Background

In 2004, the Fédération Nationale du Crédit Agricole (FNCA) hired Mr. Rossi as one of its senior managers. Mr Rossi. was entitled to a defined-benefit pension, provided he was still employed by FNCA upon retirement. In 2006, FNCA dismissed Mr. Rossi for poor performance.

The Paris Court of Appeals held his dismissal unfair, but refused to award him damages for the lost opportunity to receive a defined-benefit pension. Mr. Rossi appealed to the Cour de Cassation, the French Supreme Court.

Decision

The French Supreme Court upheld the condition that the employee must still be employed by the company upon retirement in order to benefit from a pension. On this basis, Mr. Rossi’s claim to a pension was dismissed. However, the French Supreme Court held that, where the dismissal is found to be unfair, the employee sustains a loss caused by the lost opportunity to remain employed until retirement and benefit from a pension. On this basis, Mr. Rossi’s claim was allowed.

The Paris Court of Appeals will decide within the next couple of months the amount of damages Mr. Rossi is entitled to as compensation for that lost opportunity.

What Does This Mean for Employers?

When assessing the cost of dismissing a manager and preparing a settlement negotiation, the employer must now evaluate damages for the lost opportunity to benefit from a defined-benefit pension. The French Supreme Court offers no guidelines on this, which makes it a rather difficult task. The employer will first need to assess the probability that the employee would have stayed with the company until retirement. This will then have to be balanced with the amount the employee would have been entitled to. In many cases, the employee may also claim damages for the lost opportunity to make a profit on stock options.

Settlement claims with senior managers look likely to become more challenging. To avoid disputes and future, additional expense, it is worth seeking expert advice at the beginning of the dismissal process.