Dec
12
Traders' deferred bonuses: what changes with Macron Ordinances, realism or cynicism of the French Government?

Article 6 bis of the draft law authorizing the ratification of Macron ordinances issued on the Law n°2017-1340 of September 15th, 2017 amends the Monetary and Financial Code and the conditions of remuneration and compensation in case of dismissal of Traders (risk takers of credit institutions, portfolio management companies and investment firms).

This draft law was adopted by the French National Assembly on November 28th, 2017.

With these provisions, French Government wants to make the business center of Paris more attractive, particularly in order to attract English companies, following the Brexit, so that they settle in France.

1) Possibility for banks to recover "in whole or in part" the deferred bonuses (bonus différés) received by traders based on their actions or their behavior (Monetary and Financial Code Article L. 511-84-1 new)

Article 6 bis of the law of ratification makes effective the possibility, already granted by the Monetary and Financial Code, to credit institutions, portfolio management companies and other investment firms, to recover deferred bonuses from traders ("Risk-taking executive employee" (cadres preneurs de risques)).

In this regard, the draft law of ratification provides that the prohibition of financial penalties provided for in Article L. 1331-2 of the Labour Code does not apply to the variable remuneration of traders.

It should be noted that there is a principle which strictly prohibits the employer from making any form of deduction from the employee's remuneration as a penalty (Labour Code L.1331-2).

The text adds that this variable compensation may be reduced or give rise to restitution depending on the actions or behavior of the person.

In this regard, Article 6 bis 3° of the draft law ratifying Macron Ordinances provides that "(...) Notwithstanding Article L. 1331-2 of the Labor Code, the total amount of the variable remuneration may be reduced or give rise to restitution in particular according to the behavior of the person concerned in terms of risk taking "(Monetary and Financial Code Article L. 533-22-2 IV).

The "deferred" or "recoverable" bonuses are bonuses whose payment is conditional on performance criteria spread over time.

The objective is to limit certain risks by introducing an incentive factor for the sustainability of the projected operations.

On the other hand, if long-term performance is not achieved, a "clawback" clause may apply and the bonus may be lowered or refunded (in whole or in part) to the employer.

2) Exclusion of deferred bonuses from the calculation of severance pay and compensation for unfair dismissal (Monetary and Financial Code Art L. L. 533-22-2-1 new)

Article 6 bis of the draft law of ratification provides that these same bonuses shall not enter into the basis of calculation of the legal indemnity for dismissal or in the compensation for unfair dismissal.

In this regard, Article 6 bis 2 ° of the draft law ratifying Macron ordinances provides that: "- For the application of Articles L. 1226-15, L. 1234-9, L. 1235-3, L. 1235-3-1, L. 1235-11 and L. 1235-16 of the Labor Code, the determination of the compensation paid by the employer does not take into account, for risk-takers (...), the portion of the variable remuneration whose payment may be reduced or give rise to restitution pursuant to Articles L. 511-71 and L. 511-84 of this Code. "(Monetary and Financial Code Article L. 511-84-1 new).

2.1) Exclusion of deferred bonuses from the conventional severance pay

Deferred bonuses are not taken into account in the conventional severance pay (indemnité conventionnelle de licenciement) referred to in Article L. 1234-9 of the Labor Code.

Some consider that this article will however have little consequence.

Indeed, the two collective agreements (Collective Agreement IDCC Bank 2120 and Collective Agreement on Financial Markets IDCC 2931) applicable to traders already provide that the basis of severance pay only takes into account the fixed salary.

2.2) Exclusion of deferred bonuses from the compensation for unfair dismissal

Deferred bonuses are not taken into account in the compensation referred to in Articles L.1235-3 and L.1235-3-1 of the Labor Code.

This compensation for unfair dismissal is now subject to compulsory scale (what changes for the employees with the capping of compensation for unfair dismissal).

This mandatory scale is excluded in 8 cases (Labor Code L.1235-3-1), particularly in case of moral harassment (harcèlement moral) for breach of a fundamental obligation (violation d’une liberté fondamentale), etc. (cf Our article: Employees, executives, managers : 4 tips to avoid the ceiling of the industrial tribunal awards provided by the Macron Ordinance)

The impact of this exclusion on the amount of compensation for unjustified dismissal granted by the judge in the context of unfair dismissal, is major since the reference salary used as a basis for the calculation took up to present account the totality of the variable remuneration of the trader unjustly dismissed.

It should be noted that in principle the bonus cannot exceed the amount of the trader's fixed remuneration.

However, a decision of the general meeting of the credit institution or finance company may decide to increase the amount of the bonus to twice the fixed remuneration. (Monetary and Financial Code L.511-78)

3) Is this draft law contrary to the Constitution?

We can question the constitutionality of this draft law.

Do these provisions, in that they place traders in a situation different from that of other employees, not contrary to the constitutional principle of equality before the law (Article 1 of the Declaration of the Rights of Man and of the Citizen)?

How can the legislator justify that only traders' bonuses will not be taken into account in the calculation of compensation for unfair dismissal?

One thinks in fact of employees who hold commercial jobs and whose variable remuneration can also be very substantial.

Can the legislator then avail himself of a general interest reason not to include the deferred bonuses of traders in compensation for unjustified dismissal? This remains to be demonstrated

In conclusion, with these provisions, the Government wants to make the financial center of Paris more attractive.

To dismiss a trader will be cheaper for banks to invest in France.

This is the curious and cynical message that the French Government is today sending to foreign investors.

Frédéric CHHUM

Avocats à la Cour (Paris et Nantes)

. Paris : 4 rue Bayard 75008 Paris - Tel: 01 42 56 03 00 ou 01 42 89 24 48
. Nantes : 41, Quai de la Fosse 44000 Nantes -  Tel: 02 28 44 26 44

e-mail : chhum@chhum-avocats.com

Blog : www.chhum-avocats.fr

http://twitter.com/#!/fchhum

 

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