Settlement after unfair dismissal void

(Cour de cassation, Social Division, September 13, 2023, no. 21-25.481)

As we all know, it is now accepted that an employee’s professional inadequacy cannot give rise to disciplinary dismissal unless it can be shown to be the result of the employee’s deliberate intent.

When deciding to terminate an employee’s contract on disciplinary grounds because of this type of professional shortcoming, the employer must be particularly vigilant.

In addition, the dismissal letter must state that this inadequacy is due to the employee’s deliberate choice. Failure to do so could result in the termination of the contract being requalified as a dismissal without real and serious cause, and potentially cancel the settlement reached.

This is where the decision comes in.

In the latter case, the Cour de cassation ruled that in the event of a disciplinary dismissal based on a shortcoming that was not the fault of the employee, the judge could restore the facts set out in the letter of dismissal to their true status, and thus annul the transaction signed by the parties.

Let’s come back to this:

1. The facts of the case

On October 14, 2016, an employee working as a technical sales representative was dismissed for gross misconduct.

His employer accused him of failing to achieve his objectives, of failing to implement an action plan, and of showing a total lack of interest in canvassing and prospecting for customers, all of which characterized the employee’s deliberate unwillingness to perform his employment contract.

However, in the letter of dismissal, the employer cited the lack of targets achieved and her refusal to change position in view of her shortcomings, without specifying that the shortcomings observed were in fact “intentional“.

The employee contested his dismissal and proposed a settlement, which was reached on October 28.

Thus, without having renounced the qualification of serious misconduct, the Company agreed to take into consideration the prejudice that the employee felt he had suffered due to the loss of his job and to pay him the sum of 10,000 euros in damages.

For his part, the employee waived his claim before the industrial tribunal.

However, on November 21, 2016, almost a month after the agreement was signed, the employee decided to contest its terms and requested the payment of legal severance pay, which the Company refused to grant.

He then brought the matter before the industrial tribunal (Conseil de prud’hommes), seeking to have the settlement declared null and void and to have the termination of the employment relationship reclassified as a dismissal without real and serious cause.

The lower court upheld the employee’s claims.

However, the employer considered the dismissal justified and the settlement perfectly valid, and appealed against this decision.

Subsequently, the Court of Appeal upheld the terms of the original judgment, giving rise to the decision under review, which is highly significant.

2. The decision of the Cour de cassation

The High Court fully endorsed the reasoning of the lower court, which had noted that :

“If the court called upon to rule on the validity of a transaction settling the consequences of a dismissal is not required to rule on the reality and seriousness of the reason(s) stated in the letter of dismissalIn order to assess whether reciprocal concessions have been made, and whether the employer’s concession is not derisory, it must check that the letter of dismissal is reasoned in accordance with legal requirements. To determine whether or not the concessions contained in the settlement are genuine, the judge may, without prejudice to the res judicata effect of the settlement, restore the facts set out in the letter of dismissal to their true character. “

Indeed, according to the Court of Appeal, while the reasons for the employee’s dismissal as set out in the letter of dismissal related to insufficient sales results, insufficient prospecting and a refusal of a new position, at no point did the employer indicate that these shortcomings were the result of a deliberate intention on the part of the employee.

It then deduced that the acts complained of characterized professional inadequacy and were not likely to be qualified as serious misconduct, and that the refusal of the new positions proposed by the employer could not be qualified as such either.

From this premise, the Court deduced that the payment of a settlement indemnity of €10,000.00, in return for the employee’s undertaking not to contest his dismissal, was to say the leastThe company’s decision to terminate the employee’s employment was based on the assumption that the dismissal was due to serious misconduct, but this was not the case, and the employee was therefore deprived of his right to compensation in lieu of notice and conventional severance pay.

In other words, since the latter two must be considered as due, the transaction concluded here was for an amount that did not offset them.

Consequently, noting the absence of any reciprocal concession between the parties, the Cour de cassation upheld the nullity of the transaction.

3. The scope of this decision

Three major lessons can be drawn from this ruling:

• the imperative need for the employer to carefully draft the letter of dismissal, particularly when he intends to rely on inadequate results resulting from the employee’s deliberate intention (and therefore from behavior qualifying as serious misconduct, depriving the employee of compensation, apart from paid leave).

It is this mention which, by failing to do so, has led to heavy financial penalties for the employer, even though the employee’s misconduct was proven.

• a reminder of the role of judges, who, in determining whether or not the concessions contained in a settlement are genuine, can nonetheless restore the true character of the facts set out in the letter of dismissal, without coming up against the res judicata authority attached to this agreement.
• The repeated uncertainty in which companies find themselves as a result of evolving case law which, under the guise of strict theories, aims only to seek compensation for an employee at any cost.

Cette décision a également le mérite de mettre en exergue le rôle essentiel du conseil de l’employeur, lequel a notamment pour mission, lorsqu’il est saisi, de veiller à la rédaction rigoureuse de la lettre de licenciement qui est bien trop souvent considérée comme une formalité sans difficultés … Hélas bien à tort !