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Firms in France Penalized for ‘Abusive Layoffs’

November 6, 2007
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French industrial tribunals have hit companies with stiff financial penalties for what they term “abusive layoffs” of people hired under so-called new-hire contracts, according to a report. The contracts were introduced by the government of then-Prime Minister Dominque de Villepin in 2005 to encourage recruitment, especially in small firms, and allow them to fire people for any reason in the first two years.

However, during an 18-month period the tribunals ordered companies to pay damages and interest to ex-employees, averaging more than e 7,000 ($9,895) each, for contract terminations they considered abusive for various reasons, according to the report.

The local tribunals are made up of an equal number of salaried workers and employers. That fact “makes their decisions all the more surprising,” says Evelyne Serverin, a Nanterre, France-based research director at the Centre National de la Recherche Scientifique and one of the report’s authors.

Serverin argues that the government’s legal basis for the law was flawed, and so its effect has been to expose employers to potentially unlimited penalties imposed by the tribunals, which based their decisions on common law.

“The law tried to say that during a two-year initial period, companies could fire employees without giving any reason whatsoever. But what they did not consider was that if a terminated employee filed a complaint anyway, the tribunal would require the employer to provide a justification for the firing, and then it would proceed to decide whether it was justified or not,” she says.

“The fact is that work contracts are contracts, just like any others, and an abrupt breaking of any legal contract can always be contested in court,” Serverin says.

Filed by Rick Mitchell of Business Insurance-Europe, a sister publication to Workforce Management.

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