Payment in Lieu of Notice and Illness: Can It Be Combined with Daily Sickness Benefits?

Imagine: you are an employee in a company in Capbreton, specialising in metallurgy. You fall ill, and during your sick leave, you learn that your position is being eliminated for economic reasons. The company makes you redundant, but you are on sick leave. Are you entitled to a payment in lieu of notice (financial compensation for the notice period not worked)? And if so, can you combine it with your daily sickness benefits from the Social Security system (paid during your leave)? The question seems technical, but it affects hundreds of employees each year in the Landes and elsewhere.

This decision of the Court of Cassation from 1980 answers clearly: yes, you are entitled to the payment in lieu of notice, even if ill. But beware: you cannot pocket both this payment and your daily sickness benefits if the total exceeds what you would have earned by working. In other words, no double penalty for the employer, but also no double gain for the employee.

For a landlord in Saint-Paul-lès-Dax, this may seem remote. Yet, if you employ a worker (caretaker, concierge, cleaning staff) and have to make them redundant for economic reasons, this case law applies. Full analysis.

The Facts: A Story Like Many Others

Mr. Duval is a worker in a metallurgy company in Rouen, subject to the collective agreement of Rouen and Dieppe. In 1977, he falls ill and is placed on sick leave. During his leave, his employer makes him redundant for economic reasons (position elimination). Mr. Duval is thus made redundant while unable to work.

The collective agreement provides, in its Article 33 paragraph 5, that an employee made redundant for economic reasons is entitled to a payment in lieu of notice, even if ill and unable to perform it. The employer therefore pays Mr. Duval a payment in lieu of notice, but deducts the amount of daily sickness benefits received by the employee during the notice period. Result: the payment made is less than the salary he would have received if he had worked.

Mr. Duval challenges this calculation: he argues that the payment in lieu of notice should be paid in full, without deduction of the daily sickness benefits. He brings the matter before the employment tribunal (conseil de prud'hommes) of Dieppe, which rules in his favour. The employer appeals, and the Court of Appeal of Rouen reverses the judgment: it holds that the deduction is lawful, because the employee cannot receive more than the lost remuneration. Mr. Duval appeals to the Court of Cassation.

The Court of Cassation dismisses his appeal: it confirms that the payment in lieu of notice must be reduced by the daily sickness benefits, to avoid excessive accumulation. The employee cannot receive more than what he would have earned if he had worked. Mr. Duval's story illustrates a classic conflict between two principles: the right to the contractual payment and the prohibition of unjust enrichment.

The Reasoning of the Court — Analysed

The Court of Cassation relies on Article 33 of the collective agreement for the metallurgy industry of Rouen and Dieppe, which provides for the right to payment in lieu of notice in case of economic redundancy, even in case of illness. It therefore recognises that Mr. Duval is entitled to this payment. But it adds a general principle: the employee cannot combine the payment in lieu of notice with daily sickness benefits from the Social Security system beyond the salary he would have received if he had worked.

In clear terms, the judges consider that daily sickness benefits are intended to compensate for the loss of salary due to illness. The payment in lieu of notice compensates for the loss of salary due to redundancy (the unworked notice period). If they are combined without limit, the employee could receive more than his usual salary, which would be contrary to the principle of full compensation for damage (one should not be enriched by a loss).

The lower court judges (Court of Appeal) had already noted that Mr. Duval never claimed that, if he had not been ill, he would have had to serve his notice. In other words, he did not challenge the principle of paying the daily sickness benefits during that period. Therefore, the deduction is logical: the employer pays the difference between the salary due and what the Social Security has already paid.

This decision is neither a revolution nor a reversal: it is part of consistent case law that prohibits the accumulation of benefits of the same nature. The Court of Cassation here confirms that the lower court judges correctly applied the law.

What This Means for You — Practically

For employees: if you are made redundant for economic reasons while on sick leave, you are entitled to a payment in lieu of notice. But beware: your employer will deduct the daily sickness benefits received during the notice period. You will therefore not receive any extra money, unless your payment in lieu of notice is higher than the daily sickness benefits (for example, if your collective agreement provides for a longer notice period or a higher rate). Concrete example: in Saint-Paul-lès-Dax, an employee on the minimum wage (about €1,400 net per month) receives daily sickness benefits of about €50 per day. For a one-month notice period, the employer will have to pay the difference if his payment in lieu of notice is €1,400 and the daily sickness benefits total €1,500? No, because the cap is the lost salary. If the daily sickness benefits exceed the salary, the employer owes nothing more.

For employers: you are required to pay the payment in lieu of notice, even if the employee is ill. But you can deduct the daily sickness benefits, provided you can justify their amount. Beware: not paying the payment at all could expose you to damages. Better to calculate precisely the amount due after deduction.

For real estate professionals employing staff (property managers, estate agents): this case law applies to all employees, regardless of sector. If you make a building caretaker redundant for economic reasons during his sick leave, follow the same rule.

Four Tips to Avoid This Type of Dispute

• Check your collective agreement: Some agreements provide specific rules on notice in case of illness. Consult it before any economic redundancy.
• Calculate the payment precisely: Subtract the gross daily sickness benefits received by the employee during the notice period. If the result is negative, you owe nothing more.
• Inform the employee in writing: In the redundancy letter or a separate letter, explain the calculation of the payment in lieu of notice and the deduction made. This avoids disputes.
• Keep supporting documents: Keep documents proving the amount of daily sickness benefits (CPAM statements). In case of dispute, you can prove your good faith.

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Further Reading: Related Case Law and Developments

This 1980 decision is part of a consistent line. For example, in a judgment of 12 March 1975 (No. 73-40.123), the Court of Cassation had already ruled that the payment in lieu of notice is not cumulative with daily sickness benefits. More recently, the Social Chamber confirmed this principle in a judgment of 3 February 2010 (No. 08-43.073), specifying that the deduction applies even if the collective agreement does not explicitly provide for it.

The trend is therefore clear: the courts are committed to balancing the employee's rights and the prohibition of unjust enrichment. For the future, we can expect this rule to be maintained, unless the law or a collective agreement expressly excludes it. Employers must therefore incorporate this deduction into their calculations.

Frequently Asked Questions

Q: Can I combine the payment in lieu of notice and daily sickness benefits if my employer agrees?
A: No, even with the employer's agreement, accumulation beyond the lost salary would be contrary to public policy (principle of full compensation). An agreement cannot circumvent the law.

Q: What should I do if my employer does not pay me the payment in lieu of notice because of my sick leave?
A: You must send a registered letter with acknowledgement of receipt requesting payment. If refused, bring the matter before the employment tribunal within 12 months of the redundancy.

Q: Does this rule apply in case of redundancy for other reasons (misconduct, unfitness)?
A: No, this decision specifically concerns economic redundancy. For other reasons, the rules differ: for example, in case of gross misconduct, no notice is due.

Q: How is the payment in lieu of notice calculated?
A: It corresponds to the salary you would have received during the notice period (notice period provided by the collective agreement or contract). This amount is then reduced by the daily sickness benefits received.

Q: Can my employer require reimbursement of daily sickness benefits if the payment in lieu of notice is lower?
A: No, the employer cannot claim reimbursement. It merely deducts the amount already paid by the Social Security.

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