France — Termination & Severance

French labor law divides lawful employer-initiated termination of a permanent contract (contrat à durée indéterminée, CDI) into two principal categories governed by distinct chapters of the Code du travail: dismissal for personal grounds (licenciement pour motif personnel, Articles L1232-1 through L1232-14) and dismissal for economic grounds (licenciement pour motif économique, Articles L1233-1 through L1233-91). The employer's burden is to establish that the termination falls squarely within one category and meets the statutory test for that category.

## Dismissal for personal grounds (licenciement pour motif personnel)

Article L1232-1 of the Code du travail establishes the foundational rule: "Tout licenciement pour motif personnel est motivé dans les conditions définies par le présent chapitre. Il est justifié par une cause réelle et sérieuse" (Every dismissal for personal grounds must be motivated in the conditions defined by this chapter. It is justified by a real and serious cause). A personal-grounds dismissal is inherent to the person of the employee (inhérent à la personne du salarié) — the employee's conduct, performance, capability, or health.

Personal-grounds terminations split into two broad sub-categories:

• Disciplinary dismissal: Fault-based terminations. French law recognizes three ascending tiers — faute simple (simple fault), faute grave (serious fault, rendering the employee's continued presence impossible even during notice), and faute lourde (gross misconduct with intent to harm the employer). Only faute simple preserves the employee's entitlement to statutory notice and severance.

• Non-disciplinary dismissal: Terminations for reasons other than fault, such as insuffisance professionnelle (professional inadequacy — a shortfall in skill or results that does not constitute fault), prolonged illness rendering contract performance impossible, or objective inability to perform the agreed role. These dismissals must still satisfy the cause réelle et sérieuse standard.

The cause réelle et sérieuse standard (real and serious cause) has two components. A cause is réelle (real) if it is objective, verifiable, and exact — not fabricated, not pretextual. A cause is sérieuse (serious) if the facts are of sufficient gravity to render continuation of the employment relationship impossible. Courts assess seriousness in light of the employee's role, seniority, prior record, and the specific facts. If a dismissal lacks a cause réelle et sérieuse, the conseil de prud'hommes (labor court) may order the employer to pay damages under Article L1235-3 (commonly referred to as the barème Macron scale after the 2017 Ordonnance reform, which capped and structured indemnities for unfair dismissal by employee tenure and employer size).

## Dismissal for economic grounds (licenciement pour motif économique)

Article L1233-2 sets the parallel standard: "Tout licenciement pour motif économique est motivé dans les conditions définies par le présent chapitre. Il est justifié par une cause réelle et sérieuse." Article L1233-3 defines the scope of economic dismissal: it is a dismissal "effectué par un employeur pour un ou plusieurs motifs non inhérents à la personne du salarié" (made for one or more reasons not inherent to the person of the employee) resulting from elimination or transformation of a position or modification of an essential contract term refused by the employee, consecutive to:

1. Economic difficulties characterized by a significant evolution in at least one economic indicator (decline in orders or turnover, operating losses, cash-flow or EBITDA deterioration), or any other element justifying such difficulties;
2. Technological changes (mutations technologiques);
3. Reorganization necessary to safeguard competitiveness (réorganisation de l'entreprise nécessaire à la sauvegarde de sa compétitivité);
4. Cessation of activity (not culpable liquidation).

For firms within a group, courts assess economic cause at the level of the sector of activity of the group in France (Article L1233-3, paragraph 2), defined by product/service nature, clientele, and distribution networks, not solely at the subsidiary level — a critical trap for multinational employers. Economic dismissals trigger heightened procedural obligations, including reclassification efforts (Article L1233-4 requires the employer to exhaust training and redeployment within the group before dismissing), consultation with employee representatives, and, for collective redundancies of ten or more employees in an enterprise of at least fifty employees within thirty days, establishment of a plan de sauvegarde de l'emploi (PSE, employment safeguard plan; Articles L1233-61 et seq.). Failure to comply with the PSE obligation renders the dismissal null.

