Labor Law Newsletter, September 2025
Regulatory Section
Specific flat-rate deductions for business expenses
A new decree dated September 4, 2025, regarding deductible business expenses for the calculation of social security contributions, repealed and replaced the decree of December 20, 2002. This decree provides for the phase-out, between January 1, 2026, and December 31, 2031, of specific flat-rate deductions (DFS) for professional expenses in sectors not already subject to a phased-out transition (Art. 9 of the decree).
For these sectors, between January 1, 2026, and December 31, 2031, the deduction rate will be reduced, each January 1, by an amount equivalent to 15% of the rate applicable in 2025. The rate will become zero no later than January 1, 2032.
A table listing the main professions covered by the DFS and the applicable deduction rate is included in Appendix 1 of the decree.
The decree also incorporates several provisions from the BOSS:
- a specific exemption cap of €13 per day of telework (compared to €10.90 in principle) for the flat-rate telework allowance provided for in the industry-wide collective agreement, the professional agreement, or the group agreement,
- the removal of the distance criterion for defining the situation of professional mobility, which is based solely on the criterion of a round-trip commute of at least 1 hour and 30 minutes.
Verdict: Decree of September 4, 2025, regarding deductible business expenses for the calculation of social security contributions for employees covered by the general scheme and employees covered by the agricultural scheme
Minimum age for eligibility for progressive retirement
The phased retirement program allows employees to receive a portion of their pension to offset the reduction in earnings resulting from reduced working hours. The decree of July 15, 2025, amended Article D. 161-2-24 of the Social Security Code, which previously stipulated that to qualify for the phased retirement program, an employee had to be two years below the statutory retirement age (i.e., 62 years old).
Since September 1, 2025, employees have been eligible for the phased retirement scheme starting at age 60 (Article D. 161-2-24 of the Social Security Code).
Verdict: Decree No. 2025-681 of July 15, 2025, setting the age of eligibility for the phased retirement scheme at 60
Decree on the General Reduction of Contributions Effective January 1, 2026
As provided for in the 2025 Social Security Financing Act, a new decree dated September 4, 2025, sets forth the terms and conditions for the second phase of the reform of general reductions in employer contributions, effective as of January 1, 2026.
This decree implements the elimination of reductions in family and health insurance contribution rates and the modification of the general contribution reduction.
The income threshold entitling employees to this reduction will be 3 times the minimum wage (CSS, Art. D. 241-7), whereas until December 31, 2025, it is 3.3 times the minimum wage. The decree specifies that the SMIC value taken into account is the one in effect during the relevant period of employment.
The new calculation formula is as follows:
Coefficient = T min + (T delta × [(1/2) × (3 × SMIC calculated for one year / gross annual earnings – 1)] 1.75)
This coefficient may not exceed the sum of the values of Tmin and Tdelta.
These values vary depending on the social housing allowance funding rate (“FNAL rate”) as follows:
- for companies with an FNAL rate of 0.10, then Tmin = 0.0200 and Tdelta = 0.3773;
- for companies with an FNAL rate of 0.50, then Tmin = 0.0200 and Tdelta = 0.3813.
Verdict: Decree No. 2025-887 of September 4, 2025, regarding the procedures for applying various schemes for the reduction and exemption of employer social security contributions
Case Law Section
Carrying over paid leave during a sick leave period
The Court reversed its previous case law by ruling that an employee on sick leave during their paid vacation is entitled to have their vacation rescheduled. For this to apply, the employee must notify their employer of the sick leave.
This reasoning is based on the interpretation of European law, which holds that the purpose of the right to paid annual leave is to allow employees to rest and enjoy a period of relaxation and leisure, whereas the purpose of sick leave is to allow employees to recover from a health problem.
Decision: Cass. Soc., 10 septembre 2025, n°23-22.732
Payment of Overtime During Paid Leave
The Court of Cassation has issued a new reversal of precedent by aligning French law with European law regarding the inclusion of paid vacation days in the calculation of overtime.
It had been settled case law that these paid vacation days could not be taken into account in the calculation of overtime. However, the Court now rules that an employee, subject to a weekly calculation of working hours, who is partially on paid vacation during a week, is entitled to overtime pay that they would have received had they worked the entire week.
This decision sets aside the application of the provisions of Article L. 3121-28 of the Labor Code insofar as they make the hours taken into account for determining the threshold triggering overtime contingent upon the actual performance of work.
Decision: Cass. Soc., 10 septembre 2025, n°23-14.455
Coverage for a work-related absence and proof that the accident was work-related
Following his continuous absences from work, the employee filed claims for recognition of an occupational disease. At the same time, following a medical examination to assess his return to work, the occupational physician declared the employee unfit for his position.
The employee contends that his dismissal should have been based on professional unfitness.
However, the Court of Cassation notes that it is then up to the judge to form a conviction, based on all the evidence submitted by the parties, as the coverage of a condition under occupational disease legislation does not, in and of itself, constitute proof of the occupational origin of the disease.
In this case, the occupational origin of the incapacity was ruled out because the occupational disease reported by the employee was not directly caused by the employee’s regular work.
Decision: Cass. Soc., 10 septembre 2025, n° 23-19.841
State Liability Toward the Employer if the authorisation to Dismiss Is Unlawful
The company sought compensation for the damage caused by the illegality of the labor inspector’s authorization to dismiss employees. Indeed, the illegality of the decision authorizing such a dismissal constitutes a fault capable of giving rise to the liability of the public authority toward the employer, provided that it resulted in direct and certain damage to the employer.
In this case, the dismissal authorization, which was annulled because it was issued by a labor inspector lacking territorial jurisdiction, causes direct and certain harm to the employer.
Decision: CE, 16 juillet 2025, n°469499
The option to exercise the right to withdraw from a future situation
The Court of Cassation has ruled that an employee who has reasonable grounds to believe that his or her work situation will pose a serious and imminent danger to his or her life or health on the date he or she is scheduled to return to work—regardless of whether such a danger actually exists—may exercise the right to withdraw from work.
An employee may thus exercise this right in anticipation of a future situation, provided that, at the time of invoking it, he or she believes that the situation will pose a serious and imminent danger to him or her.
Decision: Cass. Soc., 11 juin 2025, n°23-23.291
The Court of Cassation held that an employee whose probationary period is terminated on discriminatory grounds is not entitled to the compensation provided for in the event of a null and void termination (6 months) pursuant to Article L. 1231-1 of the Labor Code, which provides that the provisions relating to the termination of an indefinite-term employment contract do not apply during the probationary period.
Thus, the employee is only entitled to damages to compensate for the harm resulting from this wrongful termination.
Verdict : Cass. Soc., 25 juin 2025, n°23-17.999
