Wrongful dismissal compensation: back to a purely indicative scale?

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Anne-Lise Puget
Bersay, Paris
alpuget@bersay.com

The controversy

The introduction of the Macron scale, in September 2017, in Article L 1235-3 of the French Labour Code unsettled French case law.

Prior to its existence, should a dismissal be deemed to lack grounds, the employer would have been held liable for damages according to the former employee’s seniority and the headcount of the company on the date of the dismissal letter.

Where an employee had less than two years' seniority, or if the company’s workforce had less than 11 employees, the damages would be awarded at the sole discretion of the Court, based on the harm suffered by the employee.

Conversely, for an employee with at least two years' seniority, within a company with at least 11 employees or more, the indemnity would range between six months of salary or more, if the Labour Court ruled out the reintegration of the employee, or should one of the parties refuse it.    

It was common to come across rulings awarding damages of 12 months of salary, sometimes reaching up to 18 months’ worth. This was considered an unforeseeable financial risk in the event of a dismissal, which could discourage companies from hiring, or even from bringing their business to France.

The Macron Ordinances introduced a capped scale for unlawfully dismissed employees, depending on their level of seniority, with no ability for the judge to rule outside the scale. However, the scale is not applicable when the dismissal is deemed null and void under the strict circumstances laid out by the French Labour Code (including violation of a fundamental right, discrimination and moral or sexual harassment).

The question of the lawfulness of the scale was raised prior to its introduction, with some plaintiffs arguing that it was incompatible with the provisions of the European Social Charter and the 158th convention of the International Labour Organisation (ILO). These two treaties provide for adequate compensation of unlawfully dismissed employees’ damages. The principle of the scale itself was nevertheless validated by the French Administrative Council of State (Conseil d’Etat), (CE, December 7, 2017 No 4115243) and then a few months later by the French Constitutional Council (Conseil Constitutionnel), (Decision DC 21 March 2018 No 2018-761).

These decisions did not prevent some labour courts with first degree jurisdiction in employment matters from deviating from the scale (Amiens Labour Court, 18 January 2019 No 18.00.989; Lyon Labour Court, 21 December 2018 No 18-01.238; Amiens Labour Court, 19 December 2018 No 18-00.040; Troyes Labour Court, 13 December 2018 No 18-00.036 and Agen Labour Court, 5 February 2019 No 18-00.049). However, other labour courts applied the scale (Le Mans Labour Court, 26 September 2018 No 17-00.538).

The Government took the issue on and, on 26 February 2019, the Ministry of Justice issued a circular asking the Court of Appeal presidents and the general prosecutors to directly inform it of decisions rendered in their jurisdictions pertaining to this issue. The circular referred in particular to ‘decisions that lead to an appeal in order for the prosecutor to intervene in the matter and let the Court of Appeal know the position of the prosecutor on the issue’.

The Council of State and the Constitutional Council’s decisions were attached to this circular, which gave it the appearance of a warning.

The Cour de Cassation’s opinion

Attention was turned to the highest Court in the French judicial order, the Cour de Cassation, whose ‘role is to set forth the right interpretation of the law by lower Courts and Courts of Appeal, ensuring a uniform interpretation of the law’.

Through the process of ‘request for an official opinion’, the Cour de Cassation was given the opportunity to share its interpretation regarding the validity of the scale earlier than it would have done through judicial recourse.

In two formal opinions handed down on 17 July 2019 (No 15012 and No 15013), the Cour de Cassation approved the Macron scale.

First, the Cour de Cassation asserted the compatibility of Article L 1235-3, with Article 6, section 1, of the European Convention for Human Rights (ECHR), which guarantees the right to a fair trial.

The Cour de Cassation followed the position of the European Court of Human Rights (ECtHR), which distinguishes obstacles of a procedural type from substantive obstacles to determine the scope of Article 6, section 1, of the ECHR. The Cour de Cassation considered that the provisions of Article L 1235-3 of the French Labour Code ‘limit the substantive right of employees’ without amounting to ‘a procedural obstacle hindering their access to justice’, so that they don’t enter the scope of Article 6, section 1.

As for compatibility with the provisions of the European Social Charter, the Cour de Cassation considered that, given the latitude left to the signatory States, this does not apply directly to a dispute between individuals. Therefore, it cannot be invoked to reject the application of the Macron scale. 

As for compatibility with the provisions of the 158th International Labour Organisation (ILO) Convention, the Cour de Cassation considered that, although an employee can base his claims on this within a dispute, the term ‘adequate compensation’ (Article 10) must be understood as allowing Member States freedom of action. Article L 1235-3 of the French Labour Code is therefore compatible with the 158th ILO convention. 

Nevertheless, it would be a mistake to consider that this was the end of case law controversy regarding the Macron Scale.

First, complaints were lodged before the European Committee for Social Rights. In 2016, this committee considered that the indemnity cap for unlawful dismissals, put in place by the Finnish legislation regarding employment contracts, could lead to situations where the compensation granted did not cover the harm suffered by the employee. This was, therefore, considered to be in violation of Article 24 of the European Social Charter (European Committee of Social Rights, Finnish Society of Social rights v/ Finland, claim No 106/2014).

