Limits to the challenge of the economic reason for the amicable termination under a PSE by the employee who signed the agreement

Cass. soc., 26 juin 2024, n°23-15.498

The voluntary redundancy scheme set up by the employer as part of an employment protection plan is an alternative to compulsory redundancies, offering employees the opportunity to leave the company voluntarily in exchange for financial benefits.

In a series of judgments handed down on 26 June 2002, the Labour Division of the French Supreme Court (Cour de Cassation) ruled on the extent to which employees who had signed a voluntary redundancy agreement and thus benefited from the voluntary redundancy scheme in accordance with the provisions of a job protection plan could challenge the economic reason for the redundancy.

In this case, a company, a subsidiary of a group, carries out research and development in the field of dermatology. In 2017, as part of a plan to reorganise the company to ensure its competitiveness, the group presented the works council with an information document on the proposed conversion/closure of the site. Subsequently, the company submitted to the DIRECCTE a unilateral document on the collective redundancy project, including a mixed PSE and a voluntary redundancy plan, which was approved on 11 April 2018. Between August and September 2018, the company’s non-managerial employees signed an amicable termination agreement for economic reasons.

Challenging the economic reasons for the termination, the employees who signed the agreement filed a lawsuit with the Labour Court seeking compensation for various losses.

In a judgment delivered on 10 March 2023, the Court of Appeal of Aix-en-Provence ruled that the employees had the right to challenge the economic reason for the dismissal and ordered the employer to pay each of the employees damages for dismissal without real and serious cause. The lower courts held that since the agreement to terminate the employment relationship by mutual consent fell within the scope of the provisions applicable to dismissals for economic reasons, the employer had to prove the existence of a legitimate economic reason, with the result that the employees were entitled to challenge the economic reason for the dismissal.

The employer appealed to the French Supreme Court. It complained that the judgment had allowed the employees to challenge the amicable termination agreement and the reason for the termination of the employment contract and ordered the employer to pay them damages for dismissal without real and serious cause. It argued that where the termination of an employment contract for economic reasons is the result of an amicable termination agreement in accordance with the provisions of a collective agreement or a PSE submitted to the staff representatives, the economic reason for the termination cannot be challenged, except in the case of fraud or lack of consent.

The question put to the Cour de cassation was therefore whether employees who had signed an amicable termination agreement in accordance with the provisions of a PSE could challenge the economic reason for the dismissal.

In its judgment of 26 June 2024, based on articles 1101 and 1103 of the Civil Code, relating to the binding nature of contracts, and articles 1221-1 and 1221-3 of the Labour Code, relating to economic reasons, the Social Division of the Court of Cassation overturned the judgment of the Court of Appeal of Aix-en-Provence. The High Court judges stated that the termination of a contract by mutual consent as a result of a voluntary redundancy plan in the context of the implementation of an SPE submitted to the staff representatives cannot be challenged, except in the case of fraud or lack of consent. This solution is in line with the established case law of the Court of Cassation on the termination of contracts and voluntary redundancy plans (Cass. soc., 8 February 2012, no. 10-27.176; Cass. soc., 17 December 2014, no. 13-19.623).

On the same day, the Social Chamber also ruled that the judge is not competent to assess the economic reason and the amicable dismissal of staff representatives authorised by the Labour Inspectorate (Cass. Soc., 26 June 2024, no. 23-15.533), thus reaffirming the principle of the separation of powers.