FSC., 26 June 2019, n° 18-10953
A company had concluded a company agreement for an indefinite term providing for the payment of a specific tax and social security free “profit-sharing bonus”.
The company agreement was explicitly providing in a separate article that the bonus was exempted from social security contributions and tax, as provided by the legislation then applicable. The legislative basis was however repealed in 2015.
The employer then stopped paying the specific profit-sharing bonus, considering that the company agreement could no longer be applied.
In a decision of 26 June 2019, the French Supreme Court considered that a collective agreement is only null and void where its application has become impossible because one of its essential elements has disappeared, which it had not in the case at-hand. The French Supreme Court considered that this bonus should therefore continue to be paid, even if it was no longer legally mandatory and was no longer exempt from social security contributions nor tax.
Since the employer had not formally given notice of termination of the company agreement and because the bonus was not conditioned on the survival of the legislation in force or the benefit from special exemptions, the French Supreme Court considered that this company agreement should continue to apply.
Particular attention should therefore be paid to the drafting of collective agreements based on a legislative mechanism (in particular if it provides for social and/or tax exemptions) in order to avoid perpetuating the mechanism in the event of legislative changes (they unfortunately happen).