Economic Redundancy: When a Refusal to Transfer Suffices to Characterise It

Imagine: you own a small building in Esbly, and your tenant tells you that he is leaving his job because his boss asked him to move to another city without valid reason. You ask yourself: "Is this dismissal legal?" This question is asked by hundreds of employees and employers every day. The decision of the Court of Cassation of 14 May 1997 (No. 94-43.712) provides a clear answer: when the employer imposes a modification of the employment contract for a reason related to the company (such as overstaffing) and not to the employee's person, the employee's refusal leads to economic redundancy, not dismissal for personal reasons.

In short, if your boss asks you to change your position or place of work for organisational reasons, and you refuse, you cannot be dismissed for misconduct. Your dismissal will be economic, with all the consequences that entails: redundancy payment, right to redeployment, priority for rehiring. But be careful: the employer must prove that the modification is based on economic difficulties, technological changes or a reorganisation necessary to safeguard competitiveness.

What few people know is that this decision established a fundamental principle: the economic reason must be verified by the judge, even if the employer invokes "good management". undefined, I have come across cases where employees in Lagny-sur-Marne were dismissed for refusing a transfer when the company had no real difficulties. The Court of Cassation gives them reason.

The Facts: An Everyday Story

Mr X, owner of a flat in Esbly, worked as a regional delegate for the company Normabarre at the Lyon agency since April 1969. In January 1992, his employer noted overstaffing in the Lyon agency and the retirement of the manager of the Saint-Ouen agency. To solve this problem, he proposed a transfer to Saint-Ouen to Mr X. Mr X refused, considering that this modification of his employment contract was not justified. The employer then dismissed him for "refusal of transfer", considering that this refusal constituted a real and serious cause for dismissal.

Mr X contested this dismissal before the employment tribunal, then the court of appeal. He argued that the imposed transfer was not related to his person but to the organisation of the company, and that the dismissal should therefore be classified as economic. The court of appeal ruled against him: it considered that the transfer was "necessitated by the good management of the company" and that the refusal constituted a real and serious cause. But Mr X did not stop there: he appealed to the Court of Cassation.

The Court of Cassation quashed the appeal judgment. It recalled that dismissal resulting from the refusal of a modification of the contract imposed for a reason not inherent to the employee's person is an economic redundancy. However, the court of appeal did not verify whether the modification was consequent upon economic difficulties, technological changes or a reorganisation necessary to safeguard competitiveness. It contented itself with "good management", which is insufficient. The case was remitted to another court of appeal.

The Reasoning of the Court — Analysed

The Court of Cassation relies on two articles of the Labour Code: Article L. 122-14-4 (now L. 1235-3) which provides for compensation in case of dismissal without real and serious cause, and Article L. 321-1 (now L. 1233-3) which defines economic redundancy: "Constitutes dismissal for economic reasons dismissal carried out by an employer for one or more reasons not inherent to the employee's person resulting from the abolition or transformation of employment or from a modification, refused by the employee, of his employment contract, consequent in particular upon economic difficulties or technological changes."

In short, economic redundancy is not linked to the employee's person (conduct, skills) but to the company. The modification of the contract (transfer, change of position) imposed for a company reason, if refused, leads to economic redundancy. But be careful: the employer must demonstrate that the modification is based on one of the legal grounds: economic difficulties, technological changes or reorganisation necessary to safeguard competitiveness.

In this case, the court of appeal had noted that the transfer was due to the overstaffing of the Lyon agency and the retirement of the manager of Saint-Ouen. These facts do constitute reasons not inherent to the employee's person. Yet, it classified the dismissal as having a real and serious cause (non-economic) based on "good management". The Court of Cassation censured this reasoning: good management is not an economic reason. It requires the judge to concretely verify the existence of economic difficulties, technological changes or reorganisation.

This reasoning confirms a consistent line of case law since the 1990s: the judge must not be content with the employer's assertion. He must examine the company's accounts, technological developments, the reality of the reorganisation. This is an essential protection for the employee.

