Actance Tribune
What's NEW under French Employment Law?
N° 31 – October 14, 2024
Implementation of a supplementary social protection scheme – attention to the collective nature – final stretch to bring schemes into compliance
In order for the employer’s financing of a supplementary social protection scheme to benefit from an exemption from social security contributions, the company must set up, through a collective agreement, referendum agreement or unilateral decision of the employer, a mandatory adhesion scheme for the benefit of all employees or a part of them, provided they belong to one or more objective categories.
According to the provisions of the Social Security Code, it is notably possible to define objective categories based on the status of employees as executives or non-executives, but also according to their remuneration.
Previously, the belonging to the categories of executive and non-executive categories, as well as salary brackets, were defined by reference to the CCN AGIRC of March 14, 1947, and the ANI of supplementary pension scheme of December 8, 1961.
Given the merger of the AGIRC and ARRCO supplementary retirement schemes, these criteria have been modified to now refer to:
- Regarding executives, non-executives: employees who fall within or outside the scope of articles 2.1 and 2.2 of the ANI of November 17, 2017, relating to the provident scheme for executives, as well as certain employees defined by interprofessional or professional agreement or branch agreement mentioned, subject to the agreement or agreement being approved by APEC;
- Regarding remuneration brackets : a threshold equal to the social security ceiling, or to two, three, four or eight times this ceiling.
A transitional period was granted to enable companies to comply with these new objective categories: the schemes were to be modified by December 31, 2024, to preserve their collective nature and continue to benefit from the exemptions from social security contributions on employer contributions.
This compliance, which is very formal in nature, is essential, as failure to do so could result in the reintegration of contributions paid under supplementary social protection schemes into calculation basis of social security contributions.
Compensation – the notion of necessary loss
(i) the emerge of a principle of automatic compensation
In civil law, the prevailing principle is that, to be compensated, the victim of a loss must prove the reality and extent of that loss.
Recognizing the specific nature of the relationship between the employer and the employee, this principle was relaxed from the 1990s by the Social Chamber of the Court of Cassation, which accepted that the violation, by the employer, of certain rules necessarily caused prejudice to the employee, who could obtain compensation without having to prove it.
This was the case, in particular:
- of the failure to provide the ASSEDIC certificate, enabling the employee to register for unemployment beneficts
- if the letter of dismissal failed to mention the employee’s right to priority re-employment.
(ii) the notion of « necessary prejudice »
The notion of « necessary prejudice » was used for the first time by the Court of Cassation in a ruling handed down on Aprils 29, 2003, and its scope has continued to grow since then, covering the entire field of the employment relationship from hiring to termination, and for example:
- breaches of the obligation to undergo a pre-hiring medical examination and compulsory medical examinations
- non-compliance with the daily rest period of 11 hours,
- the absence of mention of the applicable collective agreement on the payslip,
- failure to comply with the 5-day period between receipt of the letter of invitation to a preliminary interview and the date set for the interview,
- non-compliance with the dismissal procedure, etc.
(iii) a halt?
In a ruling handed down on April 13, 2016 (No. 14-28.293), the French Supreme Court seemed to put a halt to the theory of necessary prejudice”” to return to the rules of civil liability; the French Supreme Court thus reversed many of the employer’s breaches hitherto qualified as “necessary prejudice”, in order to reject compensation claims made by the employee in the absence of proof of any prejudice whatsoever.
While the notion of « necessary harm » seemed to have been abandoned, the French Supreme Court nevertheless continued its construction by admitting new cases:
- the unjustified loss of employment by the employee (Cass. soc., 13 September 2017, No. 16-13578)
- the infringement of the employee’s privacy (Cass. soc., 12 November 2020, No. 19-20583)
- the employer’s obligation to set up staff representative institutions (Cass. soc., 28 June 2023, No. 22-11699)
- exceeding weekly and daily working hours (Cass. soc., 26 janv. 2022, no 20-21.636), or the mandatory daily rest period (Cass.Soc. 23.05.2013 n°1213.015).
By three ruling dated September 4, 2024, the French Supreme Court has just recognized three new cases:
- the employer’s failure to comply with its obligation to grant a break after a period of 6 hours of work,
- the fact of having made an employee work during his or her sick leave,
- the provision of work during maternity leave,
and maintained its refusal to recognize the existence of necessary prejudice in the employer’s failure to comply with its obligations regarding the medical follow-up of the employee.
Considering the cases identified since the 2016 reversal as causing necessary prejudice to the employee, some authors have seen a trend in French Supreme Court to retain only serious breaches of an essential obligation, causing real and not virtual objective harm, and most often whose basis is most often enshrined in a European text.
Non-competition clause: take care to comply with the conditions laid down in the collective bargaining agreement or employment contract before lifting the clause
The non-competition clause in an employee’s contract is designed to prohibit him/her from competing with his/her employer when he/she leaves the company. It must be accompanied by financial compensation.
The employer may waive the non-competition clause.
However, this waiver must be provided for, either in the collective bargaining agreement applicable to the company, or in the employment contract: in both cases, the employer can waive the clause without seeking the employee’s agreement.
On the other hand, if no waiver is provided for, the employer must obtain the employee’s agreement.
The employer must be particularly vigilant when deciding to waive the application of the non-competition clause, and in particular must scrupulously comply with the time limits laid down.
Failing to do so may result in the employee taking legal action for payment of financial compensation for the non-competition clause, for the entire period during which the clause was observed.
The employer must therefore:
Waive the clause within the period stipulated in the collective bargaining agreement or employment contract: if no period is stipulated, “at the time of termination of the employment contract”.
Please note: the starting point for this period depends on how the contract is terminated. In every case, to determine whether the employer has waived within the time limit, the date of dispatch of the waiver letter is considered, not the date of its receipt by the employee.
- Expressly inform the employee of the intention to waive the clause: the waiver cannot be tacit. Similarly, a general statement that does not specifically refer to the non-compete clause is not valid.
- Scrupulously comply with any formalities that may be provided.
This is what an employer discovered, at his cost, in a ruling dated July 3, 2004 (Cass. soc., 3 juill. 2024, no 22-17.452)
The French Supreme Court once again illustrates the importance of complying with formalities.
In this case, the employment contract stipulated that the company could waive the non-competition clause “subject to having notified [the employee] of its intention by registered letter with acknowledgement of receipt within a maximum period of 15 days following notification of the termination of the employment contract”.
While the employer had indeed informed the employee of his intention to waive the clause within the 15-day period as stipulated in the employment contract, he had informed the employee of his intention by means of two emails.
The employee, considering that the formalities had not been respected, concluded that the waiver was invalid and applied to the courts for payment of the clause’s financial compensation.
The Court of Appeal upheld his request. It considered that sending an e-mail could not replace a registered letter, a decision endorsed by the French Supreme Court.
It is possible to release an employee from a non-competition clause in the dismissal letter itself. However, if the dismissal is subsequently deemed null and void, the employer would no longer be able to rely on this letter and therefore on the lifting of the clause. Financial compensation would then be due.
We therefore advise to waive the non-compete clause in a separate document.
Our teams remain at your disposal for further information on subjects selected this month.
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