## Prohibited grounds and nullity

Certain dismissal grounds are prohibited by law and trigger nullity (licenciement nul) rather than mere lack of cause réelle et sérieuse. Article L1235-3-1 enumerates grounds of nullity, including dismissals based on:

• Violation of a fundamental freedom (freedom of expression, union activity, religious liberty, exercise of the right of withdrawal under Article L4131-1);
• Discrimination on grounds enumerated in Article L1132-1 (origin, sex, family situation, pregnancy, physical appearance, patronymic name, health, disability, age, political or union opinions, religion, sexual orientation, gender identity);
• Harassment (harcèlement moral under Articles L1152-3, harcèlement sexuel under L1153-4);
• Whistleblowing or good-faith testimony;
• Exercise of the right to strike (Article L2511-1).

A null dismissal entitles the employee to a minimum indemnity of six months' salary (Article L1235-3-1), without the tenure or firm-size caps that apply to unfair dismissals under L1235-3, and the court may order reinstatement.

## Severance consequences hinge on the category and the cause

The classification — personal vs. economic, disciplined-fault tier, null vs. lacking cause réelle et sérieuse vs. procedurally irregular but substantively justified — determines:

• Statutory severance entitlement (Article L1234-9: employees with at least eight months' tenure receive statutory indemnité légale de licenciement; employees dismissed for faute grave or faute lourde forfeit it);
• Notice period (statutory notice under Articles L1234-1 and L1234-5, or conventional notice if more favorable; faute grave and faute lourde trigger immediate departure with no notice pay);
• Damages for lack of cause réelle et sérieuse or nullity (Articles L1235-3 and L1235-3-1);
• Priority re-employment rights (droit à la priorité de réembauchage, Article L1233-45, applicable to economic dismissals for one year).

Employers contemplating termination in France must carefully establish the facts, classify the intended ground, comply with the procedural requirements specific to that ground (preliminary interview under Article L1232-2 for personal dismissals, reclassification search and representative consultation for economic dismissals), and ensure that the dismissal letter (lettre de licenciement, Article L1232-6 for personal, L1233-16 for economic) states the precise ground with sufficient detail, because the letter fixes the scope of the dispute (Article L1235-1).

Source: Code du travail, Article L1232-1 Source: Code du travail, Article L1233-2 Source: Code du travail, Article L1233-3 (définition du motif économique) Source: Code du travail, Article L1235-3-1 (licenciement nul)

French law establishes a statutory floor for severance pay owed to an employee dismissed from a permanent contract (contrat à durée indéterminée, CDI) — the indemnité légale de licenciement. This indemnity is distinct from damages for lack of cause réelle et sérieuse or for nullity; it compensates for the loss of employment itself and is payable even when the dismissal is substantively and procedurally valid, provided the employee meets the eligibility criteria.

## Eligibility: eight-month tenure threshold and exclusion of serious fault

Article L1234-9 of the Code du travail establishes the foundational rule: "Le salarié titulaire d'un contrat de travail à durée indéterminée, licencié alors qu'il compte 8 mois d'ancienneté ininterrompus au service du même employeur, a droit, sauf en cas de faute grave, à une indemnité de licenciement." (The employee holding a permanent employment contract, dismissed when the employee has eight months of uninterrupted tenure with the same employer, has a right, except in case of serious fault, to a severance indemnity.)

Three conditions must be met:

1. Permanent contract (CDI): The statutory severance right applies only to employees on contrats à durée indéterminée. Fixed-term contracts (contrats à durée déterminée, CDD) terminate at their term and do not generate a statutory dismissal indemnity (they may generate an indemnité de précarité under different rules).

1. Eight months' uninterrupted tenure: The employee must have at least eight months of continuous service (ancienneté ininterrompue) with the same employer at the date the dismissal letter (lettre de licenciement) is sent. This threshold was lowered from twelve months to eight months by Ordonnance n° 2017-1387 of 22 September 2017 (the "Macron" labor reforms), applicable to dismissals pronounced after its publication on 23 September 2017. Periods of suspension of the employment contract (for example, unpaid leave, sick leave, parental leave) count toward the ancienneté threshold for the right to the indemnity (Article L1234-10 provides that suspension does not break ancienneté) but do not count in the calculation of the duration used to compute the indemnity amount, unless the employee is an elected local representative in certain cases (Article L1234-10, second paragraph).

