All questions

Year in review

During the past 18 months, labour law disputes have been strongly affected by the continued efforts of the legislator to reduce the number of disputes coming before the labour courts.

First, the Macron Scale has introduced a ceiling for the amount of damages awarded by judges in the event of dismissals devoid of actual and serious cause. Article 2 of Ordinance No. 2017-1387 dated 22 September 2017 has significantly amended the wording of Article L.1235-3 of the Labour Code. This text provides that the judge, when a dismissal has no actual and serious cause, may propose (but not impose) reinstatement of the employee concerned. However, the new wording of the Article adds: 'If either of the parties refuses this reinstatement, the judge grants the employee damages paid by the employer the amount of which ranges between the minimum and maximum amounts set in the tables here below.'

The first of these two tables applies to employees dismissed by a company that normally has 11 or more employees. It provides for minimum and maximum damages payments that vary according to the employee's length of service. The maximum amount ranges from two months' salary for an employee with one year of service to 20 months' salary for an employee who has been with the same company for more than 30 years. The minimum amount ranges from one month's salary to three months' salary. The second table applies to all other companies. The maximum amount is capped at 2.5 months' salary after 10 years of service.

In comparison with the law that applied previously, this double limitation constitutes a major change. Formerly, an employee with more than two years of service at a company with 11 or more employees automatically received a minimum indemnity equivalent to the salary paid during the previous six months; there was no maximum amount. In all other cases, the employee received compensation for proven damage and there was no maximum amount.

Over the years, the old system has increasingly been subject to criticism. In particular, the old legislation was criticised for fostering unpredictability in labour and employment disputes. Since there was no maximum level of compensation, each labour court and, more importantly, each court of appeal could freely determine the amount of damages granted to an employee dismissed without any actual or serious cause, and in a completely different way from the labour court or another court of appeal. In addition, there were objections to the payment of six-month minimum damages as a lump sum, as could happen in certain cases. In fact, some critics said these damages payments could be disproportionate to the amount of harm suffered, especially if the employee found work immediately after being dismissed without any actual or serious basis and, as a result, suffered no economic loss.

The former legislation (unchanged since 1973) was also said to be at fault for having generated a veritable explosion of labour court disputes. Ministry of Justice statistics show 200,000 new cases coming before the labour courts each year. Worse still, the appeal rate (around 60 per cent) had destabilised the functioning of the courts, some of which were no longer able to judge cases within a reasonable amount of time, in line with France's international commitments. In this context, the current government, appointed by President Emmanuel Macron after his election, modified Article L.1235-3 of the Labour Code, which is why the progressive limitation of the damages granted by judges to employees is commonly referred to as the Macron Scale.

The capping of damages applies to all disputes relating to dismissals notified after the Ordinance that created it entered into force, which is 23 September 2017 in Paris and the day after that in all other French regions. As a result, the vast majority of labour court cases that arose during 2018 further to a dismissal are affected by the limitations of the Macron Scale. However, these limitations only affect dismissals found to be without actual or serious cause. There is no ceiling for damages granted when the dismissal is void because of the violation of a fundamental freedom, an act of moral or sexual harassment, when the dismissal is deemed discriminatory or when it follows to legal action. In the same way, no limitation can affect compensation for the harm suffered as the result of an infringement of professional equality between men and women, the denunciation of a crime or offence, the exercise of a mandate by a protected employee or protection allowed to certain employees. In these latter cases, compensation for the harm suffered must be full.

The Macron Scale has also been heavily criticised. Even before the enactment of Ordinance No. 2017-1387, the employee and employer members of the labour courts expressed their concern at what they considered a genuine interference by the legislator in the traditionally consensual operation of the labour courts, whose impartiality and objectivity, they say, are necessarily guaranteed by the composition of the court being based on an equal representation of judges. They pointed out that this equality created balance and had resulted, since 1973 and contrary to what could have been said, in the homogenisation of the awarded damages from one labour court to another and even from one court of appeal to another.

As per President Macron's commitment, once the Ordinances were ratified by Parliament, the law of ratification was referred to the Constitutional Court. (Note that this Court – the highest constitutional authority in France – can be seised by the President, members of Parliament or senators after the passing of a law but before its enactment.) Parts of the text found to be inconsistent with the Constitution were deleted and only those that were declared compliant or were not challenged were published in the Official Journal and acquired the force of law.

In their referral, members of Parliament raised three questions. First, they said the capping of damages would be contrary to the constitutional principles of the 'guarantee of rights' according to which, in their view, the low ceilings of compensation provided would be insufficiently dissuasive and would thus allow the scope for an employer to wrongly dismiss an employee. Second, the limitation would also be contrary to the principle of full compensation for the damage suffered. Finally, according to members of Parliament, by limiting the indemnity solely on the basis of length of service, the legislator would disregard the principle of equality before the law.

In its Ruling No. 2018-761 of 21 March 2018 (published in the Official Journal dated 31 March 2018), the Constitutional Court dismissed these grievances. First, the Court considered that, for reasons of general interest, the legislator may adjust the conditions under which liability may be incurred and thereby, for such a reason, make exclusions or limitations to the right to damages, provided that it does not result in disproportionate harm to the victim of a wrongful act.

By setting a mandatory reference for the damages awarded by the judge in the event of dismissal without actual and serious cause, the legislator, according to the Constitutional Court, intended to reinforce the foreseeability of the consequences attached to the termination of an employment contract and thus pursued an objective of general interest.

