Two decisions handed down in October respectively by the Cour de Cassation (C. Cass. 16.10.2019) and the Appeal Court in Paris (C.A. Paris 30.10.2019) clarified the effects of a settlement agreement and the validity of the “Macron” scale.

Scope of a settlement in employment law

Settlement agreements are frequently used in labour law to resolve a potential or existing dispute arising in connection with the contractual relationship between an employee and their employer. They are governed by civil law, rather than employment law, and generally result in the parties agreeing to waive their actions in return for compensation paid by the employer.

It is a frequent solution after termination of an employment contract. In the case here, a settlement had been signed while the employee was still working in 2007, granting him back pay and a move up to a higher hierarchical level. In this regard, the Supreme Court had already held in 1998 that a settlement relating to the performance of an employment contract was possible (C. Cass. 10.03.1998). Several years later, the employee brought an action against the employer seeking payment of various sums due to him as of 2008.

The Appeal Court dismissed the employee’s claims, stating that even though the initial dispute had been resolved by the settlement in 2007, the subsequent claims were inadmissible insofar as the settlement was broader in scope than the employee’s original claim.

In the past, the Cour de Cassation has taken different approaches to this question, varying from restrictive (disputes not covered by the settlement are not resolved), to broad (when the employee waives all claims and actions against the employer and/or the performance of the employment contract, the waiver is general in scope and all legal action becomes inadmissible).

The Cour de Cassation quashed the Appeal Court’s decision, specifying that a settlement drafted in general terms precludes all subsequent claim for compensation (broad interpretation now adopted by the Cour de Cassation) but not if the claim concerns events occurring during performance of the contract after the settlement, as was the case here (restrictive interpretation).

The decision therefore confirms that, in practice, a settlement arranged after an employment contract has been terminated must be drafted in sufficiently general terms to protect the parties’ interests.

The Court’s consistent stance on the “Macron” scale

The “Macron” scale introduced in September 2017 and codified in Article L.1235-3 of the French Labour Code, provides for a minimum and maximum limit on damages paid for termination without just and sufficient cause, varying according to the employee’s length of service.

Since these new provisions were adopted, many disputes have arisen, with laid off employees and trade union organisations invoking a violation of Article 24 of the European Social Charter (ESC) and Article 10 of the International Labour Organisation’s (ILO) Convention 158. This Convention stipulates that in the event of unjustified termination, the competent authority (referred to in Article 8 of the convention) is empowered to determine payment of adequate compensation. This power is therefore held by the Judge in domestic law.

In its decision, the Appeal Court dismissed application of the ESC, on the ground that it has no direct effect between private individuals in internal law, but recognised application of the ILO provisions, while specifying that “the introduction of a scale is not contrary, per se, to the provisions […] which require States, in cases of unjustified termination, to ensure the employee receives adequate compensation or appropriate relief, and the French judge retains a degree of discretion in respect of the minimum and maximum amounts stipulated on the basis of the employee’s seniority and the company’s headcount.”

This decision tempers the one recently handed down by the Appeal Court in Reims (C.A. Reims 25.09.2019) which recognised the “Macron” scale as compliant with international provisions but nonetheless left the judge a power of discretion relating to each case, whereby he may exclude application of the scale if it interferes with the right to adequate relief.

The Paris Appeal Court’s decision concerned a dismissal without just and sufficient cause of an employee who had 16 years of service, who could obtain between 3 and 13.5 months of salary under the “Macron” scale, the compensation granted and considered adequate amounting to 13 months of gross salary in light of the circumstances (employee’s age, unemployment benefits received, training provided, etc.).

However, it should be noted that the “Macron” scale does not protect the employer from a possible action by an employee seeking compensation for harm suffered (harassment, moral prejudice, etc.).

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