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    Failure to take care of one’s physical fitness, to comply with the Club’s physical training program and adopt a lifestyle in accordance with one’s profession constitutes serious ” unsporting ” misconduct that justifies the termination of the fixed-term contract.

    Article L. 1221-1 of the French Labor Code is explicit in that “the employment contract is executed in good faith“. Derived from good faith, loyalty is a reciprocal duty which neither the employer nor the employee can deviate from, even if the employment contract makes no reference to it.

    In a decision of 20 February 2019 (1), the French High Court of Appeal (Cour de cassation) ruled on a dispute between a professional basketball player and his employer. Victim of an injury that occurred in the course of his professional activity, the player on leave has continuously refused to follow the medical care protocol set by the team’s doctor to attend physiotherapy sessions, even though the player is required to do so by virtue of his contract and of the collective agreement.

    In these circumstances, the employer terminated the fixed-term employment contract early on the grounds of serious misconduct. However, the professional player considered that his employer could not legitimately require him to perform any activity related to his employment during the suspension of the employment contract due to his sick leave.

    This decision is noteworthy for three reasons.

    First, while the legislator has never taken a stance on the definition itself of the duty of loyalty, the High Court of Appeal has constantly defined its scope. This decision confirms that loyalty is required for all contracts, regardless of the sector of professional activity.

    As such, the sports sector is no exception to the traditional rule according to which an employee is required to be loyal in his professional relationship with his employer; the professional sports player must also not commit acts contrary to the interests of the company, which are likely to damage its reputation or performance (2).

    Consequently, loyalty is as much a part of the game on a basketball court as it is in the changing rooms.

    Second, and even more importantly, the duty of loyalty extends beyond unexpected changes in an employment contract (3). Even when the performance of the employment contract is suspended by an occupational accident or disease, the duty of loyalty remains, unlike the duty to provide work in return for compensation.

    Underlying this, the High Court of Appeal reaffirms the spirit of Article L. 1226-18 of the Labor Code, which stipulates: “when an employee who has suffered an occupational accident or disease holds a fixed-term employment contract, the employer may not terminate the contract during the periods of suspension of the contract unless he can justify either a serious misconduct on his part or a case of force majeure“.

    To justify the dismissal of the basketball player on the grounds of violating the duty of loyalty, the High Court of Appeal agrees with the reasoning of the judges that serious misconduct results from the only fact that he did not “lend himself to the care necessary to restore his physical potential in relation to the injury“, whereas he was contractually and conventionally bound even during his work absence following an occupational accident.

    It should be noted that the High Court of Appeal strictly applies the principle according to which a reason based on the employee’s personal life may justify disciplinary dismissal if it constitutes a breach of a duty pursuant to the employee’s employment contract.

    Finally, reciprocity in the employment relationship can be also demonstrated by the employer’s and employee’s obligation to ensure health and safety.

    While an employer is required to ensure that its employees can adapt to changes in their jobs throughout the duration of their contract (4), the fact remains that the Labor Code also requires each worker to take good care, based on the worker’s training and abilities, of his or her health and safety, as well as that of the other persons who are affected by the worker’s actions or failures to perform at work (5).

    However, we would have been surprised if the High Court of Appeal had reasoned differently and acknowledged that, for the sake of privacy, the employee should be completely exempted from his or her duty of loyalty. After as, the athlete employee was advised of the health measures after his accident, specifically to ensure his physical recovery.

    This being said, from now on, one might expect that serious misconduct will also be whistled at on the benches of the labor courts…

    (1) Cass. Soc. 20/02/2019, n°17-18.912, M/ c/Sté JDA Dijon basket: by noting that “during the period of work absence following his work-related accident, the employee had not attended an appointment to organize the physiotherapy sessions prescribed by the team’s attending physician and that he had not made himself available for the physiotherapist for the purposes of following the medical care protocol”, the Court of Appeal “highlighted the existence of a breach by the employee of his duty of loyalty, making it impossible to maintain the employment contract”;
    (2) Cass. Soc. 12/10/2011, n°10-16.649 ; Cass. Soc. 21/11/2018, n°16-28.513 F-D ;
    (3) Cass. Soc. 18/03/2003, n°01-41.343 ; Cass. Soc. 30/03/2005, n°03-16.167, FS-PB ;
    (4) Art. L. 6321-1 C. trav;
    (5) Art. L. 4122-1 C. trav.

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    “The main name to note is Delphine Brunet-Stoclet, who handled sensitive and high-stakes litigation on behalf of well-known clients and assisted them with issues surrounding the filing of new trade marks. Marie André-Nivet was recently promoted to senior associate and is also notable”

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    After examining a taxpayer’s personal tax situation, the tax administration considered that the transfer of securities at a derisory price, made between members of the same family, constituted a disguised gift.

    For that purpose, the Court implemented proceedings for abuse of process in order for the transfers disguised as gifts to be reclassified and to apply the transfer tax on gifts and the corresponding penalties.

    For the Committee on tax law abuse, called on for the case, the operation revealed, contrary to what the tax administration claimed, an indirect gift and not a disguised gift.

    In a March 18, 2019 decision, the Paris Court of Appeal ended up following the reasoning of the tax administration by qualifying the operation at issue as a disguised gift.

    First of all, the Court indicated that “a disguised gift is one that is done under the guise of a contract in return for payment. Although from a legal point of view, the operation is legitimate, the administration has the right to establish the genuine nature of the deed. Among the circumstances making it possible to characterize a disguised gift is the stipulation of a derisory price.

    The Court then considered that “evaluating the securities at a symbolic value, unrelated to the real value of the property, which actually corresponds to a sale at an unusually low price, establishes the gratuitous nature of the agreements and the absence of any counterpart to the deed.

    Although, in this instance, it was an exaggerated case of abuse of process, given the fictional nature of the deed, this legal precedent and the creation of a “mini abuse of tax law” by the most recent Finance law remind taxpayers of the special attention paid by the tax administration to operations of asset restructuring, as well as the necessity for those taxpayers to seek tax advice prior to any restructuring, allowing them to structure their operations as best as possible.

© Schmidt Brunet Litzler