Economic Dismissal in France: Licenciement Économique Explained

An economic dismissal, known in French as a licenciement économique, ends an employment contract for reasons unrelated to the employee personally and tied instead to the company's economic situation. French law limits the grounds an employer may invoke to a closed list, requires a reclassification search before any dismissal, and scales the procedure to company size. This overview covers the framework in force as of July 2026.

Information last verified on 19 July 2026. This article presents general legal information, not legal advice.

Jurisdiction scope: This article covers economic dismissal under French national labor law (the Code du travail) as it applies in mainland France. It does not address other countries' rules or the adapted labor codes used in some French overseas collectivities.

What Is an Economic Dismissal (Licenciement Économique)?

Under article L1233-3 of the Code du travail, an economic dismissal is a dismissal for one or more reasons that are not inherent to the employee. It must result from the elimination or transformation of a job, or from the employee's refusal of a change to an essential element of their employment contract, and that job change must itself flow from one of a small number of recognized economic causes.

This structure matters because it separates economic dismissal from disciplinary or personal-capacity dismissal. An employer cannot invoke a vague notion of business reorganization or general cost-cutting on its own. The reorganization or difficulty must fit one of the categories described below, and the position, not the individual, must be the reason the contract ends.

The Four Legal Grounds Under Article L1233-3

Article L1233-3 sets out an exhaustive, closed list of grounds. An employer cannot rely on a reason outside this list to justify an economic dismissal:

• Difficultés économiques (economic difficulties), shown either by a significant decline in a quantified economic indicator or by any other element capable of establishing the difficulty
• Mutations technologiques (technological change) affecting the job or the way the work is organized
• Réorganisation nécessaire à la sauvegarde de la compétitivité (a reorganization necessary to safeguard the competitiveness of the business or its sector)
• Cessation d'activité de l'entreprise (the company ceasing its activity entirely)

Because the list is exhaustive, a reason personal to the employee, such as performance or conduct, can never support an economic dismissal. Those situations fall under a different track entirely, including disciplinary dismissal for misconduct.

Quantified Indicators of Economic Difficulty by Company Size

When an employer relies on difficultés économiques, the law gives a quantified benchmark tied to company headcount. A significant decline in orders or in turnover, compared with the same period the year before, over consecutive quarters, is treated as establishing the difficulty:

• Fewer than 11 employees: one quarter of decline
• 11 to 49 employees: two consecutive quarters of decline
• 50 to 299 employees: three consecutive quarters of decline
• 300 employees or more: four consecutive quarters of decline

These thresholds are assessed at the level of the company itself, unless the company belongs to a group, in which case the assessment is made at the level of the group's shared business sector. An employer can also point to any other element capable of demonstrating the difficulty, so the quarterly indicator is a benchmark rather than the only possible proof.

The Reclassification Obligation (L1233-4): National Territory Only Since 2017

Before any economic dismissal, article L1233-4 requires the employer to search for an available position to offer the employee instead, a step known as the obligation de reclassement. The offered position must correspond to the employee's qualifications, or be a lower-level position accepted expressly by the employee.

This is a point where older understanding of French labor law is now out of date. Case law before the 2017 ordonnances required employers to search for reclassification positions worldwide, across the entire group. The 2017 reforms changed that. Since the ordonnances of 22 September 2017, the reclassement search under L1233-4 is limited to positions available on French national territory, within the company or within other companies of the group whose organization, activity, or location allows staff to be moved between them. A position located outside France is no longer part of the mandatory search.

Redundancy Selection Criteria (Ordre des Licenciements)

When several employees hold interchangeable positions and only some will be dismissed, article L1233-5 requires the employer to apply selection criteria, known as the ordre des licenciements, to decide who is affected. Absent a collective agreement setting different criteria, the employer fixes these criteria after consulting the CSE (the works council), and must take into account, together, at minimum:

• Family responsibilities, in particular those of single parents
• Length of service (seniority) with the company
• The situation of employees whose personal or social characteristics make professional reinsertion particularly difficult, including disabled employees and older workers
• Professional qualities, assessed by category of employee

An employer may give more weight to one criterion than another, but cannot ignore any of them entirely when building the selection.

Procedure by Company Size

The steps an employer must follow scale with how many people are being dismissed and how large the company is.

For a single dismissal, the standard procedure applies: a preliminary meeting (entretien préalable) followed by written notification. The law does not require a separate CSE consultation for that individual dismissal itself.

For a dismissal of 2 to 9 employees within a 30-day period, in a company large enough to have a CSE, the employer must hold one information and consultation meeting with the CSE. A second meeting is possible but is not required at this scale, and the employer must allow a minimum of 3 days between the meeting notice and the meeting. The employer must also inform the DREETS of the dismissals within 8 days of sending the dismissal letters.

For a dismissal of 10 or more employees within 30 days in a company of 50 or more employees, a plan de sauvegarde de l'emploi (PSE) becomes mandatory, described in the next section.