1. No serious or gross fault: The indemnity is not owed if the dismissal is for serious fault (faute grave) or gross fault (faute lourde). Simple fault (faute simple) does not deprive the employee of the statutory indemnity; serious and gross fault do. This exclusion applies to the statutory minimum — a collective bargaining agreement may provide more favorable terms.

An employee dismissed on economic grounds or personal grounds other than serious fault, with at least eight months' tenure, is entitled to the statutory severance indemnity (unless a more favorable conventional indemnity applies; the employer must always pay the higher of the statutory floor and any applicable collective-agreement amount).

## The statutory formula: 1/4 month per year up to ten years, 1/3 month thereafter

Article R1234-2 of the Code du travail, as amended by Décret n° 2017-1398 of 25 September 2017, sets the minimum severance scale:

> L'indemnité de licenciement ne peut être inférieure aux montants suivants : > 1° Un quart de mois de salaire par année d'ancienneté pour les années jusqu'à dix ans ; > 2° Un tiers de mois de salaire par année d'ancienneté pour les années à partir de dix ans.

The formula is:

• First ten years: 1/4 month of salary per year of tenure.
• Years beyond ten: 1/3 month of salary per year of tenure.

Article R1234-1 clarifies that the indemnity is calculated per full year of service in the enterprise and accounts for months of service beyond full years on a proportional basis; Article R1234-1 further specifies that for an incomplete year, the indemnity is calculated proportionally to the number of full months.

Worked example

An employee with 12 years and 7 months of tenure, earning a reference salary of €3,000 per month, dismissed on grounds other than serious fault:

• First 10 years: (€3,000 × 1/4) × 10 = €7,500
• Next 2 full years: (€3,000 × 1/3) × 2 = €2,000
• Partial year (7 months): (€3,000 × 1/3) × (7/12) ≈ €583.33

Total statutory indemnity: €7,500 + €2,000 + €583.33 = €10,083.33 gross.

The employer must compare this statutory minimum with any amount specified in the applicable collective bargaining agreement (convention collective) for the employee's professional category and pay the higher amount.

## Reference salary: the higher of two averaging methods

Article R1234-4 of the Code du travail prescribes the methodology for determining the reference salary (salaire de référence) on which the indemnity is calculated. The employer must compute both of the following and use whichever is more favorable to the employee:

1. Average of the last twelve months: The average monthly gross remuneration (rémunération brute) for the twelve months preceding the dismissal. If the employee has fewer than twelve months of service, the average is taken over all months of service preceding the dismissal.

1. One-third of the last three months: One-third of the total gross remuneration for the three months immediately preceding the dismissal. When using this method, any annual or exceptional bonus or gratification paid during those three months is included only on a pro-rata basis (à due proportion) — for example, a year-end bonus paid in December is divided by twelve and multiplied by three when computing a three-month reference period that includes December.

Case law clarifies that the reference salary should reflect the employee's normal remuneration. If the employee was on sick leave or partial-activity furlough (chômage partiel) immediately before dismissal, courts have held that the reference salary should be calculated on the remuneration the employee would have received if working normally, not the reduced payments actually received during the period of suspension (Cass. soc., 23 May 2017, n° 15-22.223 for sick leave; Cass. soc., 9 March 1999, n° 96-44.439 for partial activity).

## Interaction with collective agreements and special regimes

The amounts prescribed by Articles L1234-9, R1234-1, and R1234-2 constitute the statutory minimum (indemnité légale). Many conventions collectives specify higher amounts (indemnité conventionnelle) — often graduated by professional category (executive vs. non-executive), reason for dismissal (economic vs. personal), or seniority. The principle of faveur requires the employer to apply the regime most favorable to the employee. In practice, the employer must:

1. Calculate the statutory minimum under R1234-2.
2. Calculate the conventional amount under the applicable convention collective.
3. Pay the higher of the two.

For dismissals on economic grounds under a mandatory employment safeguard plan (plan de sauvegarde de l'emploi, PSE; required for collective redundancies of ten or more employees within thirty days in firms of at least fifty employees), the PSE typically specifies enhanced severance terms that exceed both the statutory and conventional minima.