Moreover, the derogation from the liability under common law resulting from the maximum amounts provided for does not constitute a disproportionate restriction of the general interest objective pursued. Indeed, on the one hand, these amounts were determined in line with the preparatory work, depending on the average compensation granted by the courts and, on the other hand, certain types of dismissals are not subject to any limitation (void dismissal, violation of a fundamental freedom, harassment, etc.).

As regards equality, this has not been breached. In fact, the legislator may, without disregarding the principle of equality, adjust the maximum compensation due to an employee when he or she retains, for this adjustment, the criteria relating to the harm suffered. This is precisely the case for the criterion of length of service with the company. In addition, the legislator was not required to set a scale taking into account all the criteria that determine the harm suffered by a dismissed employee, as the principle of equality does not require the legislator to treat persons in different situations any differently.

Compliance with the Constitution was therefore unambiguously upheld by the Constitutional Court. On this point, the debate is definitively closed. It is therefore no longer possible to argue before a labour court, a court of appeal, or even the Supreme Court, that capping resulting from the Macron Scale is unconstitutional.

This explains why opponents of the Macron Scale have raised their grievance on another ground, that of compliance of the revised Article L.1235-3 of the Labour Code with the international conventions that bind France. The Constitutional Court has no jurisdiction on the control of this compliance. The judicial and, more rarely, the administrative courts will be competent to exercise the control of compliance.

On this subject, the Labour Court of Troyes rendered a first decision on 13 December 2018, which has caused a sensation. The Constitutional Court considered that it was necessary not to apply the Macron Scale, which would be contrary to Article 10 of Convention No. 158 of the International Labour Organization (ILO) and Article 24 of the European Social Charter, all these texts having been signed and ratified by France. A second decision, rendered on 19 December 2018 by the Labour Court of Amiens under Article 10 of ILO Convention 158, is along the same lines.

It should be recalled that the aforementioned Article 10 provides that where a judge is led to the conclusion that a dismissal is wrongful, he or she must be entitled, in the absence of reinstatement or nullification of the dismissal, to award an employee adequate damages or any other form of compensation considered appropriate. By the mere fact that it is capped by the Macron Scale, the compensation would no longer be adequate or appropriate. Consequently, the labour courts of Troyes and Amiens have granted employees a greater amount of compensation than that afforded by the Scale, to provide the employee, from the courts' point of view, with appropriate damages for the harm suffered in the cases at bar.

Article 24 of the European Social Charter states, more simply, that 'all workers are entitled to protection in case of dismissal'. For the Labour Court of Troyes, which explicitly referred to this text in its decision, the Macron Scale would again deprive the dismissed employee of protection.

Another legislative amendment may have consequences for labour disputes, since it should decrease the number of new cases. The period of limitation for challenging the termination of an employment contract has been reduced to one year from the date when the notification of termination is issued.

Reducing the limitation period, which is specific to the termination of employment contracts, has been a long process. The first reform of civil limitation periods took place on 17 June 2008. Previously, the limitation period applicable to challenging the termination of an employment contract was 30 years (under the rules of common law), reduced to only 10 years against a merchant employer. The Act of 17 June 2008, which applied not only to employment contracts but more generally to all private law limitation periods, lowered this period to five years.

Subsequently, a new Act of 14 June 2013, specific to labour law, reduced the limitation period for bringing a legal action concerning the implementation or termination of employment contracts from five years to just two years. Finally, and only for employment contract termination cases, the Ordinance of 22 September 2017 (the same as that which instituted the Macron Scale) reduced the limitation period from two years to only one year.

The starting point of the limitation period was set as the day on which the employment contract termination is notified. It is no longer necessary to mention the existence of this one-year period in the document that notifies a termination of employment contract (except in the case of a termination relating to a 'professional employment safeguard contract' in the context of a redundancy, when reference must be made to the one-year limitation period in the proposal sent to the employee).

Outlook and conclusions

The question that should be raised at the beginning of 2019 is that of the effectiveness of the measures taken by the legislator with regard to labour law disputes.

First, the fall in the number of incoming cases occurred well before the Macron Scale was implemented and even before the reforms to the labour law procedure that took effect on 1 September 2016. The peak was reached in 2009 when the number of new cases rose to the unparalleled level of 228,578 cases. The number has fallen steadily since: to 184,343 cases in 2015, 149,806 in 2016 and, as already stated, 126,693 in 2017. It is clear that the reform only accompanied an underlying trend that was already pessimistic and certainly did not trigger the decline or even accelerate it.

On the other hand, it is certain that the nature of the cases of which the French labour courts will be seised in the future will evolve. Litigation that is currently overwhelmingly made up of disputes on individual dismissals, will gradually occupy the territory of discrimination in all its forms. Indeed, one should note that when it is discriminatory, a dismissal is void and when deemed void, a dismissal entitles the claimant to compensation without limit.

However, this type of case is much more burdensome than cases based solely on challenging the actual and serious cause. In itself, despite the benefits to the employee in terms of burden of proof when the discrimination falls within the scope of a legal prohibition, the discrimination must be carefully alleged, and the elements that make it likely and presume its existence, must be collected carefully. Conversely, an employer must be very specific when challenging allegations made by an employee without being able to take shelter behind its power of control.

In this respect, litigants could make judicious use of the new powers of investigation and guidance now granted to the conciliation and orientation boards. Likewise, they will have to ensure, in a precise written and legally founded argument, the development of all the legal means necessary to convince the judge. In a nutshell, the work done by their lawyers will become more and more important.