For several years, the French Supreme Court has been uncertain regarding the inclusion of stock options and restriction stock units (RSUs) in the termination indemnities (severance and notice period payment) calculation base. The French Supreme Court has now definitively put an end to this uncertainty in a November 15, 2023 decision.1
In this case, an employee brought several claims before the Labor Court in respect of the performance and termination of his employment contract, based on a reference salary that included the value of the RSUs he had been awarded during the performance of his contract.
The Court of Appeal held that the value of the RSUs awarded to the employee should be included in the basis for calculating the reference salary.
The French Supreme Court overturned the decision, insofar as it set the employee's monthly reference salary by taking into account the value of his free shares, in a clear statement of principle: "neither the distribution of free shares nor the granting of stock options constitute elements of remuneration included in the salary base to be taken into consideration for the calculation of the disputed indemnities."
The Court thus confirms its position that employee equity awards are not included in the salary base to be taken into consideration when calculating compensation for reclassification and termination of the employment contract.
Footnotes
1 Cass. soc. 15 novembre 2023, n°22-12.501.
