Economic dismissal, whether individual or collective, is governed by strict procedures that vary depending on the size of the company and the number of layoffs being considered. This article outlines the steps and legal obligations involved in implementing an economic dismissal within a company.

Economic dismissal is defined by Article L. 1233-3 of the French Labor Code as a dismissal carried out by an employer for one or more reasons unrelated to the employee’s personal situation, resulting from the elimination or transformation of a job or a modification (refused by the employee) of an essential element of the employment contract, particularly due to:

  • Economic difficulties,
  • Technological changes,
  • A company reorganization necessary to maintain competitiveness, or
  • The cessation of the company’s activity.

Individual Economic Dismissal

When an employer intends to carry out an individual economic dismissal, they must follow these steps: • Invitation to a pre-dismissal interview by registered letter with acknowledgment of receipt or hand-delivered against a receipt. • Pre-dismissal interview where the employer explains the economic reasons for the dismissal and listens to the employee’s explanations. • Notification of the dismissal by registered letter with acknowledgment of receipt, specifying the economic reasons for the dismissal that were previously communicated to the employee.

Collective Economic Dismissal

The procedure for collective economic dismissal varies depending on the number of affected employees and the size of the company.

For companies with fewer than 50 employees, the procedure is as follows:

• Consultation with employee representatives, if applicable.

• Information provided to the Dreets.

• Individual notification of dismissals to affected employees.

For companies with 50 or more employees, the procedure is more complex and includes:

• Consultation with the Social and Economic Committee (CSE) on the collective dismissal plan.

• Creation of an Employment Protection Plan (PSE) if the dismissal affects at least 10 employees within a 30-day period.

• Information and consultation with employee representatives on the plan. • Information to the Direccte.

• Individual notification of dismissals to affected employees.

Consultation with the CSE on the collective dismissal plan is mandatory before any decision in companies with employee representatives. The CSE must provide its opinion within 30 days of being consulted.

The creation of an Employment Protection Plan (PSE) is mandatory for companies with 50 or more employees when planning to carry out an economic dismissal affecting at least 10 employees within a 30-day period (Labor Code, Article L. 1233-61), and also when:

• The company or establishment has made economic dismissals affecting more than 10 employees in total over a 3-month period, without reaching 10 dismissals within a 30-day period, for any new economic dismissal planned within the next 3 months (Labor Code, Article L. 1233-26);

• The company or establishment has carried out more than 18 economic dismissals in a calendar year, for any new economic dismissal planned within the 3 months following the end of that year (Labor Code, Article L. 1233-27);

• The company, under judicial recovery or liquidation, is subject to a transfer plan: the Commercial Code allows for the possibility of dismissing part of the workforce to facilitate the takeover (Commercial Code, Article L. 642-5), and the dismissal is then deemed economic.

The PSE includes all the measures decided by the company to avoid or limit economic dismissals and facilitate the redeployment of dismissed employees. It details, in a clear, concrete, and relevant manner, the measures the employer intends to take: redeployment (internal or external), actions to help the resumption of part or all activities to avoid closure of one or more establishments, training actions, assistance in starting or taking over an activity, and measures to reduce working hours. These measures must respect the principle of equality among employees.

The content of the PSE can be established in two ways. The first involves negotiating a majority agreement with the representative unions. If this is not possible, the employer will create the PSE unilaterally (a unilateral document). Once adopted, the PSE commits the employer to the measures they have proposed.

The following measures must be included:

• Measures to avoid or limit the number of dismissals,

• Measures to facilitate the redeployment of employees whose dismissal cannot be avoided,

• Measures to avoid the closure of one or more establishments, for example, by transferring one or more economic entities.

Furthermore, the Professional Security Contract (CSP) must be offered in companies with fewer than 1,000 employees and in all companies under judicial recovery or liquidation. This scheme is designed to organize and carry out a return-to-work process. This may involve retraining, starting, or taking over a business.

CSP beneficiaries are employees with at least one year of seniority (though shorter seniority can be considered) and who are not eligible for full retirement. The CSP must be proposed individually to each affected employee. To do this, the employer must request a CSP file from France Travail, stating the number of layoffs being considered. The document is given to the employee during the pre-dismissal interview.

When the procedure is collective, the document is provided at the last meeting of employee representative consultations.

The employee has 21 days to respond to the CSP proposal. If no response is received within this time, the proposal is considered rejected. If the employee agrees to the CSP, their employment contract is terminated at the end of the 21-day period. The employer must then pay all severance pay, excluding the notice period. The dismissed employee then becomes a training course participant. Acceptance of the CSP does not waive the right to contest the dismissal within 12 months.

Acceptance of the CSP by the employee has consequences for the employment contract. Specifically, at the end of the 21-day reflection period, the contract is terminated, and the employee is not required to serve a notice period. However, the employer must still notify the employee in writing of the economic reason for the contract termination. Once the employee has accepted the CSP, the employer must inform France Travail.

Protected employees receive special protection in case of economic dismissal. Their dismissal requires the approval of the CSE and authorization from the labor inspector. In the event of liquidation, the administration must take into account any external mandates held by the protected employee.

In the event of liquidation, protected employees are entitled to the AGS (Association for the Management of Employee Claims Guarantee Scheme) covering their severance pay. This guarantee applies as soon as the employer, administrator, or liquidator expresses an intention to terminate the contract, even if the dismissal has not been officially notified due to lack of labor inspector authorization.

The dismissal must be notified by registered letter with acknowledgment of receipt. The date of the first presentation of this letter marks the start of the notice period, after which the employment contract is definitively terminated.

It is highly recommended to consult a labor law attorney to ensure compliance with legal procedures and to protect the rights of both employees and employers. A labor law attorney will provide valuable advice and legal assistance throughout the economic dismissal process.

Indeed, the implementation of an economic dismissal, whether individual or collective, requires strict adherence to procedures and support from a labor law attorney. Failure to comply with these procedures can lead to penalties for the employer and additional rights for the dismissed employees.

The law firm LBV AVOCATS is available to assist you in your efforts.