Dismissals in France: Supreme Court confirms validity of ceiling amount for unfair dismissal damages

Under French law, since 2017, the amount of unfair dismissal damages has been set on a minimum and maximum scale set by law. According to Article L. 1235-3 of the French Labour Code, if a dismissal is considered without a real and serious cause, judges can propose the reinstatement of the employee or order the employer to pay unfair dismissal damages.

Before 2017, the amount of unfair dismissal damages wasn’t capped. There was a minimum amount set by law, which was 6 months’ salary for employees dismissed after at least 2 years’ service and employed in a company with at least 11 employees. It was very difficult for employers to accurately know their litigation risk exposure. Depending on the local Labour Court practices, the benchmark of unfair dismissal damages based on similar cases could sometimes double or triple.

Apart from some possible nullity of dismissals, the application of the Macron scale is not subject to any exceptions. The French Supreme Court has confirmed the enforceability of one of the major legal provisions aimed at securing the risks associated to employment litigations in favour of all employers in France.

The introduction of the Macron scale

Employers were unsure that President Macron and his government addressed the situation by adopting Executive Order No. 2017-1387 of 22 September 2017 on the predictability and securitization of labour relations. It revised the terms of Article L. 1235-3 of the French Labour Code and set a maximum ceiling cap for all unfair dismissal damages (known as the Macron scale).

The Macron scale aims to facilitate settlement of disputes. The search for an amicable resolution is now framed within the limit set by Article L. 1235-3 of the French Labour Code. In other words, if an employer dismisses an employee without a real and serious cause, the company will know in advance the maximum litigation risk exposure with the maximum cap of unfair dismissal damages set by law.

This new regulation was very controversial and was subject to strong resistance from French Courts as it limits the power of appreciation by the judges. The scale is designed on the basis of the employee's length of service only, without regard to the individual’s personal situation, such as age, ability to find new employment, any personal difficulties (disability, being a single parent).

Two key cases

On 11 May 2022, the French Supreme Court (Cour de Cassation) put an end to the legal uncertainty around the Macron scale related to unfair dismissal damages. In two decisions, the Cour de Cassation decided that the Macron scale was compliant with Convention No. 158 of the International Labour Organization (ILO), confirming the position taken in its two opinions dated 17 July 2019.

In the first case of 11 May 2022 (RG n° 21-14.490), an employee with four years’ service who was dismissed for economic reasons was awarded EUR 32,000, nine months’ salary, as damages for unfair dismissal damages. The maximum amount as prescribed by law is five months’ salary. The Court of Appeal considered that the application of the Macron scale would result in awarding a sum of barely half of the loss suffered in terms of reduced financial resources. Therefore, the Court of Appeal concluded that the Macron scale did not allow adequate and appropriate compensation for the loss suffered by the employee given his particular situation, since he was 53 years old at the time of the termination. The Court of Appeal considered that the Macron scale was not compatible with the legal requirements set forth by Article 10 of ILO Convention No. 158. This provision provides for the payment of “adequate compensation or any other form of reparation considered appropriate” in the event of unjustified or unfair dismissal.

The Cour de Cassation rejected this argument and ruled that the judges from the Court of Appeal should have assessed the particular situation of the employee to determine the amount of damages due between the minimum and maximum amounts set by law and as determined by Article L. 1235-3 of the Labour Code.

In the second case of 11 May 2022 (RG n° 21-15.247), an employee with 37 years’ service who was dismissed for economic reasons challenged the amount of EUR48,000 awarded to her as damages for unfair dismissal corresponding to the maximum of the Macron scale (ie 20 months’ salary). In this case, the plaintiff believed that Article L. 1235-3 of the French Labour Code was contrary to Article 24 of the European Social Charter. This provision states that “with a view to ensuring the effective exercise of the right to protection in the event of dismissal, the parties undertake to recognize (...) the right of workers dismissed without just cause to adequate compensation or other appropriate remedy.”

The Cour de Cassation had therefore to decide on the question of the direct effect of Article 24 of the European Social Charter in a domestic French law. Without surprise, the French Supreme Court rejected this direct effect, considering that this provision could not lead to the exclusion of the application of the provisions of Article L. 1235-3 of the French Labour Code. The French Supreme Court confirmed that it was appropriate to allocate to the employee an indemnity fixed at a sum between the minimum and maximum amounts determined by the French Labour Code.

The Cour de Cassation emphasized the fact that “the European Social Charter is based on a programmatic logic: it requires Member States to translate into their national legislation the objectives set for them” and that “the supervision of compliance with this Charter is entrusted to the European Committee of Social Rights (ECSR) alone.” Consequently, “although complaints may be brought before this body, its referral is not jurisdictional: the decisions it takes are not binding under French law.”

With regard to the compliance with ILO Convention No. 158, in both cases, the Cour de Cassation was asked to determine whether French law provides “appropriate” compensation for the unfair dismissal of employees and more specifically whether the Macron scale meets this target.

To justify its answer, the French Supreme Court said that the scale does not apply in the event of nullity of the dismissal because of:

• the violation of a fundamental freedom right
• acts of moral or sexual harassment or discriminatory dismissal
• dismissal following legal action in matters of professional equality between women and men or the reporting of crimes and offences
• dismissal of a protected employee because of the exercise of their mandate
• the dismissal of an employee in disregard of the protections relating to pregnancy and maternity, paternity leave, adoption leave, parental leave and periods of suspension due to an industrial accident or occupational disease

The French Supreme Court also underlined that the judge can order the reimbursement by the employer to the French unemployment Agency (Pôle Emploi) of all or part of the unemployment benefits paid to the dismissed employees, from the day of their dismissal to the day of the judgment, within the limit of six months’ unemployment benefits per employee.

Consequently, “in view of the margin of appreciation left to the Member States and of all the sanctions provided for by French law in the event of ‘unfair dismissal,’ the Cour de Cassation considers that the Macron scale is compatible with Article 10 of ILO Convention No. 158.”