A Grading Scale to Help Facilitate Post-Termination Settlements

by Dechert LLP
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A new lump-sum grading scale has been introduced, by Decree n° 2013-721 of August 2, 2013, to help facilitate post-termination settlements at the conciliation hearing stage. The scale may also prove useful for out of court settlements, as well as amicable terminations. (Pour lire la version française, cliquez ici).

Under French law, a conciliation hearing must take place in all litigations brought before employment tribunals dealing with employment contracts’ terminations (article L. 1411-1 of the French Labor Code).

Law n° 2013-504 of June 14, 2013 on flexi-security introduced the concept of a pre-defined lump-sum, allowing the parties to put an end to their litigation at the conciliation hearing. The aim of this new measure is to increase the number – so far very low – of litigations ending through conciliation before the employment tribunals.

The decree of August 2, 2013, takes into account the provisions of the National Inter-Professional agreement of January 11, 2013, and sets the following lump-sum grading scale: 
 

 Employed for less than 2 years

 2 months salary

 Employed between 2 years and 8 years

 4 months salary

 Employed between 8 years and 15 years

 8 months salary

 Employed between 15 years and 25 years

 10 months salary

 Employed for more than 25 years

 14 months salary

 

If the decree will have an impact on conciliations before employment tribunals, it is most likely on amicable terminations and settlement agreements that a change will be observed following adoption of this new grading scale. Indeed, from now on, both employees and employers will be able to refer to it during their negotiations.

However, some uncertainties remain.

This indicative grading scale applies to employment contracts’ terminations but does not settle all claims which may be brought before employment tribunals. Yet, it has been observed that disputes on terminations often go along with additional claims, for instance, relating to working time.

Furthermore, the decree fails to specify the basis on which the lump-sum should be assessed. On this issue, we recommend following the rule applied to determine the minimum amount of damages in case of dismissal without real and serious cause, for employees with more than two years of service in companies with more than 10 employees, and therefore to refer to the employee’s last six months of salary.

Lastly, if the grading scale amounts are close to the amounts usually granted in case of amicable terminations, they will be slightly lower than sum granted in settlement agreements (which cover both the termination and the execution of the employment contract).

This grading scale hence constitutes a baseline. Its efficiency at conciliation hearing before the employment tribunals remains to be proven.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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