Termination of employment contract due to incapacity: procedure and compensation

Termination of the employment contract due to incapacity can only occur after an opinion from the occupational physician and, unless expressly waived by that opinion, after a serious search for reassignment.

The employer must follow a specific procedure, which differs slightly depending on whether the incapacity is work-related or not. An error in the search for redeployment, the consultation with the works council, or the notification of dismissal can expose the company to legal action before the labor court.

How is unfitness determined?

Unfitness for work can only be determined by the occupational physician. It should not be confused with:

• a sick leave prescribed by the attending physician;
• a disability recognized by Social Security;
• a permanent disability resulting from a work accident or occupational disease;
• a simple difficulty for the employee in performing their job.

Pursuant to Article L.4624-4 of the Labour Code, the occupational physician can only declare an employee unfit after having carried out the necessary examinations and procedures and determined that no adjustment, adaptation or transformation of the position is possible.

The unfitness notice includes the written conclusions of the occupational physician and indications relating to the reassignment of the employee.

He can, in particular, specify that:

• the employee could occupy a position subject to certain restrictions;
• his state of health allows for training designed to prepare him for a suitable position;
• Any continued employment would be seriously detrimental to his health;
• His state of health prevents any reassignment to another job.

Both the employer and the employee can contest the opinion before the labor court within fifteen days.

Does termination of an employment contract due to incapacity always imply reassignment?

In principle, the employer must look for another job that is suitable for the employee's abilities.

This obligation applies both to incapacity of non-occupational origin, governed by Article L.1226-2 of the Labour Code, and to incapacity resulting from a work accident or occupational disease.

The position offered must be:

• as comparable as possible to the job previously held;
• compatible with the conclusions and indications of the occupational physician;
• adapted to the employee's capabilities;
• sought, if necessary, through transfers, adjustments, adaptations or transformations of positions or an adjustment of working time.

The employer is not obligated to create a job that does not exist. However, they must seriously consider the possibilities of adapting existing positions.

The search must focus on available jobs within the company and, where the company belongs to a group, among the group's companies located in France whose organization, activities or place of operation allow for the transfer of all or part of the staff.

In what cases is the employer exempt from redeployment?

The employer may be exempt from seeking redeployment when the occupational physician expressly includes one of the following statements in their opinion:

• "any continuation of the employee in a job would be seriously detrimental to his health";
• "The employee's state of health prevents any reassignment to another job.".

These specific terms must be explicitly stated in the notice. A simple mention of unsuitability for all positions within the company should not automatically be construed as a waiver of redeployment.

Apart from these two scenarios, the employer must conduct an effective and individualized search, even when the possibilities appear very limited.

Should the Works Council be consulted on the reassignment of an employee deemed unfit for work?

When a search for redeployment is to be carried out, the social and economic committee must be consulted before redeployment proposals are presented to the employee.

This consultation concerns both occupational and non-occupational incapacity.

The Works Council must have sufficient information to issue a useful opinion, including:

• the notice of unfitness;
• the instructions of the occupational physician;
• the characteristics of the position held;
• the research carried out;
• the available positions and the reasons why some jobs were ruled out.

The opinion of the Works Council (CSE) is not binding on the employer. However, its absence, when mandatory, can affect the regularity or justification of the termination.

When the employer is expressly exempted from any search for redeployment by the occupational physician, the need for consultation with the CSE must be assessed in light of the exact wording of the opinion and the applicable case law.

Can an employee refuse a redeployment position in the context of termination of the employment contract due to incapacity?

The employee remains free to refuse the proposed position.

Refusal does not necessarily constitute misconduct. However, it allows the employer to consider dismissal when the offer:

• is compatible with the opinion of the occupational physician;
• corresponds to the employee's capabilities;
• was formulated after a fair search;
• respects, where applicable, the recommendations relating to working time and working conditions.

If the proposed position entails a modification of the employment contract, the employee's agreement is essential.

After a refusal, the employer must check if other suitable options are available. They cannot consider their obligation fulfilled if another redeployment solution remains possible.

The obligation is deemed to be satisfied when the employer has fairly offered a job that complies with the legal criteria and the instructions of the occupational physician, in particular in accordance with Article L.1226-12 of the Labour Code.

When is termination of an employment contract due to incapacity possible?

The employer may initiate the dismissal procedure if they can justify it:

• the impossibility of offering a compatible job;
• the refusal by the employee of a job offered under the legal conditions;
• or one of the two statements from the occupational physician exempting him from seeking redeployment.

When redeployment is impossible, the employer must inform the employee in writing of the reasons preventing it, before initiating the termination. This obligation is specifically stipulated in Article L.1226-2-1 of the French Labor Code.

For an employee on a permanent contract, the employer must then follow the procedure for dismissal for personal reasons:

1. summons to a preliminary interview;
2. interview format;
3. reasoned notification of dismissal.

