Perspectives on the definition of dismissal for economic reasons in France and the United Kingdom

The UK and France are two countries, and economic dismissal legislation can be an interesting comparison. In particular, both come from the opposite legal system.

Britain is a common law country governed by case law. France, on the other hand, is a country with a civil law tradition in which the rule of law is written, codified, judges cannot create the law, and it is bound by the law. Nevertheless, English law is increasingly marked by written rules. This is an important change for the common law country, where the role of legislators tends to develop.

The Covid-19 epidemic-related health crisis, which has undermined global economic conditions, is an opportunity to question the concept of dismissal for economic reasons in these countries.

Indeed, dismissals for financial reasons can involve not just a single employee, but an entire group of workers, in which case the company is often at the center of the news.

The termination of the partial unemployment system in the United Kingdom on September 30, 2021 raises concerns about the big wave of layoffs, especially for economic reasons.

Differences in the definition of dismissal for financial reasons

Under French law, dismissals for financial reasons are characterized by the following cumulative factors:

    • am Not unique to the employee ;
    • that is Material element This can be characterized by either redundancy, job changes, or refusal to change key elements of an employee’s employment contract.
    • It must be justified by Causal factorIt consists of financial difficulties (particularly characterized by reduced orders, sales, operating losses or worsening cash flow), technological changes, or restructuring of the company necessary to protect its competitiveness. Finally, by a complete and decisive outage of activity.

Under English law, dismissal for financial reasons is known as “redundancy.”

The Employment Rights Act of 1996 (1) describes various situations that may characterize dismissal for financial reasons. According to this law, an employee is considered to have been dismissed for financial reasons if the dismissal of the employee is due to or primarily due to the following facts:

    • If your employer has stopped or plans to stop:

– The activity in which the employee was hired.
– To perform this activity where the employee was working.

    • Companies no longer need or need less.

– A specific function performed by an employee for an activity.
– His job at the place where the employee was working.

The law specifies that for some reason there may be an outage or reduction of activity, or it may be imminent. The judge does not need to assess whether the reason for being called is serious.

Dismissal for financial reasons is also defined in the Trade Union and Labor Relations Act (2) of 1992 and is not unique to an individual employee as in French law. This definition is primarily used by judges to ensure that collective redundancy procedures are respected (3).

Economic causes not found in English law

English law does not specify an economic background that can justify dismissal. Therefore, unlike the French definition of dismissal for economic reasons, British legislators are not interested in the economic causes of dismissal.

The UK employer does not need to provide an explanation of the financial situation of his company. French judges confirm the existence of realistic and serious economic causes, while British judges are reluctant to identify the commercial and economic reasons that motivated the dismissal.

In reality, a British judge only confirmed the existence of the reason for the call (such as a complete suspension of activity, relocation to another location or country), not the circumstances that led to it, but hired. Analyzing the criteria used by the Lord, the dismissed employee and the subsequent steps. Therefore, legislators and judges do not want to investigate the reality and seriousness of the economic causes of dismissal.

Unlike the UK, France does not give employers the possibility of dismissal to make them more competitive, but only if this is “threatening”. The idea that seems to have emerged is that legislators do not want redundancy to be created solely for the purpose of improving a company’s economic and financial performance.

The UK is by allowing companies to dismiss some of their staff to increase profits and increase their competitiveness, even if they are not facing financial difficulties or threatening their competitiveness. It’s part of the opposite move.

Another important differentiator is that French law does not allow temporary suspension of activity, unlike British law, which allows temporary and permanent suspension of activity.

As an example, a British judge believed that financial redundancy was justified by closing the company for 13 months to get the job done (4). British judges, on the other hand, are unaware of the existence of financial reasons if the closure period is too short (5).

As part of that, the Court of Cassation will dismiss the dismissal in case of suspension of activity, unless this is final. Therefore, the six-month hotel closure was not considered to constitute a suspension of company activity (6). Dismissal for economic reasons declared in this context lacks a truly significant cause.

Dismissals for financial reasons in the United Kingdom can also result from relocation. For example, if an employee’s contract stipulates that an employee can work in multiple company-owned locations, but the employer decides to close the workplace and move it to a location 20 km away. , The dismissal of an employee for financial reasons is considered justified (7).

In France, relocation is not such a reason for dismissal. Relocations with workplace changes that accompany changes in employee employment contracts must be justified for financial reasons (economic difficulties, restructuring necessary to protect competitiveness, etc.).

Therefore, the economic cause of the dismissal (that is, the reason for the dismissal) is a fundamental element of French law. Contrary to English law, a slight decline in activity, market loss, high employee compensation, temporary suspension of company activity … is not a reason to terminate an employee’s employment contract. For financial reasons.

As you can see, the concept of dismissal for financial reasons is different in both countries. French law believes that dismissals for financial reasons must be presented as an “unavoidable” measure, and employers need to justify serious and pre-established reasons, but British law. Shows flexibility by prioritizing employer freedom in management choices. society.

[1] Section 139 (1), Employment Rights Act 1996.

[2] Section 195 (1), Trade Unions and Labor Relations Act 1992.

[3] Under English law, collective redundancy procedures apply when at least 20 people in the same facility within 90 days may be affected by redundancy for financial reasons. In this case, prior consultation with the staff representative is essential.

[4] Gemmell v Darngavil Brickworks Ltd [1967] ITR20.

[5] Whitbread plc v flattery, eat [1994] n ° 287/94: In this case, the Employment Appeal Tribunal considered the four-week closure not to meet the legal definition of economic reasons.

[6] Cass. , Soc. , October 15, 2002, No. 01-46.240.

[7] Hollister v National Farmers’ Union [1979] IRLR238.