## Effective date and transitional rule

The current formula (1/4 up to ten years, 1/3 thereafter, eight-month qualifying period) took effect on 27 September 2017 under Décret n° 2017-1398 of 25 September 2017, implementing the labor reforms of Ordonnance n° 2017-1387 of 22 September 2017. Article 4 of the Decree provides that these provisions apply to dismissals and retirements pronounced, and to ruptures conventionnelles concluded, after its publication. Prior to 2017, the statutory formula was 1/5 month per year plus 2/15 month per year beyond ten years, and the qualifying period was twelve months (lowered to eight months by the 2017 reform).

An employer planning a dismissal in France must calculate the statutory severance precisely, verify whether a more favorable conventional regime applies, ensure the employee meets the eight-month qualifying threshold, confirm the dismissal ground does not constitute serious or gross fault (which would forfeit the indemnity), compute the reference salary under both R1234-4 methods and use the higher, and apply the tenure formula with proportional accounting for partial years. The indemnity is paid as part of the solde de tout compte at the end of the employment relationship and benefits from partial exemption from income tax and social contributions within specified ceilings.

Source: Code du travail, Article L1234-9 (eligibility) Source: Code du travail, Article R1234-2 (statutory formula: 1/4 and 1/3 month per year) Source: Code du travail, Article R1234-1 (per-year and proportional-month calculation) Source: Code du travail, Article R1234-4 (reference salary: 12-month or 3-month average)

French law imposes a mandatory notice period (préavis) on every employer-initiated dismissal of a permanent contract (contrat à durée indéterminée, CDI), with two narrow exceptions: dismissal for serious fault (faute grave) or gross fault (faute lourde) triggers immediate termination without notice, and cessation by force majeure (construed restrictively—typically limited to unforeseeable, irresistible external events such as natural disaster or war) relieves the employer of the notice obligation. In all other dismissals—whether for simple personal fault, non-disciplinary personal grounds, or economic grounds—the employee is entitled to statutory notice unless a collective agreement, individual contract, or local usage specifies a longer period.

## Statutory notice tiers under Article L1234-1

Article L1234-1 of the Code du travail establishes the foundational rule: "Lorsque le licenciement n'est pas motivé par une faute grave, le salarié a droit..." (When the dismissal is not motivated by serious fault, the employee has the right...). The statute then sets three notice bands by tenure:

1. Less than six months' continuous tenure: Notice duration is determined by statute, collective bargaining agreement (convention collective), individual contract, or, failing any of those, by local usage (usages pratiqués dans la localité et la profession). Article L1234-1(1°) does not specify a floor; in practice, many conventions collectives specify a minimum (commonly one week for employees, two weeks for supervisory staff, though the figures vary by sector and agreement).

1. Six months to less than two years' continuous tenure: One month of notice. Article L1234-1(2°).

1. Two years or more of continuous tenure: Two months of notice. Article L1234-1(3°).

The statutory formula is a mandatory floor. Article L1234-2 of the Code du travail provides that "Toute clause d'un contrat de travail fixant un préavis d'une durée inférieure à celui résultant des dispositions de l'article L. 1234-1 ou une condition d'ancienneté de services supérieure à celle énoncée par ces mêmes dispositions est nulle" (Any clause of an employment contract setting a notice period of shorter duration than that resulting from the provisions of Article L. 1234-1, or a condition of tenure greater than that stated in the same provisions, is void). If a convention collective, contract, or usage specifies a longer notice period or a more favorable ancienneté threshold, the more favorable term applies under the principle of faveur. For instance, many collective agreements specify two months' notice for non-executive employees (employés) with at least two years and three months for executives (cadres) with at least two years, both of which override the two-month statutory floor (though the specific durations vary by sector and agreement).

The statute uses the term "ancienneté de services continus" (continuous service tenure). Article L1234-8 provides that circumstances causing suspension of the employment contract—statutory leave (sick leave, parental leave, sabbatical), conventional leave, or contractual leave—do not break the continuity of ancienneté for purposes of determining the notice duration under L1234-1(2°) and (3°). However, the period of suspension does not count toward the ancienneté duration for purposes of crossing the qualifying thresholds (six months, two years). This is the same rule that applies to severance-indemnity ancienneté calculation under Article L1234-9.

