In France, an employer and an employee can terminate the employment contract by mutual agreement ("rupture conventionnelle"), subject to the compliance with strict rules as regards the formal process to be followed: at least one prior meeting between the parties to discuss the termination, a 15-day retraction period during which both parties can decide finally not to enter into the agreement, the agreement being subject to authorisation by the French Labour Administration of the mutual termination and a specific indemnity to be paid to the employee.

After a mutual termination agreement has been executed, none of the parties can challenge the ground for termination of the employment contract (as opposed to an ordinary dismissal where the employee can dispute this termination before an Employment Tribunal). However, a mutual termination agreement will not prevent the employee from claiming any amounts that he or she would have been entitled to under his/her contract before it was terminated.

Cass. soc. 25 March 2015, n°13-23.368

Following the signing of a mutual termination agreement, a settlement agreement cannot be entered into in order to prevent the employee from challenging the termination of his/her contract.

The Supreme Court (Cour de Cassation) confirmed a prior decision dated 26 March 2014, ruling that an employer and its employee or former employee cannot enter a settlement agreement which prevents either party challenging any mutual termination agreement that they have previously signed.

Indeed, where the employer and employee have previously signed a mutual termination agreement, the Supreme Court allows the parties to enter into a settlement agreement, only in order to prevent any litigation that would relate to the execution of the employment agreement (e.g. overtime hours claims, bonuses claims, etc.), and not to its termination.

Consequently, when both the employer and the employee envisage entering into a mutual termination agreement, which may be followed by a settlement agreement in order to protect the parties' positions on termination, they will need to go through a traditional dismissal or resignation procedure and then protect and confirm their positions in relation to the termination through a settlement agreement.

Cass. soc. 30 September 2014 n° 13-16.297

A mutual termination agreement can be entered into with an employee who is under specific protection due to a workplace accident or illness resulting from their working environment. Although the Labour Administration had previously forbidden employers and employees to enter into a mutual termination when the employee was on sick leave due to a workplace accident or illness caused by their working environment, the Supreme Court ruled that such a termination is permitted.

The Supreme Court's decision is based on the fact that the mutual termination agreement procedure offers sufficient guarantees to the employee (one prior meeting at least with the employer to discuss the modalities of termination and 15 days as reflection time, with the possibility for the employee to seek advice) in order to allow him/her to freely enter into a negotiated termination of his/her employment.

Cass. soc. 25 March 2015, n°14-10.149

A mutual termination agreement can be entered into with an employee on maternity leave. French legislation forbids the termination of an employee's contract when she is on maternity leave and also during the 4 weeks following her return to work. Because of this prohibition, the French Labour Administration previously  considered that the employee's termination, even by means of a mutual termination agreement, was strictly forbidden during an employee's maternity leave and during the period of 4 weeks following her return at work as employees benefit from a specific protection against dismissal during this period.

For the same reasons as set out in its decision dated 30 September 2014 (as summarised above), the Supreme Court decided that a mutual termination can be signed with an employee on maternity leave and during the extra protection period of 4 weeks following her return at work.

Cass. soc. 3 March 2015, n°13.20-549

A mutual termination agreement can be entered into further to a previous dismissal. In this case, an employer had dismissed an employee and had agreed to release him from his work obligations during a 3-month notice period (although he remained an employee during his notice period). One month after notice of termination of employment had been given, both parties had entered into a mutual termination agreement. The employee had then brought an action before the Employment Tribunal in order to have the agreement nullified, arguing that such agreement could not be entered into after his dismissal.

The Supreme Court ruled that when an employment agreement is terminated through one party exercising his or its right to unilaterally terminate the agreement, the further signature of a mutual termination agreement revokes the initial termination.

Consequently, both the employer and the employee can enter into a mutual termination agreement after a prior dismissal or notice of termination or resignation has been given. The prior termination of the employment agreement will, in these circumstances, thus not be enforceable.

It should be pointed out that this Supreme Court decision was given in a case where the employment agreement had not ceased, as the employee remained under notice at the point at which the parties entered into the mutual termination agreement. Therefore, it is not clear whether the Supreme Court decision would be the same if the mutual termination had been entered into after the unequivocal termination of the employment agreement (i.e. after the end of the notice period, or if the employment agreement had been terminated for gross misconduct where no notice period would be required).

Further clarification will be needed from the Supreme Court in relation to this ruling.

Recent Supreme Court decisions on non-compete provisions

Cass. soc. 11 March 2015, n°13-22.257

The employer can waive the employee's non-compete commitment during the course of the employment agreement, under certain conditions.

The Supreme Court has confirmed its previous decisions, ruling that an employer can unilaterally waive an employee's contractual non-compete commitment during the course of the employment, provided that such waiver is allowed by the contractual non-compete clause (if any) of any relevant collective bargaining agreement.

It should be noted that under French law, non-compete clauses have to have consideration (i.e. employees must receive financial compensation in exchange for the clause, in order for it to be valid). Therefore, judges consider that the provision of a non-compete clause (which has attached or allocated value) in the employee's contract constitutes a benefit for him/her and that the employer cannot waive this benefit unilaterally.

This is why the option for an employer to unilaterally waive an employee's non-compete clause during the course of employment has to be expressly provided for in the employee's contract or in the applicable collective bargaining agreement, and the procedure for waiving the provision has to be strictly followed by the employer otherwise the waiver will not be enforceable.

The consideration for a non-compete clause cannot vary depending on the modalities of the employment termination.

Cass. soc. 9 April 2015, n°13-25.847

The Supreme Court has confirmed its position regarding the amount of the consideration for the non-compete provision; the amount cannot vary depending on the circumstances and the nature of termination of employment.

This means that any provision in the employee's agreement that provides for a different amount of consideration according to the nature of the termination would not be enforceable. In such a case, the non-compete clause would remain valid but the employee would be entitled to obtain the highest amount of the various consideration amounts, whatever the circumstances of the termination.