What This Means for You — Practically

If you are a landlord in Lagny-sur-Marne and your tenant is dismissed for refusing a transfer, this may affect his ability to pay the rent. But above all, if you yourself are an employee, this decision protects you: your employer cannot impose a transfer on you without respecting the rules of economic redundancy.

For an employee: if your employer proposes a modification of your contract (change of location, duties, remuneration) for a company reason (overstaffing, reorganisation), you have the right to refuse. This refusal cannot be sanctioned by a dismissal for misconduct. The employer will have to initiate an economic redundancy procedure, with all the guarantees: preliminary interview, reasoned dismissal letter, redundancy payment (at least 1/5 of a month per year of service), priority for rehiring for one year.

For an employer: you must prove that the modification is justified by economic difficulties (decline in turnover, losses), technological changes (new tools, digitisation) or a reorganisation necessary to safeguard competitiveness (to avoid future losses). A simple "overstaffing" is not enough if you do not demonstrate that the company is in difficulty. undefined, I have seen cases where the employer invoked "good management" without supporting accounts: the dismissal was reclassified as dismissal without real and serious cause, with damages of 6 to 12 months' salary.

Example: an employee with 10 years' service and a salary of €2,500 per month. If the dismissal is reclassified as dismissal without real and serious cause, he may obtain between €15,000 and €30,000 in damages (depending on the loss). If it is an economic redundancy, he will receive about €5,000 in statutory redundancy payment, plus unemployment benefits.

Four Tips to Avoid This Type of Dispute

• Check the reason for the modification: before accepting or refusing a transfer, ask your employer to justify in writing the economic reason (difficulties, technological changes, reorganisation). Keep all documents.
• Do not refuse without thought: a refusal may lead to economic redundancy, but if you accept unconditionally, you lose the right to contest. Consult a lawyer before responding.
• Insist on a written notice: the employer must notify you of the modification by registered letter with acknowledgement of receipt. You have one month to respond. During this period, inform yourself of your rights.
• Consult a lawyer at the first signs: if you feel that your employer is trying to push you out, or if the transfer seems abusive, make an appointment. A quick consultation can save you from an unfair dismissal.

Further Reading: Related Case Law and Developments

This 1997 decision is part of a protective line for the employee. Already in 1993, the Court of Cassation had ruled (Société Générale decision, No. 91-42.829) that refusal of a modification of the contract for economic reasons constitutes economic redundancy. Since then, case law has clarified that the reorganisation must be necessary to safeguard competitiveness (Vidéocolor decision, 1995), and not merely to improve results.

More recently, in 2016, the Court of Cassation extended this protection to changes of workplace (even in the absence of a mobility clause): if the change is imposed for an economic reason, refusal leads to economic redundancy (No. 15-10.892). The trend is therefore constant: the judge rigorously verifies the reality of the economic reason.

For the future, this case law could evolve with the labour law reform (Macron ordinances of 2017) which broadened the grounds for economic redundancy in case of reorganisation to "preserve competitiveness" or "safeguard the competitiveness of the business sector". But the principle remains: the reason must be proven.

In Practice: What to Do

FAQ:

• Can I refuse a transfer without being dismissed for misconduct? Yes, if the transfer is imposed for a company reason (economic, technological, reorganisation). Your refusal leads to economic redundancy, not disciplinary dismissal.
• What should I do if my employer dismisses me for refusing a transfer? Contest the dismissal before the employment tribunal within 12 months. You can request reclassification as economic redundancy, or even as dismissal without real and serious cause if the economic reason is not proven.
• What are the time limits to act? You have 12 months from the notification of dismissal to refer the matter to the employment tribunal. To contest the modification itself, you have one month from receipt of the employer's letter.
• What compensation can I expect? In case of economic redundancy, you are entitled to the statutory redundancy payment (1/5 of a month per year of service) and unemployment benefits. If the dismissal is without real and serious cause, damages of 6 to 12 months' salary (depending on length of service and loss).
• Can my employer transfer me without my consent? Yes, if the contract contains a mobility clause, but only if the transfer is justified by the company's interest and not abusive. Otherwise, the modification requires your agreement.

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