## No serious or gross fault: the threshold test

The notice right exists only when the dismissal is not motivated by serious fault (faute grave). French law distinguishes three tiers of fault-based dismissal:

• Simple fault (faute simple): The employee's conduct or performance shortfall justifies dismissal but does not render the employee's immediate departure necessary. The employee retains the full statutory notice and severance entitlement.

• Serious fault (faute grave): The conduct is so serious that it makes the employee's continued presence in the enterprise impossible, even during a notice period. Examples: physical violence, theft, gross insubordination, willful destruction of company property. No notice is owed (Article L1234-1), and the contract terminates immediately. The employee forfeits statutory severance (Article L1234-9 excludes faute grave dismissals from the indemnité légale de licenciement).

• Gross fault (faute lourde): Fault committed with intent to harm the employer (intention de nuire). Same consequences as faute grave—no notice, no statutory severance—plus the employee may forfeit accrued paid leave (congés payés) depending on case law and the applicable convention collective.

The classification between simple and serious fault is fact-specific and frequently litigated. Courts assess the gravity of the facts, the employee's role and seniority, the impact on the enterprise, and whether immediate departure was objectively necessary. An employer who wishes to avoid paying notice must establish that the facts constitute faute grave or faute lourde; if the conseil de prud'hommes (labor court) later finds the fault was only simple, the employer will owe the indemnité compensatrice de préavis even though the employee did not work the period.

## Commencement, duration, and the fixed-term nature of the notice period

Article L1234-3 provides that "La date de présentation de la lettre recommandée notifiant le licenciement au salarié fixe le point de départ du préavis" (The date of presentation of the registered letter notifying the dismissal to the employee fixes the starting point of the notice period). The notice begins on the date the registered letter is first presented to the employee, not the date the employee actually retrieves or accepts the letter. If the employee is absent or refuses delivery, the first-presentation date still starts the clock.

The notice period is a fixed term (délai préfixe). Article L1234-4 provides that "L'inexécution du préavis de licenciement n'a pas pour conséquence d'avancer la date à laquelle le contrat prend fin" (Non-execution of the notice does not have the consequence of advancing the date on which the contract ends). If the employee falls ill during the notice period, or if the employer dispenses the employee from working, the contract end date does not change—it remains the date originally calculated as the end of the statutory notice from the first-presentation date. The notice period is not suspended or extended by illness, leave, or other suspension events occurring during the notice itself.

Article L1234-7 reinforces this: "La cessation de l'entreprise ne libère pas l'employeur de l'obligation de respecter le préavis" (Cessation of the enterprise does not release the employer from the obligation to respect the notice). Even if the enterprise shuts down during the notice period, the employer must pay the indemnité compensatrice for the full notice duration unless the shutdown qualifies as force majeure under Article L1234-12.

## Indemnité compensatrice de préavis: payment in lieu when notice is not worked

Article L1234-5 establishes the core compensation rule: "Lorsque le salarié n'exécute pas le préavis, il a droit, sauf s'il a commis une faute grave, à une indemnité compensatrice" (When the employee does not execute the notice, the employee has the right, except if the employee committed serious fault, to a compensatory indemnity). The second sentence of L1234-5 specifies: "L'inexécution du préavis, notamment en cas de dispense par l'employeur, n'entraîne aucune diminution des salaires et avantages que le salarié aurait perçus s'il avait accompli son travail jusqu'à l'expiration du préavis, indemnité de congés payés comprise" (Non-execution of the notice, in particular in case of dispensation by the employer, does not entail any reduction in the salaries and benefits that the employee would have received if the employee had performed work until the expiration of the notice, including the paid-leave indemnity).

The indemnité compensatrice de préavis is calculated as the gross salary and benefits the employee would have earned had the employee worked the full notice period. This includes:

• Base salary (salaire de base).
• Variable elements regularly paid during the reference period (commissions, bonuses that would have accrued, shift premiums).
• The pro-rata share of annual bonuses or 13th-month salary (treizième mois) attributable to the notice period.
• The indemnité de congés payés (paid-leave indemnity) for leave that would have accrued during the notice period.