The Job Protection Plan (PSE) in Companies of 50 or More Employees

A PSE, or plan de sauvegarde de l'emploi, is required whenever a company with 50 or more employees plans to dismiss 10 or more employees for economic reasons within a 30-day period. The PSE sets out measures aimed at avoiding dismissals or limiting their number, and measures to help place affected employees, such as internal or external reclassification, training, or support for starting a business.

The PSE takes one of two legal forms: an accord collectif majoritaire, negotiated and validated by the DREETS, or a document unilatéral drawn up by the employer after CSE consultation and then homologated (approved) by the DREETS. Dismissals cannot be notified before that validation or homologation has been obtained. This sequencing is a structural safeguard: the administrative authority reviews the plan before any employee actually loses their position under it.

The Contrat de Sécurisation Professionnelle (CSP)

In companies with fewer than 1,000 employees, and in any company undergoing redressement or liquidation judiciaire regardless of size, the employer must offer the employee facing economic dismissal a contrat de sécurisation professionnelle (CSP). Larger companies typically use a different device, the congé de reclassement, which pays and functions differently and should not be confused with the CSP.

The employee has 21 calendar days to accept or refuse the CSP. Silence at the end of that period is treated as a refusal. Accepting the CSP ends the employment contract by mutual agreement rather than by dismissal, and opens the door to an allocation de sécurisation professionnelle (ASP). For an employee with at least one year of seniority, the ASP is equal to 75 percent of the employee's reference daily salary, paid without a waiting period, for up to 12 months, alongside reinforced job-search support. The CSP scheme is currently extended through 31 December 2026.

The CSP is a time-limited, income-replacement and job-search support program. It does not guarantee a new job, and it comes with active job-search obligations for the employee who accepts it.

Priority for Rehiring (Priorité de Réembauche)

Article L1233-45 gives an employee dismissed for economic reasons a priorité de réembauche, a rehiring priority, lasting one year from the date the contract ends. This priority is not automatic protection; the employee must request it within that same one-year period. Where it applies, the employer must inform the employee of any position becoming available that corresponds to their qualifications, before offering it to an outside candidate. It is a right to be considered first, not an absolute right to be rehired.

Related Topics

Economic dismissal is one of several ways a French employment contract can end. A dismissal for personal or disciplinary reasons follows a different track, covered in the dismissal for gross misconduct overview. An employer and employee can also end a contract by mutual consent through a mutual agreement termination, which follows its own separate procedure. Whatever route a contract ends through, the employee's final pay is settled through a final pay settlement, and severance amounts are addressed on the severance pay page. For the full set of France employment law topics, see the France hub.

Questions about economic dismissal tend to repeat across readers facing the same situation. The answers below address the most common ones at a general level.

Disclaimer

This article is provided for general informational purposes only and does not constitute legal advice. French employment law, including the thresholds, procedures, and programs described above, can change through new legislation, decrees, or court decisions, and specific collective bargaining agreements may add obligations beyond the statutory minimum. Anyone facing an economic dismissal, or considering carrying one out, should consult a qualified French employment lawyer or the relevant French labor authorities (Direction Régionale de l'Économie, de l'Emploi, du Travail et des Solidarités, or DREETS) for guidance on their specific situation.

Frequently Asked Questions

What compensation is paid after an economic dismissal?

At minimum, the statutory indemnité de licenciement, calculated from seniority and reference salary, plus notice pay (or its equivalent) and payment for unused paid leave. A collective bargaining agreement or a PSE can set higher amounts than the legal minimum.

Is an employee entitled to unemployment benefits after an economic dismissal?

Yes. An economic dismissal is an involuntary loss of employment, which opens entitlement to the allocation d'aide au retour à l'emploi (ARE) if the standard eligibility conditions are met, or to the ASP if the employee accepts the CSP instead.

Must an employer offer another position before dismissing someone for economic reasons?

Yes, the reclassement obligation under L1233-4 requires this, but only for available positions located in France, within the employer's company or group, since the 2017 reforms narrowed the search from worldwide to national territory.

What is the CSP and does an employee have to accept it?

The CSP is a reinforced job-search support program offered in companies with fewer than 1,000 employees. An employee has 21 calendar days to decide. Accepting it ends the contract by mutual agreement rather than dismissal and pays an allowance equal to 75 percent of the reference daily salary for up to 12 months.

When is a PSE required?

A PSE is required only when both conditions are met together: the company employs 50 or more people, and it plans to dismiss 10 or more employees for economic reasons within a 30-day period. Neither condition alone triggers the requirement.

How are employees chosen for an economic dismissal when several hold similar jobs?

The employer applies selection criteria set out in L1233-5, covering family responsibilities, seniority, difficulty of professional reinsertion, and professional qualities, weighing all of them together rather than relying on a single factor.

What is the priority for rehiring and how long does it last?

An employee dismissed for economic reasons can request a priorité de réembauche within one year of the contract ending. During that year, the former employer must inform the employee of suitable openings before hiring externally, though this is a right to be considered, not a guarantee of a job offer.

Does the four-ground list in L1233-3 leave room for other business justifications?

No. The four grounds, economic difficulties, technological change, reorganization to safeguard competitiveness, and cessation of activity, form a closed list under L1233-3. A reason outside that list does not support an economic dismissal.