Second, the Cour de Cassation’s opinion is not binding for judges, who may still, in theory, reject the applicability of the scale on the grounds of its non-compliance with international treaties and conventions.

Latitude left to judges

Some labour courts, including the Labour  Court of Grenoble, have decided not to follow the opinion handed down by the Cour de Cassation, as early as 22 July 2019. In a decision where the Court made reference to the Cour de Cassation’s opinion, the Labour Court stated that Article 24 of the European Social Charter was not applicable to internal matters in disputes between individuals. However, considering the seniority of the employee (almost 12 years); her age (55 at the time of her dismissal); her salary; her position; her known wish to move up the hierarchy (which was barred) and the loss of opportunity to benefit from an end-of-career allowance, in addition to the circumstances of the dismissal itself; the Court decided that such harm exceeded the scale compensation.

It is noticeable that, in this case, the scale provided for 11 months of salary compensation. The Labour Court of Grenoble dismissed this in order to allow for ‘an adequate compensation of the employee’s harm, in accordance with the provisions of Article 10 of the 158th ILO Convention’. The Court awarded €35,000 of damages, which represented 16.7 months of salary, an increase of 45 per cent in comparison to the amount provided by the scale.

In this context, the Court of Appeal rulings were awaited.

The Paris Court of Appeal discretely began proceedings and caused a new breach of the legal provisions in its decision, issued 18 September 2019.

After stating the compliance of the scale with European and international law, the Paris Court of Appeal admitted the possibility for the judge to dismiss the scale in order to award 'an adequate compensation or any other form of appropriate redress'.

In a ruling delivered on September 25 2019, the Reims Court of Appeal provided some crucial clarification.

Considering that Article 24 of the European Social Charter, as well as Article 10 of the 158th ILO Convention, directly impacted disputes between individuals, the Court noted that an ‘appropriate compensation’ could not be symbolic. Instead, it started that it must be in connection with the harm suffered by the employee and therefore must remain ‘sufficient in order to have a deterrent effect’.

The Court noticed that Article L 1235-3 of the French Labour Code allowed for a modulation of the compensation in consideration of the employee's seniority, taking into account the employee’s personal situation, while other alternatives existed in the event of a null and void dismissal. According to the Court, compliance with Article L 1235-3 was therefore unquestionable.

Similar to the Paris Court of Appeal, the Reims Court of Appeal decided that compliance with international and European law does not exonerate the judge from assessing whether or not applying the scale causes a disproportionate infringement of the employee’s rights by causing him to bear excessive costs (eg, the cost of judicial proceedings) in relation to the result sought.

The Reims Court of Appeal considered that the judge could therefore dismiss the scale. Nevertheless, according to the Court of Appeal this in concreto analysis must be requested by the employee; the judge cannot initiate it. In the aforementioned case at hand, the employee had only required a general in abstracto assessment from the Court. Therefore, the Court followed the scale.

Several trade unions were party to the case before the Paris Court of Appeal, for which a decision was issued on 30 October 2019 (CGT/CGT/FO, CFDT, etc). The Court considered that they were admitted to the Court proceedings alongside the employee for the defence of the collective interests that they represent. However, the action of the French Union of Lawyers was not admitted on the grounds that the decision would not have consequences for its members.

In this case, the employee and the unions claimed an infringement of:

• Articles 6 and 13 of the ECHR (the right to a fair trial and an effective recourse);
• Article 24 of the European Social Charter (the right to legal protection in the event of a dismissal);
• Articles 20, 21 and 30 of the Fundamental Rights European Union Charter (equal treatment, non-discrimination, protection against unlawful dismissal); and
• Articles 4, 9 and 10 of the 158th ILO convention (cause for dismissal).

The Paris Court of Appeal considered that the European Social Charter is not directly applicable to disputes between individuals and confirmed the compliance of the Macron scale with other international treaties. Indeed, it considered that the provision of a scale was not, in itself, a violation of such international legislation, since the maximum and minimum amounts provided by it left the judge with enough latitude.

The Court did a brief in concreto analysis and observed that the employee was aged 45, with 16 years of seniority at the time of his dismissal, received 15 months of unemployment allocations and benefited from a paid training course. Consequently, the Court granted him an indemnity amounting to 13 months of gross salary, while the cap was set by the scale at 13.5 months of salary.

The Court ruled that the scale offered ‘an adequate compensation of the harm resulting from the unlawful dismissal’. Had it not been the case, the Court may have dismissed the scale in the case at hand.

In spite of case law, a clear standpoint is becoming apparent in favour of the compliance of the scale with international law, coupled with the judges’ ability to dismiss it on a case-by-case basis.

It will be up to employees to bring evidence that the scale does not allow for adequate compensation of their harm. In consideration of the aforementioned decisions, the seniority, age, level of salary, job position, loss of opportunity to enjoy an end of career allowance, the circumstances of the dismissal and the former employee’s personal situation will all be taken into account by the judge.

Overall, one might consider whether the scale is not going to become purely indicative. In light of the Grenoble Labour Court’s decision, pessimists might wonder how much time it will take before we go back to the level of compensation granted prior to the Macron Ordinances.

If case law is to continue along this path, the aim of securing litigation and allowing foreseeable compensation, as set forth by the government, will be left unachieved.

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