Compensatory Payment in Lieu of Notice: Employer who Waives Performance Cannot Claim It

Imagine the scene: in Mont-de-Marsan, a small family business dismisses one of its employees. In accordance with the contract, a notice period (the period during which the employee remains in post after notification of dismissal) is provided. But the employer, to avoid a tense atmosphere, proposes that the employee leave immediately. The employee agrees. So far, everything seems amicable. Except that a few months later, the employer claims a compensatory payment in lieu of notice, arguing that the employee did not serve the notice period. Who is right?

This decision of the Court of Cassation of 22 November 1979 (n° 77-41.185) clearly answers: the employer who agrees that the employee stops work immediately cannot later demand a compensatory payment in lieu of notice. In other words, you cannot both waive performance and claim financial compensation. This is a matter of legal logic, but also of common sense.

This principle, although dating from 1979, remains relevant today and is applied daily in the jurisdictions of Mont-de-Marsan and Dax. Whether you are an employer or an employee, understanding this rule can save you from costly litigation. Let us analyse this decision together.

The Facts: A Common Everyday Story

The case involves a company and its employee, Marie-Christine Mordant. The company decides to dismiss the employee and gives her one month's notice, in accordance with the Labour Code (Article L. 122-8 at the time, now incorporated into Articles L. 1234-1 et seq.). The employee must therefore work during this notice period and receive her salary. But the employer, no doubt to facilitate the separation, agrees that the employee stops work immediately. The employee leaves the company without serving her notice period.

Some time later, the company claims a compensatory payment in lieu of notice, considering that since the employee did not serve her notice, she must repay an equivalent amount. The employee refuses. The dispute goes to court. The Court of Appeal rules in favour of the employee: she does not have to pay this amount. The company appeals to the Court of Cassation (an appeal to contest a court decision).

The judges of the Court of Cassation dismiss the appeal. They confirm that the company, by agreeing to an immediate cessation of duties, waived the right to require the notice period to be served. However, the compensatory payment in lieu of notice is only due if the employee refuses to serve the notice or if it is the employee who takes the initiative not to serve it. Here, it was the employer who proposed the waiver. The company's counterclaim (a claim made by the defendant in proceedings) for payment of the compensatory payment is therefore dismissed.

The Court's Reasoning — Analysed

The Court of Cassation relies on the provisions of the Labour Code relating to notice and compensatory payment in lieu. In essence, the notice period is a period that allows the employee to look for a new job and the employer to find a replacement. The compensatory payment in lieu of notice is payable by the party that fails to comply with the notice period. But be careful: if the employer waives the employee's obligation to serve the notice, it cannot later claim a payment for non-performance. That would be contradictory.

The legal basis is Article 1134 of the Civil Code (old version, now replaced by Article 1103), which sets out the principle of the binding force of contracts: agreements lawfully formed take the place of law for those who have made them. By agreeing to an immediate cessation, the employer modified the employment contract and is bound by that agreement. It cannot go back and claim a payment.

In other words, the judges consider that the waiver of performance amounts to a renunciation of the compensatory payment. This solution is logical: you cannot both release the employee from their obligation and ask them for compensation for not having performed it. What few people know is that this rule also applies in other areas, such as property law, where a landlord who waives a tenant's rent cannot later claim arrears for the same period.

In this case, the Court of Cassation upholds the Court of Appeal's decision. There is no development or change in case law; it is a classic application of labour law. But this decision has the merit of reminding employers of a principle that is often misunderstood.

What This Means for You — Practically

This decision has direct practical implications, whether you are an employer or an employee. Let's take concrete examples in the Landes region.

For the employer: If you dismiss an employee and offer them not to serve their notice period, you cannot claim a compensatory payment in lieu of notice. You must therefore bear the cost of this waiver. For example, in Dax, a small construction company dismisses a worker with two months' notice. To avoid tensions on the site, the manager tells him not to come in from the next day. The worker receives his salary for the two months (since the waiver does not deprive him of his salary), but the employer cannot ask him to repay anything.

For the employee: If your employer waives your obligation to serve the notice period, you are entitled to your salary for the notice period, and you do not owe any compensatory payment. However, be careful: if you refuse to serve the notice without the employer's agreement, you may owe a compensatory payment.

For property professionals: This principle can apply by analogy to commercial leases. A landlord who waives a tenant's rent for a period cannot later claim unpaid rent for that same period.

undefined, I have come across cases where an employer in Mont-de-Marsan dismissed an employee and, to avoid conflict, waived the notice period. Later, he tried to withhold part of the final settlement (the final payment settling accounts between employer and employee) as a compensatory payment. The employee challenged this, and the employment tribunal ruled in his favour, based on this 1979 case law.

Four Tips to Avoid This Type of Dispute

• Formalise any agreement in writing: If you waive an employee's obligation to serve notice, have them sign a document specifying that this waiver is granted free of charge and that no compensatory payment will be claimed. This avoids any subsequent dispute.
• Do not offer a waiver if you are not prepared to bear the cost: The compensatory payment in lieu of notice is often equal to the salary the employee would have received during the notice period. If you waive it, you will have to pay this salary without any work in return. Assess the cost before offering a waiver.
• Check the collective agreement: Some collective agreements provide specific rules on notice and compensatory payment. For example, in retail in Dax, the notice period may be longer. Consult a lawyer lawyer to check.
• In case of dispute, keep evidence: If you are an employee and the employer claims a compensatory payment despite having waived your notice, keep any written evidence (email, letter, text message) where they authorise you not to serve the notice. This evidence will be decisive before the employment tribunal.

Further Reading: Related Case Law and Developments

This 1979 decision is part of consistent case law from the Court of Cassation. An earlier decision of the Social Chamber of 14 March 1973 (n° 71-14.175) had already held that an employer who waives the employee's obligation to serve notice cannot claim a compensatory payment in lieu. The solution is therefore well established.

More recently, the Court of Cassation clarified that even if the waiver is at the employee's initiative, the employer can accept it and renounce the compensatory payment (Cass. soc., 12 June 2001, n° 99-42.274). Conversely, if the employee refuses to serve the notice without the employer's agreement, the compensatory payment is due.

The trend in the courts is therefore protective of the employee: as soon as the employer agrees to an early cessation, it is presumed to have renounced the compensatory payment. For the future, we can expect this rule to be maintained, as it is consistent with fairness.

Checklist Before Acting

FAQ: Frequently Asked Questions on Compensatory Payment in Lieu of Notice

1. Can I waive an employee's notice without paying the compensatory payment? No, if you waive it, you must pay the salary corresponding to the notice period, but you cannot claim a compensatory payment. The waiver does not exempt you from paying the salary.
2. What should I do if my employer claims a compensatory payment despite having waived my notice? You should refuse and, if necessary, take the matter to the employment tribunal. Provide evidence of the waiver (written proof, witness statements).
3. What are the time limits for taking action? The employee has 2 years from the date of termination to bring a claim to the employment tribunal. For the employer, the time limit is also 2 years from the day they became aware of the facts giving rise to the claim.
4. Is the compensatory payment taxable? Yes, it is subject to income tax and social security contributions, unless it is paid as part of a redundancy plan.
5. Can I withdraw my agreement after having waived the notice? No, once the employee has accepted the waiver and left their post, the agreement is final. You cannot go back and claim a compensatory payment.

Are you in a similar situation? A 30-minute initial consultation with Maître Zakine (€45) may save you months of proceedings — and often much more. Book an appointment →