by Jilali Maazouz and Sébastien Le Coeur

As of 26 January 2011, the French Supreme Court ruled that the change of control clauses in French executive-level employment contracts are valid, a consideration which international companies contemplating the acquisition of a company in the country need to consider.  The control clause is also valid for both public and private companies.

In July 2005, further to the termination of several of Havas’s officers, one of the top managers decided to leave the company by claiming constructive dismissal under her change of control clause.  A McDermott employment lawyer in Paris advised on the drafting of this landmark control clause upheld by the French Supreme Court.

This change of control clause within the Havas executive’s contract was as follows:

• The identities of the top managers were key reasons as to why the employee entered into her/his employment contract.
• Should one or several of these top managers be terminated by the company, the employee would be entitled to claim constructive dismissal, within a certain period of time.
• The claim for constructive dismissal would trigger the payment of a golden parachute.
• The French Supreme Court upheld the clause and justified this decision by the seniority of the employee’s position.

As a result of this landmark Supreme Court decision, companies in France can now apply the change of control clause as a deterrent to hostile takeovers through the entrenchment of its top management executives.