The indemnity is owed whether the employer dispenses the employee from working the notice (dispense de préavis—a unilateral decision by the employer to send the employee home immediately while paying the notice in full) or the employee is unable to work the notice (for example, immediate hiring by a new employer, though the employee must offer to work the notice under Article L1234-1). If the employee commits faute grave after the dismissal letter is sent but during what would have been the notice period, courts have held that the faute grave committed during notice can forfeit the indemnité compensatrice that had not yet been paid (though the dismissal itself remains classified by the grounds stated in the dismissal letter under Article L1232-6).

Article L1234-5, third paragraph, provides that the indemnité compensatrice de préavis cumulates with the indemnité de licenciement (statutory severance under L1234-9) and with damages for lack of cause réelle et sérieuse under Article L1235-2. The three are distinct: notice compensates for the duration between notification and contract end; severance compensates for loss of employment; damages compensate for wrongful termination.

## Interaction with collective agreements and executive notice

The statutory one-month and two-month floors bind only in the absence of a more favorable provision. Many conventions collectives specify:

• Longer notice periods for certain professional categories. For example, executive staff (cadres) commonly receive three months of notice regardless of tenure (a conventional overlay that supersedes the two-month statutory floor for employees with two or more years).
• Graduated notice by seniority bands beyond the statutory two-year threshold (e.g., two months for 2–5 years, three months for 5–10 years, four months for 10+ years).
• Notice entitlement for employees with less than six months, where the statute leaves the matter to convention or usage. A common conventional provision is one week of notice for employés and two weeks for agents de maîtrise with any tenure above the trial period (période d'essai).

The employer must identify the applicable convention collective, verify the notice provisions for the employee's classification (employé, agent de maîtrise, cadre), and apply whichever is longer—the statutory floor or the conventional term. Failure to provide the longer conventional notice (or failure to calculate it correctly) triggers liability for the shortfall in the indemnité compensatrice.

## Effective date and common traps

The statutory notice framework under Articles L1234-1 through L1234-8 has been in force since 1 May 2008 (the recodification of the Code du travail) and has remained substantively stable. The 2017 labor reforms (Ordonnances Macron) did not alter the notice-period formula, though they reformed the severance formula and the damages scale for unfair dismissal.

Common traps for employers standing up payroll in France and planning a first termination:

1. Starting the notice clock from the wrong date. The notice begins on the first presentation of the registered letter, not the date the employee signs for it or retrieves it from the post office. Article L1234-3 is unambiguous.

1. Assuming two months is always sufficient. Many collective agreements specify three months for executives or for long-tenured employees. Always check the applicable convention collective.

1. **Confusing faute simple with faute grave**. Only faute grave or faute lourde forfeit notice. If the employer misjudges the gravity and the court later finds the fault was simple, the employer will owe the full indemnité compensatrice de préavis plus potential damages for the wrongful immediate termination.

1. Suspending the notice period for illness or other leave. Article L1234-4 is clear: the notice is a fixed term; suspension events during the notice do not extend it. The contract ends on the originally calculated date.

1. **Forgetting that the indemnité compensatrice includes paid-leave accrual**. Article L1234-5 expressly includes "indemnité de congés payés comprise." The employer must calculate the pro-rata leave that would have accrued during the notice period and include its cash value in the compensatory indemnity.

An employer contemplating dismissal in France must identify the applicable notice period (statutory or conventional, whichever is longer), confirm the dismissal ground does not constitute faute grave or faute lourde (which would eliminate notice), calculate the commencement date from the first presentation of the registered dismissal letter, apply the correct tenure band, decide whether to dispense the employee or require the employee to work the notice, and prepare to pay the indemnité compensatrice de préavis as part of the solde de tout compte if the notice is not worked in full.

Source: Code du travail, Article L1234-1 (statutory notice periods by tenure) Source: Code du travail, Article L1234-2 (nullity of less favorable contract clauses) Source: Code du travail, Article L1234-3 (commencement: first presentation of registered letter) Source: Code du travail, Article L1234-5 (indemnité compensatrice de préavis) Source: Code du travail, Article L1234-8 (suspension periods and ancienneté calculation)