HOW TO DISMISS AN DISMISS AN EXECUTIVE ON THE SAME GROUNDS

HOW TO DISMISS AN DISMISS AN EXECUTIVE ON THE SAME GROUNDS

In a recent decision (CA Paris 4-6-2024 n° 22/07491, X c/ Sté HRO France) it was ruled that the real and serious cause of an employee’s dismissal may constitute just cause for the dismissal of his duties as a director, and that this dismissal may itself be the basis for the dismissal of the person concerned from his corporate office in another company.

1. The facts

The management of a property project was entrusted to a limited liability company (SARL) (A). Its manager, who was also an employee of the company, was appointed manager of another SARL (B), created to carry out the project.

He was dismissed from his position in company A, and then dismissed by the company for serious misconduct. The sole shareholder of company B considered that his dismissal prevented the normal continuation of their relationship.

The interested party then sued the two companies to obtain compensation for the dismissal of his two corporate offices, which he considered to be unfounded.

2. The decision

The Paris Court of Appeal dismissed his claim.

The manager’s brutal and contemptuous behaviour, as reported by several witnesses, was such as to seriously undermine the smooth internal running of company A and was contrary to the company’s interests, since it gave the company a poor image in the eyes of its external partners.

What is more, the fact that this circumstance had already been upheld by a labour tribunal as a genuine and serious reason for dismissal was irrelevant: the argument of the autonomy of the corporate office and the employment contract was inoperative due to the nature of the acts complained of, which affected all of the interested party’s functions in the same way.

We know that certain directors, including SARL managers (C. com. art. L 223-25, para. 1), are entitled to damages if they are dismissed without just cause.

The Paris Court of Appeal states that just cause may arise from a fault on the part of the manager, or from an attitude that is not at fault but is likely to compromise the company’s interests or the way it operates (Cass. com. 4-5-1999no 96-19. 503 P: RJDA 7/99no. 792), a change in the internal organisation – it being specified that the removal of the executive from his post is not equivalent to dismissal (Cass. com. 4-4-2024no. 22-19.991 F-B: RJDA 6/24no. 341) – or the loss of his functions within another legal entity.
The Court of Cassation has also already accepted that the dismissal of the director of a subsidiary could be justified by the termination of his employment contract with the parent company, provided that the corporate office, for which no remuneration was provided, was part of the same management logic as the employment contract (Cass. com. 12-6-2007no 06-13.900 F-D: RJDA 12/07no 1242).

This decision seems to follow the same logic.