French Employment law - Variable remuneration: objectives must be achievable and set at the start of the financial year (c. cass. January 31 st, 2024)

By a judgment rendered on January 31 st, 2024, the social chamber of the Court of Cassation ruled on the request for reminders of an employee's target bonus against his employer.

On the basis of articles 1353 and 1103 of the civil code, the Court of Cassation not only recalls that the objective must be set upon the employee's arrival in the company, otherwise, the elements retained by the employer to deprive the employee of his target bonus are unenforceable against him, and also, if the employer can modify the annual objectives within the framework of his management power, it is however up to him to do so at the start of the financial year and not during its execution .

Failing this, according to the decision of the Court of Cassation, the maximum amount provided for the variable portion must be paid in full, as if the employee had achieved his objectives.

This is a confirmation of jurisprudence.

I. Solution

Is the absence of contestation by the employee of the table produced by his employer capable of justifying the refusal of payment of the variable part of his remuneration?

Likewise, can the fact that the employee was informed in November 2015 that the objectives would be reviewed in January 2016 constitute a basis for refusing to pay the variable part of his remuneration?

The social chamber of the Court of Cassation responds in the negative to the two legal questions put to it.

Indeed, the Court of Cassation recalls the principle which arises from articles 1134 of the civil code and L.1221-1 of the labor code, according to which "when the objectives are defined unilaterally by the employer within the framework of its management power , these must be achievable and brought to the attention of the employee at the start of the financial year.

Failing this, the Court of Cassation considers that the maximum amount provided for the variable portion must be paid in full as if it had achieved its objectives.

Therefore, the Court of Cassation only notes that the judgment of the Paris Court of Appeal ruled on improper grounds, without noting that the objectives had been brought to the attention of the employee at the start of the financial year.

Consequently, the Court of Cassation overturns and annuls the judgment of the Court of Appeal only in that it rejects the employee's requests for payment of the variable part of his remuneration for the 2015 and 2016 financial years.

The case is referred to the Paris Court of Appeal, otherwise composed.

II. Analysis

This judgment of the Court of Cassation of January 31, 2024 is a confirmation of case law.

Indeed, in a judgment published on March 2, 2011 (n°08-44.977), the Court of Cassation specified the conditions of lawfulness of the objectives defined unilaterally by the employer "When the objectives are defined unilaterally by the employer in the within the framework of his management power, he can modify them as long as they are feasible and they have been brought to the attention of the employee at the start of the financial year; ".

In addition, the financial objectives set under the following conditions may have been deemed unachievable or unreasonable:

- A commission plan increased by 20% compared to the previous year combined with the loss of a customer portfolio; (CA, Paris October 4, 2016, n°15/10365) “The modification of the sales commission plan setting a coefficient of 35 to 39% of the price of the software sold, even though the previous plans provided for a coefficient of 100% of the license sold”; (Cass, soc, October 6, 2016; n°15-15.672).

- Furthermore, the Paris Court of Appeal ruled in a judgment of May 25, 2022 that an objective increased by almost 1/3, compared to that which had been assigned to the employee during his “best commercial year ”, is unrealizable.

In this case, the Sales Director employee had refused to sign an annual commission plan due to the unachievable nature of the assigned objectives and was therefore dismissed for serious misconduct. The dismissal was therefore judged to have no real and serious cause. (CA, Paris, Pôle 6, room 10, May 25, 2022, n° 18/06987) (Exhibit n° 38)

The setting of unrealizable or unreasonable objectives constitutes a sufficiently serious breach which justifies the judicial termination of the employment contract at the fault of the employer. (cass, soc, October 6, 2016, n°15-15.672)

In a judgment published on December 15, 2021 (n°19-20.978), the Court of Cassation specified that it is up to the employer to demonstrate, in the event of a dispute, that the objectives set for employees were achievable, otherwise the variable remuneration for the financial year is due to the employee.

This solution in principle was also confirmed in a judgment of March 2, 2022

Source :

Cass. soc. 31 janvier 2024, Pourvoi n° 22-22.709

https://www.courdecassation.fr/decision/65b9f0c18452800008b2b3ab?search_api_fulltext=%2231%22%20%22Code%20civil%22&judilibre_juridiction=cc&op=Rechercher%20sur%20judilibre&page=1&previousdecisionpage=1&previousdecisionindex=4&nextdecisionpage=1&nextdecisionindex=6

Frédéric CHHUM avocat et ancien membre du conseil de l’ordre des avocats de Paris (mandat 2019-2021)

CHHUM AVOCATS (Paris, Nantes, Lille)

e-mail: chhum@chhum-avocats.com

www.chhum-avocats.fr

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