The French company you run from London, New York or Dubai is losing money. Orders have collapsed, cash is draining, and the salary of your first or second employee has become the largest line you can still cut. You cannot simply invoke poor performance, because the reason is not the person, it is the business. French law gives you a dedicated track for exactly this situation, the economic dismissal, but it is the most demanding track in the Labour Code: you must prove the economic reason with figures, offer the employee a statutory return-to-work scheme, notify the labour administration, and survive a judge who will check every step. Get it right from abroad and the file closes at a known price. Get it wrong and the dismissal is judged without cause with damages on top.
This guide explains, in plain English, how a foreign owner runs an economic dismissal in France without moving there. You will learn what economic reason a French court accepts from a foreign-owned company, how to run the procedure and the mandatory job-security offer remotely, how to price the severance and the litigation risk in advance, and how to defend the file before the labour court through French counsel. Every acronym is explained on first use and every decisive rule is quoted from the statute or from a recent Court of Cassation ruling. If your problem is the behaviour of the employee rather than the state of the business, read our companion guide on dismissing for personal reasons and agreeing a mutual separation from abroad instead. And if you have not yet structured the company itself, start with our complete guide to setting up a company in France as a foreign founder.
I. Can I dismiss my French employee for economic reasons while running the company from abroad?
A. What economic reason will a French judge accept from a foreign-owned company?
An economic dismissal is defined by its cause, not by your intention. Article L1233-3 of the Labour Code states that “Constitue un licenciement pour motif économique le licenciement effectué par un employeur pour un ou plusieurs motifs non inhérents à la personne du salarié résultant d’une suppression ou transformation d’emploi ou d’une modification, refusée par le salarié, d’un élément essentiel du contrat de travail”. In practice you close the position, you do not replace the employee, and the letter explains the business facts behind the closure. The most common ground for a small foreign-owned company is financial difficulty, and the statute gives you a measurable test. Difficulties are shown by a significant change in at least one indicator such as falling orders or turnover, operating losses, or deteriorating cash flow or gross operating surplus, and a significant fall in orders or turnover exists, compared with the same period of the previous year, over “Un trimestre pour une entreprise de moins de onze salariés”. For a company with fewer than eleven employees, which covers most foreign founders with one or two hires, a single quarter of falling turnover against the same quarter last year can legally characterise the difficulty. Larger headcounts require two or three consecutive quarters. Pull the quarterly accounts, the order book and the bank statements before anything else: the dismissal letter will cite them, and the judge will read them.
Foreign ownership adds one decisive twist: where your French company belongs to a group, the difficulties are assessed at group sector level, not on the French company alone. The Court of Cassation confirmed the rule on 31 March 2021 in a published ruling, No. 19-26.054: “La cause économique d’un licenciement s’apprécie au niveau de l’entreprise ou, si celle-ci fait partie d’un groupe, au niveau du secteur d’activité du groupe dans lequel elle intervient. Il incombe à l’employeur de démontrer, dans le périmètre pertinent, la réalité et le sérieux du motif invoqué.” If your American parent or your Dubai holding is thriving in the same sector while the French subsidiary bleeds, the dismissal fails, because the sector is healthy. Conversely, a standalone French SAS with no group behind it is assessed on its own figures, which is simpler. Map your group honestly before choosing this track: list the companies, their sectors and their results, and ask your counsel whether the relevant sector is declining. Where the group picture is mixed, the personal track or a negotiated exit from our companion guide is usually safer than an economic dismissal that collapses on the sector test.
The second pillar of the economic reason is redeployment, the obligation to look for another post before dismissing. Before any economic dismissal, the employer must search for every available redeployment possibility, in the company and, where there is one, across the group companies whose activity, organisation or operating location allow staff to be moved. The Court of Cassation tightened the standard on 21 January 2026 in No. 24-20.463: “Il résulte de ce texte que l’employeur est tenu avant tout licenciement économique de rechercher toutes les possibilités de reclassement existant dans le groupe dont il relève, parmi les entreprises dont l’activité, l’organisation ou le lieu d’exploitation permettent d’effectuer la permutation de tout ou partie du personnel.” In that case a generic circular letter mentioning only the job title, without the contract type, status or classification of the employee concerned, was held too vague to prove a real search. For a foreign founder this means sending written, individualised redeployment offers, to the French company itself and to any group entity that could take the person, stating the precise posts, contract terms and locations, and keeping every reply. A standalone company with one employee and no other post documents the search in a short memo: the positions examined, why none fits, and the emails proving it. That memo joins the dismissal file and answers the judge’s first question.
Two traps close this section. First, never dress a personal conflict as an economic dismissal: suppressing the post then recruiting the same profile weeks later proves the reason was the person, and the dismissal is judged without cause. Second, check protected statuses before starting, pregnancy, recent complaint of harassment or discrimination, staff mandates, because dismissing a protected employee requires prior authorisation from the labour inspector and a flawed economic file on a protected employee produces an annulment with uncapped back pay. The economic track rewards documented figures and punishes improvisation; run the numbers first, then decide.
