Loss of turnover is not the only reason for economic redundancy
Publié le 28 octobre 2022 - Directorate for Legal and Administrative Information (Prime Minister)
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A company may justify an economic dismissal on grounds other than a reduction in turnover or orders over the relevant reference period. This is what the Court of Cassation stated in a judgment published in the bulletin issued by the Social Chamber on 21 September 2022.
An employee was dismissed on economic grounds by the employer of a company with between 50 and 299 employees. He contests this dismissal before the judge as being without any real and serious cause.
The appeals court upheld the employee’s application on the grounds that the company did not justify economic hardship at the time of the dismissal in March 2017. The documents provided by the company attesting to this economic situation (balance sheets 2013 to 2016 and forecast results) were not accepted because they did not show that orders or turnover fell over three consecutive quarters in the reference period preceding the dismissal. The employer appealed in cassation.
The Court of Cassation quashed the Court of Appeal’s judgment in finding that the dismissal had no real and serious cause. The Court held that where the economic indicator relating to the fall in turnover or orders in the reference period preceding the dismissal is not met, it must be examined whether the company’s economic difficulties can be characterized by another criterion. These economic indicators are set out in Article L1222-3 of the Labor Code:
operating losses;
deterioration of the cash flow or of thegross operating surplus;
any other factors justifying those economic difficulties.
In the present case, the company had equity of less than half of its capital and a significant level of indebtedness at the end of 2016.
