France is world-renowned for its protection of employees against adverse employer actions, particularly unilateral terminations. Like virtually all other countries outside the United States, France does not recognize at-will employment, and French employers may not fire employees without justification that meets a stringent standard.
In what appears to be an extreme example of these protections, on June 7, 2016, a French labor court held that French bank Société Générale SA (SocGen) unfairly fired trader Jérome Kerviel in 2008 without real and serious cause (“sans cause réelle ni sérieuse”) and ordered SocGen to pay him €450,000 in damages (including a bonus for 2007). The bank’s grounds? His unauthorized trades resulted in close to €5 billion in losses and a near-bankruptcy. SocGen’s 2008 investigation led to Kerviel’s criminal conviction for breach of trust, forgery, and unauthorized computer use (“abus de confiance, faux et usage de faux, introduction frauduleuse de données dans un système informatique”) and a five-year prison sentence. Kerviel was also ordered to reimburse the bank’s losses of €4.9 billion, but the Cour de Cassation (France’s equivalent to the Supreme Court of the United States) overturned the monetary penalty in 2014, finding that the bank’s actions contributed to the fraud and its attendant financial consequences. (Cass. crim. 19 mars 2014 12-87416). Kerviel served a total of five months in prison before being released, under condition that he wear an electronic monitoring bracelet.
Despite being criminally prosecuted, Kerviel had separately filed a claim in labor court to challenge SocGen’s decision to terminate his employment. On June 7, 2016, the labor court found that the bank was not justified in firing Kerviel because it had known what he was doing and fired him not for his actions, but rather for their consequences when the trades went bad. Under the French labor code, an employer may only discipline an employee within two months of learning of the offending behavior; in this case, the court held that while Société Générale claimed it did not know about the fraud until January 18, 2008, there were various warnings regarding his actions dating as far back as 2005. The court held that the employer could not sanction him later for the same behavior that it had tolerated for so long. (Cons. prud’h. Paris, 7 juin 2016, Kerviel c/ Société Générale, n° 15/08164)
Key Takeaways
This ruling (which Société Génerale says it will appeal) and other similar decisions, put French employers in an almost impossible position—it is expensive and extremely difficult to fire someone, but if you do not take action as soon as you discover wrong-doing, even while determining the extent of that wrongdoing, carefully building your case and following proper procedure, then you may lose your chance to use that event as justification for a termination decision. In Kerviel’s case, managers may have not viewed his trading activity as egregious enough for termination, especially while the extent of his fictitious positions was not known and the bank was making money—leading managers to discount the riskiness of his actions.
It may be worth noting that Kerviel has attracted something of a fan following, and L’Outsider, a documentary about his fight against the bank has recently been released in France. Because Kerviel was not well connected, but rather, the son of an ironworker and a hairdresser, some argue that he was an easy scapegoat for financial wrongdoing in 2008. The labor court may have factored in this backdrop when making its determination.
The Kerviel case presents a sobering lesson for employers—especially in countries like France, where courts hold employers to an extremely high standard to justify a firing. To make a case for dismissal, employers must be vigilant to ensure proper company controls in managing employees and must be prepared to act swiftly to determine whether employee actions or behavior warrant dismissal, all while balancing their interests against the rights of employees. Moreover, France is not the only country where employers can find themselves without recourse if they do not act quickly. Belgium’s laws are even more draconian—an employer has a mere three days to terminate an employment contract for serious cause, once the cause is known to the employer. Even in countries where there are no specific time constraints written into the law, any delay by the employer may work against its argument that the conduct was so egregious it warranted dismissal.
