In a decision dated 7 October 2026, the French Supreme Court held that meeting the minimum duration thresholds for a revenue decline set by the Labor Code is not enough to justify an economic dismissal. Courts must also look at whether the decline is serious enough to reflect real economic difficulties (Cass. soc., 7 October 2026, No. 25-10.107).
Under Article L. 1233-3 of the Labor Code, an economic dismissal may be justified by difficulties evidenced by a significant change in at least one economic indicator such as a fall in orders or in revenue, for instance. For these two indicators, the law fixes a minimum duration for the decline, measured against the same period of the previous year and varying with headcount: one quarter for companies with fewer than 11 employees, two consecutive quarters for those with 11 to 49, three for those with 50 to 299, and so on.
In June 2020, a company of around 30 employees dismissed two analysts on economic grounds, relying on a drop in revenue over the first two quarters of 2020 compared with the same periods in 2019. This fall was mainly attributed to the COVID-19 pandemic. The employees challenged the dismissals, arguing that the decline was temporary and that activity had since rebounded following the market downturn of March 2020.
The Court of Appeal decided that the dismissals were not grounded on a real and serious cause. The employer appealed this decision arguing that meeting the statutory duration was enough to establish economic difficulties.
The French Supreme Court dismissed the appeals and held that the lower courts must weigh all the evidence to decide whether the fall in revenue is significant enough to constitute economic difficulties justifying the dismissal. In the instant case, the short-lived decline and subsequent recovery as well as the weak financial evidence all justified rejecting the economic grounds.
Clearing the minimum duration set by Article L. 1233-3 is necessary but not sufficient. Courts keep the power to look behind the figures and assess the company’s real situation on a case-by-case basis. As a result, a dismissal built on duration alone, without evidence that the difficulties are serious, remains exposed.
Decision: French Supreme Court, 7 October 2026, No. 25-10.107.
