What is Economic Dismissal?

Redundancy is the termination of an employment contract of indefinite duration by an employer. Unlike traditional dismissal, this type of dismissal is not the fault of the employee. Whether individual or collective, the implementation of economic redundancy must follow a strict procedure with the aim of preserving jobs as much as possible. Before thinking about this step, it is necessary to have a precise idea of ​​redundancy and to really understand the subject.

Economic dismissal: what is it?

Economic dismissal is a dismissal that occurs for reasons that do not really concern the employee. It is generally due to the elimination or transformation of a job. This type of dismissal is also pronounced following a modification refused by the employee, of the change of an important element of the employment contract following economic difficulties.

This dismissal can also be caused by a reorganization of the company, technological changes, etc. Also, to be considered as economic dismissal, the dismissal of the employees or of the employee must meet the following conditions:

– the cause of the breach of contract must be recognized by case law or provided for by law, – the dismissal of the employee must not be related to his behavior and even less to his person, – the permanent termination of the employee must have a specific impact on employment (transformation, deletion, modification of the employment contract).

Once these three conditions are met, the employee has no choice but to face the facts and understand that he has just lost his job.

What are the grounds for economic dismissal?

There are many reasons that can lead to economic dismissal. However, there are some that are more common than others.

Financial difficulties

Article 1233-3 of the Labor Code in its first paragraph emphasizes the situations in which a company can be considered to be in financial difficulty. For the legislator, a structure can only dismiss its employees for economic reasons when it has:

– a fall in its orders, – a forfeiture of cash or a gross operating surplus, a drastic reduction in its turnover, – operating deficits.

However, you should know that this list established in 2016 is not restrictive. Indeed, companies can use other elements to prove that they are in financial difficulty. Those who have established a PSE, also called a job protection plan and have not succeeded in avoiding economic redundancy can use it to prove their good faith.

Also, according to case law, dismissal is subject to the obligation of a serious cause, but above all real. This implies that the difficulties must be tangible and serious enough to be considered as a cause of redundancy. In a court, the judge will rely on the criteria of durability and importance to assess the magnitude of the difficulties encountered by the company.

On the other hand, these difficulties do not have to be insurmountable. Other than that, the company can't fire you because it wants to increase profits or save money.

The reorganization of the company

Unlike economic difficulties, the reason for economic dismissal related to the reorganization of the company was created by the judges. However, it is only valid if it is carried out with the aim of preserving the competitiveness of the establishment.

Since the implementation of this operation involves risks, the company must be one step ahead of them in order to prevent or aggravate them. It is important to understand that the reorganization of a company is not necessarily linked to the fact that it is encountering economic difficulties.

The dismissal here makes it possible to prevent or not to aggravate a risk, a crisis which could arise in the future. On the other hand, the company must be able to prove that the risk it prevents is serious and real. The establishment must be threatened for a while.

Technological change

Technological change is also an excellent reason for economic redundancy. In practice, it brings together all the technological innovations, the modifications of techniques recommended for the interest of the company and the necessities of production which are capable of generating important consequences on the employment contract or in terms of employment. To put it simply, for you to be dismissed for economic reasons, the technological changes that the company wishes to make must be able to cause the transformation or elimination of employment, or the change of an important element of the employment contract.

At the level of the last point, it is when the employee refuses the new contract that he is dismissed. Also, there are other reasons that can be used to justify economic redundancy due to technological change.

Stopping or cessation of activity

We speak of cessation of activity when a company stops operating. Unlike the other grounds, this one has been established by case law. To accept the cessation of activity as a reason for economic redundancy, the judges will first check that the judgment is final (there is no risk that the company will resume service).

Next, they will ensure that the termination is for the entire company and not for a specific unit or department of the company. Finally, they will ensure that this stoppage is not the fault of the employer.

For economic dismissal to be valid, there must be a causal link between the various grounds listed above and their effects. It is also recommended to call on a lawyer specializing in labor law in the context of a redundancy procedure.

What is the procedure for redundancy?

The procedure to be followed for redundancy is subject to very strict rules. Compliance with the latter is essential, especially if you do not want the industrial tribunal to cancel your dismissal.

To begin with, you should know that the breach of contract for economic reasons depends strongly on the number of employees concerned or the workforce of the company depending on the case. In addition, keep in mind that for the liquidation or receivership of the company, the dismissal procedure has been arranged.

Employer's obligations

Before starting to lay off its employees, the employer must, according to article L1233-4 of the Labor Code, do its utmost to protect jobs as much as possible. To do this, you must:

– train your employees and adapt them to their workstation (this obligation is provided for in article L6321-1 of the Labor Code), – reclassify your employees. Here, you must make sure to return the employee to a position of the same category as the one he occupies or to an equivalent job accompanied by a similar salary. Failing this, and unless expressly agreed by the employee, the reclassification takes place on positions of a lower category. Also, before you get started you must provide written offers, but above all precise. Finally, you do not have the possibility of reclassifying employees who are outside the national territory, your company or your group.

Only in case of refusal of the employee or failure of all these options, you can implement the procedure of economic dismissal. On the other hand, for a collective dismissal, you must first consult the Social and Economic Committee on the conditions and the reasons for dismissal if you have at least 11 employees.

The determination of the order of dismissal

When you find that the dismissal is inevitable, you must define the criteria to determine the order of dismissal. The latter, which will allow you to select one employee over another, are mentioned in the collective agreement, the convention or by the employer himself after consulting the Social and Economic Committee [CSE].

According to articles L1233-5 and L1233-7 of the Labor Code, the criteria for dismissal, whether collective or individual dismissal, take into account:

– the employee's family responsibilities, mainly those of single parents, – the situation of employees who may have difficulties in their professional reintegration (elderly or disabled people), the employee's seniority, – the professional qualities of the employees.

You have an obligation as an employer to take into account all these criteria even if you can favor one and add others. In addition, the employee may hold you accountable for the criteria you used to establish the dismissal order.

The summons of the employee for the interview prior to dismissal

The company is required to send a summons to its employees for an interview before starting the dismissal. To ensure that all employees have received their summons, she must send a registered letter with acknowledgment of receipt. It can also opt for a shipment by hand against a discharge.

The interview must be scheduled for at least 5 working days after the invitation has been sent. Similarly, the employee must see in the letter the date, subject, time and place of the interview. He must also inform the employee that he has the possibility of being assisted by an outside adviser or a staff representative. The address of the department where the employee can find the list of counselors should also be on the letter.

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