belongs and whose organization, activities or place of operation ensure the interchange of all or part of the personnel [5].

A reclassification system must be implemented as soon as the dismissal is considered and until it is notified.

The employee’s reclassification must be carried out first and foremost in a job in the same category or in an equivalent job with equivalent compensation. Failing this, and subject to the express agreement of the employee, the reclassification may be carried out in a job in a lower category [6].

From a practical point of view, the employer can [7] :
- either send personalized job offers of reclassification to each employee ;
- or convey, by any means, a list of available job positions to all employees.

In both cases, the proposed job positions must be written and detailed (job title and description, name of the employer, nature of the employment contract, location of the position, level of remuneration and classification).

Finally, the list must specify the criteria according to which an employee will be chosen in case of multiple applications were sent for the same job position, as well as the time limit for the employee to submit a written application (usually, a minimum of 15 days).

The absence of a written application from the employee at the end of this period is deemed to constitute a rejection of the proposed job offers.

4/ Determination of the criteria for the order of dismissals.

When the employer must follow a dismissal process for economic reasons, he must not seek to dismiss a particular employee, but must proceed with job cuts (or make changes to the employment contract which, if refused by the employee, may lead to job cuts).

The employer must therefore objectively determine the employee(s) to be dismissed, in accordance with the criteria for legal or conventional dismissals.

In the absence of an applicable collective agreement or convention, the employer must define the objective selection criteria used to determine the order of dismissals, after consultation with the Social and Economic Committee (hereafter "CSE").
These criteria take into account [8] :
1° Family expenses, in particular single-parent families ;
2° Seniority of service in the establishment or company ;
3° The situation of employees whose social characteristics make their professional reintegration particularly difficult, especially as far as disabled persons and elderly employees are concerned ;
4° The professional qualities appreciated by category.

The employer may give preference to one of these criteria, provided that all the others are taken into account.

It should be specified that in the absence of a collective agreement, the scope of application of the criteria cannot be less than that of each employment zone in which one or more establishments of the company concerned by the job cuts are located (the atlas of employment zones is carried out by “INSEE” : Institut national de la statistique et des études économiques).

The criteria of order apply to all employees belonging to the professional category to which the job cuts belong.

From a practical point of view, the following process must be conducted as follows :

1/ Define the "professional categories", which cover all employees who carry out functions of the same nature in the company that require common professional training.
2/ Group together all the employees of the company in the professional category they belong to.
3/ Apply the criteria to each employee by professional category, it being specified that it is possible to attribute points to each criterion.

Examples :
- Single parent : 3 points ; 1 child : 1 point, 2 children : 2 points, etc.
- Seniority between 1 and 3 years : 1 point ; between 4 and 8 years : 2 points, etc.
- Age between 18 and 25 years : 1 point ; between 26 and 35 years : 2 points ; between 36 and 45 years : 3 points, etc.

As an exception, the determination of the order criteria is not applicable in the event of the closure of the company or if all jobs in the same professional category are eliminated [9].

5/ Prior consultation of the CSE.

An employer who plans to proceed with a collective redundancy for economic reasons of less than 10 employees within the same 30-day period must convene and consult the CSE (or the central CSE) in enterprises with at least 11 employees [10].

To this end, the employer must provide the employee representatives with the notice for the consultation meeting and all useful information on the contemplated collective redundancy, in particular :
1° The economic, financial or technical reasons for the redundancy ;
2° The number of contemplated redundancies ;
3° The professional categories concerned and the proposed criteria for the order of redundancies ;
4° The number of employees, permanent or not, employed in the establishment ;
5° The provisional timetable of redundancies ;
6° The planned economic measures ;
7° Where applicable, the consequences of the planned redundancies in terms of health, safety or working conditions.

The CSE gives its opinion within a time limit which cannot be more than one month from the date of the first meeting during which it is consulted. In the absence of an opinion within this period, the CSE is deemed to have been consulted.

The minutes of the meeting of the CSE shall be forwarded to the administrative authority.

In addition, regarding companies with 50 or more employees, the CSE must be consulted for its opinion on restructuring and downsizing projects [11].

NB. Consultations on restructuring and downsizing projects and redundancies are two separate procedures. They may, however, be concurrent, subject to the observance of the most favorable deadlines.

It is therefore not obligatory to hold separate meetings [12], unless otherwise stipulated by agreement. Finally, the employer must not forget the consultation of the CSE on the criteria of order.

6/ Preliminary interviews.

The employer who plans to proceed to a collective dismissal of less than 10 employees within the same 30-day period calls, before any decision, the « interested parties »/ « involved parties » to a preliminary interview [13].

The summons is made by registered letter with acknowledgement of receipt or delivered by hand against a receipt indicating the date, time, place and object of the summons, as well as the possibility for the employee to be assisted.

The preliminary interview may not take place less than 5 working days after the registered letter or the hand-delivered notice has been presented.

During the preliminary interview, the employer must inform the concerned employee of the reclassification measures proposed to them :
- the professional security contract (hereafter "CSP") for companies with less than 1 000 employees ;
- or the outplacement leave in for companies with 1 000 employees or belonging to a group with 1 000 employees.

7/ Notification of dismissals.

At the end of the preliminary interview, and in the absence of the possibility of reclassification, the employer must, once his decision has been taken, notify the dismissal(s).

The letter of dismissal may not be sent before 7 working days from the date of the preliminary interview to which the employee has been summoned.

As a reminder, this period is amounts to 15 working days for the individual dismissal of a member of the management staff.

Moreover, when the termination of the employment contract results from the employee’s acceptance of the CSP, the employer must state the economic reason [14] :
- either in the written information document on about this system which must be given to the employee concerned by the proposed dismissal ;
- or in the letter that the employer is obliged has to send to the employee when the deadline for reply expires after the deadline for sending the letter of dismissal ;
- or again when it is not possible for the employer to send this letter before the employee accepts the CSP, in any other written document brought to his attention at the latest at the time of his acceptance.

8/ Information of the Direccte.

Within 8 days after sending the letters of dismissal, the employer must inform the Direccte by dematerialized means, [15], specifying : his/her name and address, the nature of the activity and the number of employees in the company or establishment, as well as the surname, first name(s), nationality, date of birth, gender, address, employment and qualification of the employee(s) dismissed and the date of notification of the dismissals.

The competent administrative authority is the one in whose jurisdiction the head office of the enterprise or establishment is located, or that of the establishment in respect of which the employer intends to dismiss the employee(s).

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Notes de l'article:

[1C. trav. art. L1233-3, al. 2.

[2Cass. soc. 26-6-2012, n° 11-13.736.

[3Cass. soc. 3-5-2011, n° 09-43.335.

[4Cass. soc. 10-7-1995, n° 94-40.137.

[5Cass. soc. 10-7-1995, n° 94-40.137.

[6C. trav. art. L1233-4, al. 3.

[7C. trav. art. L1233-4, al. 4 and 5.

[8C. trav. art. L1233-5.

[9Cass. soc. 14-01-2003, n° 00-45.700.

[10C. trav. art. L1233-8, al. 1.

[11CE 8-2-1985, n°43161.

[12Cass. soc. 9-2-2000, n° 98-12.143

[13C. trav. art. L1233-11, al. 1.

[14Cass. soc. 22-9-2015, n° 14-16.218.

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