B. What procedure and what job-security offer must I run step by step from abroad?
The procedure for an individual economic dismissal or a small collective dismissal of fewer than ten employees in thirty days runs in five stages, and a foreign owner can operate all of them through a French representative holding written authority: your lawyer, your accountant-backed HR contact or your local manager. Stage one is the invitation to a preliminary meeting, sent by registered letter with acknowledgement of receipt or handed over against receipt, stating its purpose and reminding the employee of the right to be assisted, by a colleague or, where there is no staff representation, by an outside staff adviser from the official list. Stage two is the meeting itself, a genuine discussion you may conduct through your authorised representative, with notes taken and no decision announced on the spot. Keep the postal slips and the meeting notes: from abroad, paper proof replaces presence.
Stage three is the notification, with a longer cooling period than personal dismissals. Article L1233-15 of the Labour Code requires that “il lui notifie le licenciement par lettre recommandée avec avis de réception. Cette lettre ne peut être expédiée moins de sept jours ouvrables à compter de la date prévue de l’entretien préalable de licenciement auquel le salarié a été convoqué.” Seven full working days minimum, fifteen for a managerial employee covered by the executive rules. The letter must state the economic reasons precisely, with the figures, the suppressed post and the redeployment search already run, because the letter fixes the boundaries of any later trial and the employee may request further detail on the economic reasons within fifteen days of notification. Write the letter as the judge will read it: one page of facts, numbers and dates, not adjectives.
Stage four is the job-security offer, the feature that distinguishes French economic dismissals from anything an American or British founder has seen. In companies below one thousand employees, you must offer the employee the professional security contract, the CSP, a France Travail return-to-work programme with accelerated support and an allowance. Article L1233-65 of the Labour Code defines it as follows: “Le contrat de sécurisation professionnelle a pour objet l’organisation et le déroulement d’un parcours de retour à l’emploi, le cas échéant au moyen d’une reconversion ou d’une création ou reprise d’entreprise.” Hand over the official information document against receipt and let the clock run: the employee has a 21-day reflection period that cannot be shortened, and silence at the end counts as refusal. Acceptance ends the contract by mutual agreement at the expiry of the period with enhanced allowances; refusal converts your file into a classic notified dismissal. The official English explainer, with the seniority-based allowance rules, sits on service-public.fr. Never skip the written CSP offer: omitting it is an autonomous fault that generates damages even where the economic reason was perfect.
Stage five is the administration. Article L1233-19 of the Labour Code provides that “L’employeur qui procède à un licenciement collectif pour motif économique de moins de dix salariés dans une même période de trente jours informe l’autorité administrative du ou des licenciements prononcés.” In practice you notify the DREETS, the Regional Directorate for the Economy, Employment, Labour and Solidarity, within eight days of sending the dismissal letter, and the official employer-side guidance confirms the sequence on service-public.fr. Where your company has at least eleven employees, add the staff consultation: Article L1233-8 of the Labour Code requires that “L’employeur qui envisage de procéder à un licenciement collectif pour motif économique de moins de dix salariés dans une même période de trente jours réunit et consulte le comité social et économique dans les entreprises d’au moins onze salariés, dans les conditions prévues par la présente sous-section.” A two-person startup usually has no social and economic committee and skips this step, but verify headcount on the day, because crossing the eleven-employee line without consulting poisons the file.
Close with the departure papers the same week: notice period worked or paid according to the contract and collective agreement, work certificate, France Travail attestation for unemployment benefits, and the final settlement with the last payslip. Article L1234-20 of the Labour Code describes the receipt as follows: “Le solde de tout compte, établi par l’employeur et dont le salarié lui donne reçu, fait l’inventaire des sommes versées au salarié lors de la rupture du contrat de travail.” Have your French payroll provider prepare it before the last day and pay by transfer with proof, because the employer bears the burden of proving payment. Article 1353 of the Civil Code states that “Celui qui réclame l’exécution d’une obligation doit la prouver. Réciproquement, celui qui se prétend libéré doit justifier le paiement ou le fait qui a produit l’extinction de son obligation.” Keep every transfer slip where your counsel can produce it within days; an employer abroad who cannot produce the figures loses the argument about the figures.
II. What will the economic dismissal cost me and how do I survive a court challenge from abroad?
A. How do I price severance, notice and the litigation risk in advance?
Price the file before signing anything, because the total has four layers. Layer one is the statutory severance, owed for any dismissal except serious or gross misconduct. Article L1234-9 of the Labour Code grants it to “Le salarié titulaire d’un contrat de travail à durée indéterminée, licencié alors qu’il compte 8 mois d’ancienneté ininterrompus au service du même employeur”, and Article R1234-2 of the Labour Code sets the floor at “Un quart de mois de salaire par année d’ancienneté pour les années jusqu’à dix ans” and “Un tiers de mois de salaire par année d’ancienneté pour les années à partir de dix ans.” Take a first employee on an open-ended contract, the CDI, dismissed after two full years with a reference salary of 3,500 euros gross: the floor is one quarter of a month per year, so 875 euros times two, which is 1,750 euros. Then apply the contract and the collective agreement, the convention collective, which frequently grant more: the employee always receives the highest of the amounts. The official English simulator and worked examples are on service-public.fr.
