Securing your contractual termination
While the procedure for the contractual termination of employment, initially provided for by law, was intended to be simple and rapid, in order to spare the parties the formalities of dismissal, the judge has added a number of obligations for the employer, thereby increasing the risk of litigation. We must therefore be extremely vigilant, and include new stages in what could become a procedure almost as complex and risky as dismissal.
After discussions between the parties, the parties sign a Cerfa form setting out the terms and conditions of the contractual termination (end date, withdrawal period, amount of specific severance pay), which is then submitted for administrative approval. The procedure, initially laid down by law, was intended to be simple and rapid, so as to spare the parties the formalities of dismissal in terms of both form and content.
Nevertheless, the contractual termination of employment must guarantee freedom of consent, and cannot be imposed by either party. For this reason, in a number of recent rulings, the Social Division of the Cour de cassation has added to its case law on the employee’s right to withdraw from the agreement. It has also reiterated that the settlement indemnity paid following a contractual termination must compensate for a loss in order to be exempt from social security contributions.
Right of withdrawal
Previously, the French Labor Code provided that the contractual termination agreement had to be signed by both parties and sent, at the end of the withdrawal period, by the most diligent party to the administrative authority for approval (C.trav. L. 1237-11 and L. 1237-14). There was therefore no requirement for the employer to formally hand over a copy of the form to the employee.
It was case law that imposed a certain number of obligations on the employer.
Having previously required the employer to provide the employee with a copy of the termination agreement, signed by both parties, failing which the agreement would be null and void, the High Court now requires the employer to be in a position to prove that the employee has indeed been provided with the copy of the termination agreement to which they are entitled, since delivery cannot be presumed from a reading of the article in the French Labor Code. The judge is concerned that the agreement should be approved by both parties, and not just by the employer, and that each of them should be able to exercise their right of retraction in full knowledge of the facts.
The Cour de cassation goes even further in its reasoning, placing the burden of proof solely on the employer. It is now up to the employer to prove that the employee has received a copy of the contract (Cass soc., September 23, 2020, n°18-25.770). Indeed, only the delivery of a copy of the agreement to the employee, signed by both parties, enables them to request homologation and exercise their right of retraction in full knowledge of the facts. Consequently, a court of appeal cannot dismiss the employee’s claim that the contractual termination is null and void, without noting that a copy of the termination agreement was indeed given to the employee (Cass soc., April 13, 2022, no. 20-22895).
Employers are now advised to add a note to the Cerfa form stating that a copy of the agreement has been given to the employee, or to provide a receipt for the employee to countersign. If the employer intends to waive the non-competition clause, this should be done no later than the termination date set out in the agreement.
Contractual termination and settlement indemnity
Lastly, the Cour de cassation also reiterated that the settlement indemnity paid to an employee as part of a transaction concluded following a contractual termination may be exempt from social security contributions, provided that it compensates for a prejudice distinct from the termination. Otherwise, the settlement indemnity would be included in the social security contributions base.
In this case, following an URSSAF audit, an employer was required to pay social security contributions on a settlement indemnity paid to an employee just a few days after a contractual termination, on the grounds that the employee was contesting the terms of the employment contract and the validity of the contractual termination.
The Cour de cassation upheld the URSSAF’s reassessment, pointing out that only sums intended to compensate for a loss are excluded from the basis for social security contributions, provided that the elements constituting the loss have been established (Cass, Civ 2e, October 22, 2020, no. 19-21.932).
Employers must therefore remain vigilant when concluding a settlement, as it must compensate for a distinct prejudice and not the termination requested or accepted by the employee.
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