For a US subsidiary, underestimating these differences can turn a routine departure into a significant financial and legal exposure. This guide covers what you need to know to manage terminations compliantly in 2026.
1. The core shift: from at-will to cause-based termination
In France, the permanent contract (CDI) is designed to be durable. An employer cannot end it without a legitimate reason.
- Legal cause — every employer-initiated termination must rest on a cause réelle et sérieuse: objective, verifiable, proportionate. Without it, the dismissal is unjustified and the employee can claim significant damages before the Conseil de prud'hommes.
- Mandatory social affiliation — from day one, your subsidiary is registered with URSSAF. Every termination triggers obligations toward the departing employee plus specific social declarations and, in some cases, contributions on severance.
2. The main routes to ending an employment relationship
Dismissal (Licenciement)
Disciplinary, non-disciplinary, or economic — all require a highly structured process: written invitation to a preliminary meeting, the meeting itself, then formal notification by registered mail, each with mandatory waiting periods. Procedural errors generate penalties even when the underlying reason is entirely valid.
Mutual termination (Rupture Conventionnelle)
Often the preferred solution for US subsidiaries thanks to its amicable nature.
- Severance — at least equal to the statutory (or collective-agreement) dismissal indemnity.
- Process — a mandatory 15-calendar-day revocation period, then a 15-working-day administrative approval by the DRIEETS.
Constructive dismissal (Prise d'Acte)
If an employee resigns and argues the departure was caused by employer misconduct (unpaid overtime, harassment, unilateral contract change), a judge may reclassify the resignation as a constructive dismissal — with financial consequences identical to an unjustified dismissal.
3. The Macron Scale: putting a number on your litigation risk
The Barème Macron caps the compensation a judge can award for dismissal without real and serious cause. The ceiling is based on length of service, giving employers a concrete framework for quantifying maximum exposure before deciding.
Critical exceptions: the cap is nullified in cases of discrimination, harassment, or violation of a fundamental freedom. Judges retain full discretion and damages can far exceed the standard ceilings.
4. The real cost of a French termination
Severance pay
Unless dismissed for gross or willful misconduct (faute grave / faute lourde), severance is owed — whichever is higher between the statutory minimum and the industry's Collective Bargaining Agreement, which frequently sets a much higher bar.
Notice period
Terminated employees are generally entitled to a notice period — commonly three months for managerial roles (cadres). If you need the employee to leave immediately, you must pay a compensatory indemnity for the full notice period.
Accrued paid leave
All unused vacation days at termination must be paid out — consistently underestimated by US finance teams when modeling exit costs.
5. Process and documentation: where US companies most often go wrong
- Verbal notification — communicating a termination orally before the formal letter is sent can void the entire procedure.
- Missing deadlines — each stage carries mandatory waiting periods. Compressing the timeline creates procedural exposure usable against you independently of the merits.
- Late document delivery — the employer must immediately provide the work certificate, the unemployment benefit certificate (attestation France Travail), and the final settlement receipt. Delays trigger additional claims.
6. Strategic support: Orbiss and Impulsa
Managing a French departure from a US headquarters requires seamless coordination between local HR, legal, and global finance. Our combined expertise lets you:
- Simulate costs — precise estimates of all indemnities and social charges before any decision is made.
- Draft legal documents — termination letters, rupture conventionnelle agreements, and settlement protocols that are procedurally sound.
- Ensure social compliance — final settlement processed correctly in payroll, with all declarations filed on time.
Knowing the exit cost before you make the entry decision is what separates a well-run French subsidiary from one that accumulates exposure over time.