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Article L. 1233-3 of the French Labor Code sets out a list of objective criteria for determining the existence of economic difficulties justifying redundancy, including :

• • Significant drop in orders or sales, operating losses, deterioration in cash flow;
  • Technological change ;
  • Company reorganization ;
  • Company ceases trading.

Legal provisions lay down specific conditions for declining orders and sales. For operating losses or cash flow deterioration, legal provisions require only a “significant change”.

The French Supreme Court has therefore clarified the conditions under which these factors, which are not specified by legal provisions, can justify redundancy for economic reasons, stating that they must be “serious and lasting” in order to justify redundancy for economic reasons. The Court of Cassation had already stated in the past that changes in EBITDA could justify redundancy if the deterioration in this economic indicator was of a “serious and lasting” nature. In other words, the employer cannot invoke economic difficulties if the deterioration in the economic index concerned is only slight or temporary.

Mere temporary or minor disruptions do not justify redundancy. Here, the Cour de cassation has made similar clarifications concerning business losses.

To be considered grounds for redundancy, business losses must be significant, serious and lasting in the sector concerned, and of a sufficiently large scale. If there is insufficient evidence of the extent of the deterioration in economic indicators, the dismissal may be considered to be without real and serious cause.

It is advisable to enlist the support of experts such as DESRUMAUX AVOCATS when implementing redundancy procedures.