A settlement (transaction) is a contract by which employer and employee end a dispute, whether already arisen or about to arise, through reciprocal concessions (article 2044 of the Civil Code). It has no statutory amount: the sum is set against the risk that labour litigation would create, that is, what the file would be worth before the conseil de prud'hommes (France's labour court). Well calibrated, it costs less than the trial it avoids; badly calibrated, it is open to challenge or too generous.
The transaction is governed by articles 2044 and following of the Civil Code, including in employment law, which has no regime of its own. It requires three elements: a dispute arisen or about to arise, reciprocal concessions from both parties, and a written document. Since the 2016 reform, article 2052 provides that it bars the bringing or continuation, between the parties, of any action with the same object. In other words, once signed, it closes the dispute: the employee gives up bringing the matter before the court on the points settled, in return for the sum paid.
It is precisely this binding force that gives it its value for the employer: it secures the termination and extinguishes the litigation risk, provided it is validly concluded.
Two conditions concentrate most of the litigation over the validity of settlements.
First, it must come after the definitive termination of the contract. The Cour de cassation (France's supreme civil court) consistently holds that, in the case of a dismissal, the transaction is valid only if it is concluded after notification of the termination by registered letter, once the employee has actual knowledge of the grounds. A transaction negotiated before, or which merely restates an agreement predating the termination, is void.
Next, the concessions must be real and reciprocal. The court checks that they exist, without assessing their proportion, but a derisory concession by the employer can lead to nullity. Concretely, the settlement sum must represent a genuine effort in view of the employee's claims, failing which the transaction is recharacterised and the dispute reopened.
The transaction is not a form of termination. The rupture conventionnelle (a statutory mutually-agreed termination) ends the contract through an agreement approved by the administration; the transaction settles a dispute once the contract has already been terminated, whatever the form of termination. The two can follow one another, but a transaction cannot be used to circumvent the dismissal procedure, nor to settle in advance a dispute that does not yet exist. This distinction dictates the timetable: you settle after the termination, not in its place.
The amount of a transaction only makes sense in relation to the risk it extinguishes. The method is first to value what the file would be worth in litigation, then to apply a discount reflecting the uncertainty, the cost and the length of the trial avoided.
Valuing the risk adds up the heads a conseil de prud'hommes could award: the award for dismissal without real and serious cause within the limits of the barème Macron (the statutory scale capping unfair-dismissal awards, article L1235-3), any salary and overtime back-pay, the related social contributions, and the possible reimbursement of unemployment benefit. This total is the theoretical ceiling of the risk. The transaction is then negotiated below it, in a range that depends on the strength of each party's arguments.
Two symmetrical pitfalls await the employer: underestimating the risk and offering a sum the employee will refuse in order to try their luck in litigation, or overestimating it and paying more than necessary. Both are corrected by an objective estimate, grounded in comparable decisions rather than intuition.
The discount applied to the risk is not a fixed percentage: it reflects the strength of the grounds for the termination, the quality of each party's evidence and the employee's appetite for litigation. The stronger the employer's file, the larger the discount can be; conversely, a weak file brings the transaction closer to the theoretical ceiling of the risk.
This is the work Plato automates on the employer's side: producing the order of magnitude of the litigation risk from decisions handed down on close files, in order to place the transaction at the right level. Each amount stays traceable back to the decision it comes from, which makes it possible to objectify the offer internally as well as before the employee's counsel. This reading extends the assessment of labour-litigation risk before a dismissal and the cost of a contested dismissal. The tool informs the decision, it does not take it: the settlement strategy remains that of the employer and their counsel.
What is a labour settlement (transaction)?
It is a written contract by which employer and employee end a dispute, arisen or about to arise, through reciprocal concessions (article 2044 of the Civil Code). Once signed, it bars a court action on the points settled (article 2052).
When can a transaction be signed?
Only after the definitive termination of the contract. In the case of a dismissal, the Cour de cassation requires it to be concluded after notification of the termination by registered letter. A transaction predating the termination is void.
Is there a scale for the transaction?
No. The amount is freely negotiated, but it must correspond to a real concession by the employer in view of the employee's claims. A derisory concession can lead to the nullity of the transaction.
How do you set the amount of a transaction?
By first valuing what the file would be worth in litigation (barème Macron, salary back-pay, social contributions, unemployment benefit), then applying a discount that reflects the uncertainty, the cost and the length of the trial avoided.
Transaction and rupture conventionnelle, what is the difference?
The rupture conventionnelle is an amicable form of termination approved by the administration. The transaction settles a dispute once the contract has already been terminated. One ends the contract, the other the dispute.
Can a transaction be challenged afterwards?
It can be called into question if its validity conditions are not met: no real reciprocal concessions, a transaction concluded before the termination, or vitiated consent. This is why its calibration and its timetable must be rigorous.
Is the settlement sum subject to social contributions and tax?
Its regime depends on the nature of the sums it covers: the part corresponding to salary follows the salary regime, the part compensating a loss may be exempt within certain limits. It must be checked case by case.
Can a tool help calibrate a transaction?
Yes. Plato values the litigation risk from comparable decisions and makes it traceable back to its source, which gives the employer an objective starting point for setting the amount of the transaction.