Allen & Overy (A&O) has been ordered to pay damages to a former Paris associate who was laid off last year as part of the firm's global redundancy programme.

The magic circle firm declined to comment on the ruling, first reported on RollOnFriday, other than to state: "The court found in favour of the associate and the matter has now been settled."

The case follows a number of similar lawsuits brought by associates at major law firms in Paris, where France's strict employment laws have led to a system whereby associates traditionally work as self-employed contractors rather than employees, saving on significant expenses for both the firm and the associate.

However, associates laid off from firms including Baker & McKenzie and Herbert Smith in recent years have argued that they were in fact employees, meaning that they would be entitled to significant redundancy payouts.

The contractor agreement provides certain freedoms for associates relating to client contacts, holiday and the firm's management structure.

The French employment courts have decided on a case-by-case basis whether the associate was in fact an employee rather than a contractor, with previous ruling going both ways depending on the specific details of the case.

Most recently, Bakers lost a similar case in a Paris employment tribunal at the end of last year, but the US firm is understood to have appealed the decision.

The issue has become more pertinent in the wake of the economic downturn after several major law firms made associate redundancies in Paris, and the local profession is now debating how associate employment should be managed in the future.

Yasmine Tarasewicz, the Paris-based co-head of the international labor and employment group at US law firm Proskauer Rose, commented: "In France we consider that associates are self-employed, but in some cases it is ruled that law firms have not complied with the agreement and treated the associate as an employee."

"In some situations the associates themselves want to keep this statute of contractor, but it really depends on the situation and there should be a dialogue between the associate and the firm on what is the best option depending on the situation."