Layer two exists only if the dismissal is judged without a real and serious cause, and the Macron scale caps it. Article L1235-3 of the Labour Code provides that “Si le licenciement d’un salarié survient pour une cause qui n’est pas réelle et sérieuse, le juge peut proposer la réintégration du salarié dans l’entreprise, avec maintien de ses avantages acquis”, and where either side refuses reinstatement, the judge awards damages within a table of minimum and maximum months of gross salary by seniority. For short tenure the brackets are readable: no seniority caps at one month, one year runs from one to two months, two years from three to three and a half months, and the ceiling climbs with seniority. Budget the ceiling of your bracket as the worst case, because judges award near the top where the figures are thin or the procedure sloppy. Layer three is the extras: notice and paid leave balances, plus, where the dismissal is annulled or judged without cause, the reimbursement of unemployment benefits. Article L1235-4 of the Labour Code provides that “le juge ordonne le remboursement par l’employeur fautif aux organismes intéressés de tout ou partie des indemnités de chômage versées au salarié licencié”, within “la limite de six mois d’indemnités de chômage par salarié intéressé”. Layer four is the CSP sanction and procedural damages for each skipped step. Put the four lines in a table in euros before deciding, and compare with a negotiated termination, which typically settles between the statutory floor and the bracket ceiling plus a premium for peace. Seen from abroad, the negotiated exit is often the cheaper purchase.
B. How do I defend the economic reason before the labour court without flying to France?
Challenges go to the conseil de prud’hommes, the elected labour court for individual employment disputes. Article L1411-1 of the Labour Code defines its method: “Le conseil de prud’hommes règle par voie de conciliation les différends qui peuvent s’élever à l’occasion de tout contrat de travail soumis aux dispositions du présent code entre les employeurs, ou leurs représentants, et les salariés qu’ils emploient.” It judges disputes where conciliation has failed. Every case therefore opens with a conciliation hearing, a short session where the judges probe settlement, and only continues to a full hearing where conciliation fails. Give your French lawyer a written authority to settle within a bracket fixed in advance, with a rule for reaching you by phone or video the same day, because a representative who must call abroad for every euro loses the moment, and a well-prepared conciliation offer closes a large share of files within months.
You do not need to attend in person. Your counsel represents the company with a signed power of attorney, files the submissions and pleads, while you approve strategy in writing from abroad. What you must supply fast is the economic bundle: quarterly accounts and turnover comparisons proving the difficulty, order book and cash statements, the group-sector memo where a group exists, the individualised redeployment letters with their replies, the invitation letter with postal proof, the meeting notes, the dismissal letter with acknowledgement of receipt, the CSP information document with its delivery receipt, the DREETS notification proof, the contract and collective agreement, all payslips and the final settlement with transfer proofs. Remember the two Cassation rulings above: the judge checks the sector perimeter and the reality of the figures, then the genuineness of the redeployment search. Dated papers win these cases; general statements about a crisis lose them.
Watch the clock on both sides. Article L1471-1 of the Labour Code sets the short fuse: “Toute action portant sur la rupture du contrat de travail se prescrit par douze mois à compter de la notification de la rupture.” Twelve months from notification, the dismissal itself can no longer be challenged, which is why your proof of the notification date matters as much as the letter. Claims about performance of the contract, such as unpaid bonuses, have a longer two-year window, so keep payroll archives for the full period. If a summons arrives, forward it to counsel the same day: hearing-by-hearing filing deadlines apply identically to an employer in Paris and an employer abroad. Keep settlement on the table at every stage including appeal, with three numbers reported after each hearing: the amount claimed, the amount realistically at risk, and the settlement price available that week. Economic dismissal litigation is largely a pricing exercise, and the foreign owner who prices early, produces papers fast and settles at the right hearing almost always pays less than the one who discovers the judgment in the mail.
Conclusion
An economic dismissal run from abroad succeeds on three conditions. Prove the reason with figures measured at the right perimeter: your own accounts for a standalone company, the group sector where a group exists, with the quarterly comparison the statute requires. Run every step in writing: invitation, genuine meeting, detailed seven-day letter, individualised redeployment offers, written CSP proposal with its 21-day period, DREETS notification and complete departure papers with payment proofs. And price the file before signing: statutory severance from eight months of service, the Macron bracket as the worst case, plus notice, leave, benefit reimbursement and step-by-step sanctions, against the known premium of a negotiated exit. Files prepared this way usually close at conciliation; files improvised from abroad become the judgments other founders read about. Economic law rewards the employer who counts, dates and keeps everything, wherever that employer happens to live.
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