French Employment law - Fixed-sum conciliation indemnity (Prud’hommes): exclusion from the social security contribution base up to a limit of 2 PASS (Cass soc, Sept. 3rd, 2026, 24-11.310)
When a dispute is settled via an agreement reached before the conciliation bureau of an employment tribunal (*conseil de prud’hommes*), the fixed-sum indemnity paid to the employee—pursuant to Article L1235-1 of the French Labor Code—is subject to the specific social security treatment applicable to such an indemnity.
Consequently, it is excluded from the social security contribution base, up to a limit of twice the annual social security ceiling (*plafond de la Sécurité sociale* or PASS). Furthermore, the courts may not—for the purpose of reincorporating a portion of the sum into the contribution base—investigate whether that sum actually corresponds to a payment in lieu of notice (*indemnité compensatrice de préavis*).
This is the ruling of the Court of Cassation in its decision of September 3rd, 2026 (24-11.310), which has been published in the official *Bulletin*.
The significance of this ruling lies in the protection it affords to the social security status of the fixed-sum conciliation indemnity, provided that the agreement was reached before the conciliation bureau of the employment tribunal.
II. Analysis.
This ruling first reiterates that the lump-sum indemnity provided for under Article L1235-1 of the Labor Code is subject to a specific social security treatment when paid within the framework of a conciliation process before an employment tribunal (*conseil de prud’hommes*).
Article L1235-1 allows the parties to resolve a dispute through an agreement—recorded by the conciliation and guidance panel—which provides for the payment of a lump-sum indemnity by the employer. Furthermore, the official record (*procès-verbal*) formalizing this agreement constitutes a waiver by both parties regarding any claims or indemnities related to the termination of the employment contract as provided for under the Labor Code.
This specific characteristic of the conciliation record was previously highlighted in a 2018 brief titled "Employment Tribunals: The Benefits of Conciliation via the Conciliation Scale," which noted that "using a conciliation record is advantageous for both parties, from both a tax and a social security perspective."
That article pointed out, in particular, that the lump-sum conciliation indemnity is exempt from social security contributions, up to the limits defined by the conciliation scale and a cap equal to twice the annual Social Security ceiling.
The ruling of September 3, 2026, gives this rule a particularly concrete application.
In this case, the Court of Appeal had attempted to determine the true nature of a portion of the indemnity by examining the claims initially made by the employee and the content of the conciliation record.
Specifically, the Court of Appeal reasoned that, in the absence of an explicit statement regarding the retention of the "serious misconduct" (*faute grave*) classification or a waiver of the notice period, a portion of the total sum could be construed as compensation in lieu of notice. The Court of Cassation rejects this analysis: since the compensation was paid as part of a settlement agreement signed before the conciliation board of the Employment Tribunal (*Conseil de prud’hommes*), it falls under the regime for the lump-sum indemnity provided for by Article L1235-1.
The significance of this ruling lies in the fact that it links the social security/tax treatment of the indemnity to the legal framework under which it was paid—namely, the employment tribunal conciliation process—rather than to how the parties or a judge might subsequently characterize or allocate the sum.
This approach strengthens the legal certainty associated with using a formal conciliation record (*procès-verbal de conciliation*): when parties resolve a dispute within this framework, the lump-sum indemnity qualifies for the social security/tax treatment stipulated by law, up to a limit of twice the Social Security ceiling.
The ruling thus confirms one of the major practical advantages of using a formal conciliation record, in addition to its implications for tax purposes and the deferral period for unemployment benefits.
To read the full brief, click on the link below.
Sources.
Cour de cassation, 2e chambre civile, 3 septembre 2026, n° 24-11.310
Prud’hommes : les avantages à concilier par le barème de conciliation.
Frédéric CHHUM avocat et ancien membre du conseil de l’ordre des avocats de Paris (mandat 2019-2021)
CHHUM AVOCATS (Paris, Nantes, Lille)
e-mail: chhum@chhum-avocats.com
https://www.instagram.com/fredericchhum/?hl=fr
Paris: 34 rue Petrelle 75009 Paris tel: 0142560300
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