Capped damages at risk in France?

The Paris Employment team would like to draw your attention to some interesting developments regarding the application of the capped damages scale applied to unfair dismissals.

As a reminder, a mandatory capped damages scale was implemented through the “Macron legislative orders” in September 2017, whereby judges ruling a dismissal unfair could not award more damages to the employee than mentioned on the scale for his/her length of service (for more information on this topic, see our article published in Bloomberg law : “France: The current landscape for Employers” )

Prior to this, judges could allow any compensation they saw fit in each particular case, with no restriction on the amount.

Initially the judges composing Employment Tribunals (who are lay magistrates) contested this bill.

In some recent decisions, a number of employment tribunals (Amiens, Troyes and Lyon) refused to comply with the mandatory capped damages scale, stating that it is contrary to international legal sources (i.e. Treaty n°158 of the International Labor Organization and the European Social Charter).

From a strictly legal point of view, and this view is usually shared by the Doctrine, such judgements are unlikely to be upheld by the Courts of appeal or ultimately, if required, by the French Supreme Court. Indeed, the legal provisions of the Treaty n°158 of the International Labor Organization and the European Social Charter supporting the employment tribunals’ position, are vaguely drafted and do not, as such, prohibit capped damages scale - all the more since French law provides for some situations where the scale does not apply.

While the scale was created to help employers foresee the potential amount of damages they would have to pay in case of unfair dismissal, these employment tribunal decisions do create some uncertainty – at least temporarily - until the Court of Appeal and/or the French Supreme Court rule on this issue.

It may also give rise to some new arguments and strategies when negotiating out of court settlements. As a matter of fact, employees are likely to use the aforementioned decisions to ask for more compensation than what they are entitled to, pursuant to the scale.

Until a court of appeal rules on this matter, it is worth bearing in mind that this kind of decision could go viral before other employment tribunals. If your company is facing such a scenario, it would certainly be advisable to appeal the judgment.