The modification of an employment contract for reasons that are not specific to the employee necessarily requires an economic ground (including where the change impacts the individual variable remuneration)

FSC. 28 May 2019, n°17-17929

In a decision of 28 of May 2019, the French Supreme Court confirmed that, as a matter of principle, if a termination is not based on personal grounds, it is automatically based on economic ones.

In the case at hand, a clothing company had increased the retail space to which three of its employees were attached. As a result of this change, the company offered a modification of the employees’ commission rate so that it reflected the increased sales area and be aligned with those of other employees assigned to similar sales areas.

As the employees refused this modification of their employment contracts, they were dismissed for refusing to accept an adjustment of their variable remuneration rate in accordance with the company’s remuneration structure.

The Court of Appeal considered that the dismissals were unfair because the employer had not applied the procedure under Article L1222-6 of the French Labour Code which governs contractual modifications for economic grounds.

The company had filed an appeal before to the French Supreme Court, arguing, inter alia, that the dismissal of employees who had refused to adjust their variable remuneration was necessary to comply with the principle of “equal pay for equal work

Although the decision on appeal was confirmed in its consequences, the French Supreme Court adopted a reasoning a little different from the Court of Appeal’s by considering that since the dismissals did not mention any economic reason, they were necessarily unfair.

Therefore, unless otherwise stated by law, there is no sui generis grounds for termination other than personal or economic grounds. In a similar situation, the conclusion of a collective performance agreement (“accord de performance collective”) may now prove a relevant alternative since it allows the employer to dismiss those employees who refuse the contractual change triggered by such an agreement without any other reason being required.