The letter must explain the unsuitability and the reason making it impossible to continue the contract: impossibility of reassignment, refusal of the proposed position or exemption resulting from medical advice.

Is the employer required to resume salary payments after one month?

Yes. If the employee is neither reassigned nor dismissed within one month of the medical examination that led to the opinion of unfitness, the employer must resume payment of the salary corresponding to the job previously held.

This obligation applies even if:

• the employee is no longer providing work;
• He was declared unfit for any employment;
• The search for redeployment continues;
• The dismissal procedure is not yet complete.

For non-occupational incapacity, this rule stems from Article L.1226-4 of the French Labor Code. An equivalent rule applies to incapacity of occupational origin.

The employer must therefore quickly organize the search, the consultation with the CSE and the possible termination procedure.

Does an employee dismissed for incapacity have to give notice?

No. The contract is terminated on the date the dismissal is notified. There is no notice period to be observed.

However, the financial consequences differ depending on the origin of the incapacity.

Incapacity of non-occupational origin

The employee receives, unless more favorable provisions are stipulated in a collective agreement:

• the statutory or contractual severance pay;
• the compensation in lieu of paid leave;
• the other sums remaining due at the time of termination.

He does not receive compensation in lieu of notice since the notice period is not worked and does not legally exist in this situation. However, the theoretical length of the notice period is taken into account when calculating the severance pay.

Occupational disability

When incapacity results from a work-related accident or occupational disease, the employee is entitled, subject to legal conditions:

• a special severance payment equal to twice the statutory severance payment, unless a more favorable contractual provision exists;
• of compensation equal to the amount of compensation in lieu of notice;
• of the compensation in lieu of paid leave.

These rules result in particular from article L.1226-14 of the Labour Code.

It is therefore necessary to determine precisely whether the incapacity is work-related or not before settling all accounts.

Should the letter mention skills assessment, VAE (Validation of Acquired Experience) or training?

The old article from 2013 stated an obligation to inform the employee, in the dismissal letter, of the possibility of requesting a skills assessment, validation of acquired experience or training during a period corresponding to the notice period.

This solution was linked to the former individual right to training. The DIF was replaced by the personal training account as of January 1, 2015.

Therefore, this statement no longer constitutes, as such, a mandatory statement in the letter of dismissal for incapacity.

The employee retains the rights registered in their personal training account, but their use now falls under the specific rules of the CPF (Personal Training Account). The article must therefore remove the sections based on the ruling of September 25, 2013.

Similarly, the assertion that omitting a detail would "necessarily" cause harm must be rejected. Case law now generally requires the employee to demonstrate the existence and extent of the alleged harm.

Does the termination of a fixed-term contract due to incapacity require a prior interview?

Unfitness for work as determined by the occupational physician may justify the early termination of a fixed-term contract when no reassignment is possible.

The obligations relating to the search for redeployment and the resumption of salary after one month also apply to employees on fixed-term contracts.

However, the early termination of a fixed-term contract due to incapacity does not constitute dismissal. Therefore, the dismissal procedure for personal reasons and the preliminary interview are not, in principle, applicable.

The employer must, however:

• to have a valid certificate of unfitness;
• seek a reassignment, unless expressly exempted;
• consult the CSE when this consultation is required;
• inform the employee of the reasons preventing reassignment;
• clearly notify the early termination of the fixed-term contract.

The termination entitles the employee to compensation, the amount of which varies depending on whether the incapacity is work-related or not. The applicable regulations are specified in particular by Article L.1226-4-3 of the French Labor Code.

Points to check before any termination of the employment contract due to incapacity

Before terminating an employment contract due to incapacity, the employer must, in particular, verify the following:

1. the regularity and date of the notice of unfitness;
2. its professional or non-professional origin;
3. the specific instructions of the occupational physician;
4. the possible existence of an exemption from redeployment;
5. the scope of research within the company and the group;
6. the possibilities for adapting or transforming positions;
7. consultation with the CSE when required;
8. evidence of the research and proposals carried out;
9. written notification to the employee in the event of impossibility of reassignment;
10. the one-month period resulting in the resumption of salary;
11. the procedure applicable to permanent or fixed-term contracts;
12. the exact calculation of severance pay.

Support from the employment law department of ARST Avocats

Termination of an employment contract due to incapacity presents a significant risk of litigation, particularly when the search for redeployment or the consultation of the CSE is contested.

The social law department of ARST Avocats assists employers in analyzing medical opinions, defining the scope of redeployment, consulting the CSE, conducting the procedure and calculating compensation.

A preliminary analysis helps to secure the termination of the employment contract due to incapacity and to gather the elements necessary to demonstrate compliance with the employer's obligations.

Article written by Chaouki Gaddada