Can an employee justify their immediate resignation due to imperfect management of company?

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Date:
02 Jan 2020

ILO, Employment & Benefits

By:
Guy Castegnaro, Ariane Claverie

The Court of Appeal has ruled that employers' decisions regarding their economic policy, internal organisation and operating procedures cannot justify an employee's resignation due to serious misconduct.

Background

Employees are free to resign with notice or with immediate effect.

A resignation with notice need not be justified. On the other hand, a resignation with immediate effect must be based on a serious fault on the part of the employer of which the employee must have had knowledge within the month of resignation (both conditions being cumulative). Without these conditions being fulfilled, the resignation will be considered unjustified in the event of a dispute and the employer will be entitled to compensation in lieu of notice.(1)

The Labour Code provides for certain cases where employees have the right to resign without being required to comply with a notice period.(2)

In addition, the labour courts have specified cases in which an employee's resignation with immediate effect is justified, including situations in which an employer:

  • pays wages or supplies payslips late;(3)
  • shows aggressive or abusive behaviour towards the employee;(4) or
  • repeatedly refuses to grant the employee leave.(5)

Facts

In a recent case the Court of Appeal considered an original ground for resignation with immediate effect – namely, the management policy applied by the employer, which was a bank on the verge of bankruptcy.(6)

In 2001 the employee was hired by the bank as a risk manager and at the time of his resignation was head of risk management.

On 9 October 2008 the employee resigned with immediate effect for the following reasons:

  • Despite the fact that he had warned the bank about risks since 2007, the bank had persisted in taking and maintaining inappropriate credit and liquidity risks, resulting in excessive financial risk, inadequate management responses and actions which had discredited the bank's reputation in the risk management field.
  • There had been insufficient resources and staff in the risk management department, which – in the employee's view – was a result of a series of unilateral and discretionary decisions made by the bank's management.
  • There had been a lack of adequate operational and hierarchical support from the bank's group risk management.

Decision

According to the court, it was necessary to first check whether the employer was guilty of serious misconduct and then verify whether the employee had respected the one-month time limit.

Consequently, the court first ascertained that the bank's management, its decisions and the means put in place that had been criticised by the employee were not linked to a serious fault on the part of the employer.

Indeed, after having recalled the general principle(7) that an "entrepreneur is the master of the organisation and the reorganisation of his company and bears the risks engendered by the activity of the company", the court decided that an:

employee may criticize these decisions relating to management and choose to terminate his employment contract binding him to the employer, but respecting the notice period; however, he cannot rely on them as serious misconduct attributable to the employer to resign with immediate effect.

For the court to admit otherwise "would allow any employee whose employer risks being declared bankrupt to resign in extremis for serious misconduct, in order to claim damages".

After analysis of the second condition was deemed to have become superfluous, the resignation with immediate effect was declared abusive and the employee was denied his claim for damages.

Endnotes

(1) Article L124-6(1) of the Labour Code. Employers may also claim damages on the basis of Article L124-10(1) of the Labour Code, but case law shows that such claims are rarely admitted in practice.

(2) Article L133-2(2) of the Labour Code (where an employee works for a company on an illegal basis) and Article L245-7 of the Labour Code (where an employee is a victim of sexual harassment).

(3) Court of Appeal, 1 February 2018, 44587, which states that the "late and partial payment of wages at irregular intervals and repeatedly, and late discount of the salary slips constitute a serious breach of the employer's obligations justifying the resignation with immediate effect of the employee".

(4) Court of Appeal, 29 January 2009, 33745 and 33933; Court of Appeal, 22 November 2012, 35572.

(5) Court of Appeal, 8 November 2012, 37228.

(6) Court of Appeal, 11 July 2019, CAL-2018-00277.

(7) The court has called this a recurrent principle in labour law.