Contractual termination vitiated by employee malice […].

A contractual termination vitiated by fraud on the part of the employee has the effect of a resignation.   If the employee, a party to a termination agreement, intentionally conceals information which he knows to be decisive for the employer in his consent to the termination of the contract, the termination is null and void and produces the effects of a resignation. (Cass. soc. June 19, 2024 n° 23-10.817 FS-B, P. c/ Sté Alientech France)  

• Under the terms of article L. 1237-11 of the French Labor Code, “the employer and the employee may jointly agree on the conditions for terminating the employment contract binding them”.

The contractual termination of employment cannot therefore be imposed by either party, and is the result of an agreement, so that the freedom and integrity of the parties’ consent must remain intact. This means that consent must not have been vitiated, i.e. it must be free from fraud, violence or error, on pain of nullity of the termination.  

• A case decided on June 19, 2024 involved fraud, i.e. the concealment by an employee of decisive elements for the employer, which had the effect of vitiating his consent.

In principle, the mere withholding of information does not in itself give rise to fraud, unless it can be proved that the withholding of information had a decisive effect on the consent of the party deceived (Cass. soc., May 11, 2022, no. 20-15.909). According to the Court of Appeal, this was the case here. In this case, the employee’s maneuvers were as follows: a “voluntary failure to inform the employer of the business project initiated in the same sector of activity in which two former employees were involved”, while the employer had only made up his mind “with regard to the sole desire to retrain in management”, without having any knowledge of the employee’s real intentions. The court therefore declared the termination null and void and ordered the employee to pay various sums.  

• In his appeal to the French Supreme Court, the employee considered that the creation of a competing business after his contractual termination was irrelevant, since there was no non-competition clause that would have restricted his freedom to do so.

He deduced from this that he was not obliged to spontaneously reveal to his employer his plan to set up a competing business, nor the preparatory acts he had carried out, and therefore could not be accused of fraudulent concealment. He also argued that the Court of Appeal had disproportionately infringed the fundamental principle of freedom to pursue a professional activity. However, the Cour de cassation ruled in favor of the Court of Appeal, after recalling article 1137 of the French Civil Code, which states that intentional concealment by one of the contracting parties of information he knows to be decisive for the other party constitutes fraud. In this case, however, it was clear that the employer had based his decision solely on the employee’s desire for professional retraining in management, without any link to a competing activity that might necessarily have slowed down his acceptance of the amicable termination procedure. The Court of Appeal had thus rightly considered that the employer’s consent had been vitiated, “without imposing on the employee a contractual obligation to provide information, or infringing on his freedom of enterprise”.  

• The penalty is severe:

The Court of Cassation also upheld the reasoning of the Court of Appeal, which had considered that, when the employment contract is terminated in execution of a termination agreement subsequently cancelled due to a defect in the employer’s consent, the termination has the effects of a resignation. As a result, the employee was ordered to reimburse the specific severance pay received at the time of the termination of his contract (€19,000) and to pay him compensation for the notice period (€20,000). This is the first time that the Court has given such effect to the nullity of a contractual termination. However, this decision is consistent with the High Jurisdiction’s long-standing ruling that the nullity of a contractual termination due to a defect in the employee’s consent produces the effects of a dismissal without cause (Cass. soc. January 30, 2013 n° 11-22.332 FS-PBR : RJS 4/13 n° 279). It was therefore normal to give it the opposite effect in such a case.  

• However, this ruling needs to be tempered.

In principle, it is difficult to determine the existence of intentional concealment of information. Even if, in this case, there were preparatory acts for the launch of a competing business, it could be ruled in a case with a somewhat different factual situation that the employee concerned could pursue several objectives at the same time, only to give preference to one after the conclusion of the contractual termination, without this ultimately characterizing a desire to deceive his employer. In any event, this ruling should be interpreted as a counterpart to another decision handed down on January 6, 2021, in which the Cour de cassation annulled a contractual termination agreement, this time because the employer had concealed from the employee the fact that it was preparing a job-saving plan for his position at the time the termination agreement was signed, thus depriving him of the benefit of the plan (Cass. soc. January 6, 2021 no. 19-18.549 F-D). This case law is therefore fully in line with that of the Cour de cassation, and will encourage employers to formalize the conditions they consider decisive when concluding a conventional termination agreement, for example in a letter accepting a request made by the employee.