liquidation and termination: employee rights

liquidation and termination: employee rights

A company in difficulty under process of liquidation or receivership may resort to redundancies. But the dismissed employees retain the legal protections of the Labor Code. Some procedural rules must be respected on pain of dismissal invalidate and the payment of compensation to the employee.

dismissal procedure

If the backup process, the redundancies in the backup plan are subject to the redundancy procedure law. In this case, the measures provided for compensation of employees whose jobs are threatened must be included in the backup plan.

The redundancies in reorganization or liquidation proceedings must also follow the redundancy procedure under common law but are nevertheless subject to special provisions. The main exceptions to know the rules.


During a legal redress, layoffs can occur at different stages of the procedure:

  • When they occur during the observation period, the administrator (or employer) must first inform and consult employee representatives (works council or staff representatives) and the competent administrative authority . It must then obtain authorization from the bankruptcy judge before being able to (x) termination (s). The bankruptcy judge then issues an order stating the number of employees whose dismissal is authorized and activities and categories involved. Note that, for the courts, the notification letter of dismissal to employees (see below) in this case must necessarily include the visa of that order.
  • If the dismissal comes after the adoption of the recovery plan, the judgment must necessarily specify the number of employees whose dismissal is authorized and activities and categories involved. Otherwise, the dismissals pursuant to the decision must be considered without just cause.

In case of liquidation, the liquidator has failed to obtain prior authorization. It can therefore freely proceed to layoffs by simple application of the liquidation decision while respecting the procedure under the Labor Code.

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Staff representatives

When the employer, the administrator or liquidator intends to carry out a collective redundancy, prior consultation of staff representatives (works council or staff representatives) is mandatory. This consultation takes place under the conditions provided by Article L1233-58 of the Labor Code. The minutes of the meeting must be sent to regional management companies, competition, consumption, labor and employment (DIRECCTE).


Before sending pink slips to the employees concerned, the administrator, the employer or the liquidator must necessarily inform the administration about the nature of layoffs about to be notified. This information is transmitted to the DIRECCTE. It must contain the particulars specified in Article R1233-15 permit Labor Code which notably include employment and qualification or employees whose dismissal is contemplated and the measures taken to facilitate their rehabilitation.

Notification of dismissal

In terms of notification schedule as part of the dismissal procedure (7 or 15 working days from the date of the preliminary interview) are not applicable in case of reorganization or liquidation proceedings. Otherwise, notification of dismissal is subject to the same rules as apply in the context of a common law procedure.

For the courts, the letter of dismissal is sufficiently reasoned when it seeks the recovery or disposal plan in the event of bankruptcy or liquidation is the judgment on liquidation.

However, a letter that would target only the insolvency procedure is considered sufficiently substantiated.

Note that the payment of wages in the event of liquidation, as severance pay, is almost guaranteed.

Rights of dismissed employees

In terms of benefits, workers enjoy the same rules as those provided as part of the redundancy procedure law. The provisions for rehiring and reclassification apply.

However, because of the difficulties encountered by the company, it may be that the latter does not have sufficient funds to pay the indemnities arising from the termination of the employment contract. In this case, the payment of such compensation is provided by the AGS.
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