REDUCTION OF A GOLDEN PARACHUTE

IN THE NAME OF THE FRENCH PEOPLE

IN THE NAME OF THE FRENCH PEOPLETHE COURT OF CASSATION, SOCIAL CHAMBER, delivered the following judgment:

On the sole means:Having regard to articles 1134 and 1152 of the Civil Code;

Whereas Mr X … was engaged on March 1, 1983 as industrial director by the company Laboratoires Labaz; that the employment contract was taken over by the company Sanofi Beauté and lastly by the company Yves Saint-Laurent Beauté to the rights of which comes the company Yves Saint-Laurent Parfums; that an amendment dated 20 November 1998 included a so-called “golden parachute” clause worded as follows: “the company grants you an irrevocable guarantee intended to cover all cases (with the exception of serious or gross negligence) where its situation in the The company would be called into question, directly or indirectly, because of the employer, except for retirement from the age of 65. In such a case, he would automatically benefit from an indemnity. an amount equivalent to two years’ salary if his departure from the company occurs within two years of the transfer of control of the company. Beyond that, this compensation would be reduced to one year’s salary. This compensation would be due in addition to any compensation to be paid under the law and collective agreements “;that after having been dismissed for serious misconduct on September 13, 2000, the employee seized the industrial tribunal to challenge his dismissal and claim payment of contractual compensation for breach;

Whereas in order to condemn the employer, who requested the reduction by application of article 1152 of the Civil Code, to pay the entire contractual indemnity known as “golden parachute”, the contested judgment retains that it is a question of a guarantee of employment clause which does not aim at the fixed compensation of a breach of a contractual non-performance and which does not have the nature of a penalty clause;Whereas, however, the severance pay, when it is provided for in the employment contract, has the character of a penalty clause and may be reduced by the judge if it is manifestly excessive;

That by so ruling, while it was for him to examine whether the contractual indemnity which was to be paid to the employee in the event of termination by the employer was manifestly excessive and to assess the amount thereof, the court of appeal violated the aforementioned texts;FOR THESE REASONS :

BREAK AND CANCELED, in all its provisions, the judgment rendered on June 10, 2003, between the parties, by the Versailles Court of Appeal;

returns, consequently, the cause and the parts in the state where they were before the aforementioned judgment and, to be done right, returns them before the court of appeal of Paris;

Condemns Mr X … to the costs;

Considering article 700 of the new Code of Civil Procedure, rejects the request;

Said that on the diligence of the Attorney General near the Court of Cassation, this judgment will be transmitted to be transcribed on the sidelines or following the broken judgment;

 Thus done and judged by the Court of Cassation, Social Chamber, and pronounced by the president in his public hearing on September twenty-first, two thousand and five.