Update on employee information, profit-sharing, and economic dismissals

Publication of the decree listing the information relating to the employment relationship that the employer is obliged to provide to the employee

Articles 19 and 20 of Law no. 2023-171 of 9 March 2023, transposing European Directive no. 2019-1152 of 20 June 2019, strengthened the employer's obligation to provide certain information regarding the employment relationship, while also creating a specific procedure enabling the employee to demand this information.

Decree no. 2023-1004 of 30 October 2023 specifies the nature of the information (in one or more documents) relating to the employment relationship that the employer must provide to the employee ((i) to all employees and (ii) to employees sent to work abroad) as well as the procedures for preparing and providing it.

From 1 November 2023, pursuant to article R. 1221-34 et seq. of the French Labour Code, the employer must provide the following information to all employees, in paper or electronic format, subject to the conditions set out in article R. 1221-39:

Article R. 1221-36 of the French Labor Code also sets out the information to be provided to employees usually working in France who are required to work abroad for more than 4 consecutive weeks.

Most of the above information is already included in employment contracts. However, it will be necessary to ensure that all documentation (employment contracts and others) complies with these provisions. A decree setting out model documents to facilitate the implementation of this new information obligation is expected and may prove useful.

An employee who has not received the above-mentioned information within the mandated timeframe may give formal notice to his employer to provide him with it or complete it. If the employer fails to provide the information in question within seven calendar days following the receipt of the formal notice, the employee may bring the matter before the industrial tribunal.

Exemptions from social security contributions on top-up amounts on mandatory and voluntary profit-sharing are subject to the conclusion of a specific agreement

In this decision (Cass. 2^e Civ., October 19, 2023, no. 21-10.221), a company, which had set up mandatory and voluntary profit-sharing schemes in accordance with legal provisions, through collective agreements signed in 2003 and 2012 respectively, had paid top-up amounts (“suppléments”) pursuant to his mandatory and voluntary profit-sharing schemes during the 2012, 2013 and 2014 financial years.

The payment of these top-up amounts had been decided as part of the mandatory annual negotiations (“NAO”), formalized in the negotiation agreements, all of which had been filed with the relevant authorities (the Direccte in this case).

However, as part of an audit covering the years 2012 to 2014, the social security administration (“URSSAF”) reassessed social contributions due on the top-up amounts, considering that the terms and conditions of payment of the top-up amounts should have been the subject of a specific agreement.

The company challenged this decision in court, arguing (i) that the provisions of the French Labor Code did not require the conclusion of a specific agreement when the top-up amounts did not follow distribution rules different from those of the initial agreements setting up mandatory/voluntary profit-sharing, and (ii) that in any event, the agreements in question had been filed in accordance with the conditions for the implementation of these schemes, set out in articles L. 3322-6 (for mandatory profit-sharing) and L. 3312-5 (for voluntary profit-sharing).

However, the Amiens Court of Appeal and then the French Supreme Court confirmed the URSSAF's position and the reassessment made. The solutions adopted by the courts are surprising, particularly in terms of voluntary profit-sharing, since if the methods for distributing the top-up amount did not differ from those set out in the initial voluntary profit-sharing agreement. Therefore, pursuant to a strict interpretation of the FLC, a unilateral decision deciding to pay the top-up amounts would have suffice: no specific agreement is necessary based on the administration's past position. (Guide de l'épargne salariale, July 2014, p. 42)

This decision calls for great caution from employers when it comes to deciding on topping-up the sums paid pursuant to mandatory and voluntary profit-sharing schemes.

Individual economic redundancies may precede the date of total cessation of activity

In this decision (Cass. Soc., Sept. 20, 2023, n°22-13.485), the French Supreme Court ruled for the first time that an employer can give notice of redundancy to his employees when the cessation of activity has begun, but is not yet definitive.

In this case, the Allergan group had sold its generic drug distribution and marketing business and certain other products to the Teva group through the sale of one of its French subsidiaries, TA. The dismantling of TA's portfolio led it to inform its employee representatives in September 2016 of its plan to cease operating the last 5 products remaining in its portfolio and transfer them to the Teva Group in the first half of 2017. This project included a collective redundancy plan (“PSE”), validated by the labor administration (“Dreets”), with the employees made redundant on the grounds of the complete and definitive cessation of the company's activity, set for March 31, 2017.

However, some employees contested their dismissal, arguing that the cessation of activity was not definitive due to the fact that:

• the business was partially continued by the Teva group, to which TA sold its remaining products and transferred some of its employees;
• the redundancies had been notified before the company ceased its operations definitively.

Firstly, the French Supreme Court points out that, in accordance with recent case law (Cass. Soc., April 6, 2022, no. 20-23.234), the fact that another company of the group has pursued an activity of the same nature does not prevent the cessation of activity from being regarded as total and definitive, since cessation of activity is assessed at company level and not at group level.

Secondly, the Court set out the principle whereby it is not necessary for the company's cessation of activity to be complete and definitive at the time the redundancies are notified: it is sufficient for the cessation to have been irrevocably underway at that date.

A pregnant employee must always be dismissed for a reason unrelated to her pregnancy, even if she accepts a securitization contract ("CSP")

Pursuant to article L. 1225-4 of the French Labor Code, no employer may terminate an employment contract if the employee is pregnant (medically certified as such), unless the employer can prove serious misconduct on the part of the employee, unrelated to her state of pregnancy, or the employer's inability to maintain the contract for a reason unrelated to the pregnancy. Failing this, the termination is null and void and may justify awarding damages to the employee.

In this decision (Cass. Soc., October 4, 2023, no. 21-21.059), a pregnant employee had signed up to the CSP proposed by her employer, with the employer informing her beforehand, as is customary, of the economic reason for proposing said contract. However, the employer failed to mention in the letter informing her of her dismissal of the impossibility to maintain her employment contract for a reason unrelated to her pregnancy.

The employee then claimed that the termination was null and void for lack of justification. The French Supreme Court agreed, pointing out that joining the CSP, even if it results in a termination deemed to be “by mutual agreement", remains a form of economic redundancy.

As a result, when an employee signs up to the CSP, the employer must still specify in the dismissal letter (i) the information set out in article L.1232-6 of the French Labor Code and (ii) in the case of a pregnant employee, the motive (s) specified in article L.1225-4 of the French Labor Code, failing which the termination will be null and void.

This decision reflects the French Supreme Court’s consistent approach regarding the economic dismissal of employees benefiting from special protection, since it had already ruled similarly on the dismissal of an employee suffering from an occupational disease who had signed up to the CSP (Cass. Soc., May 27, 2020, no. 18-20.142).

Authored by Alexandra Tuil and Cristina Sanchez Herran.