After much toing and froing, the new French labor law (sometimes also referred to as " The El Khomri Law " was finally passed by Parliament on the 8th of August 2016 .

Among the articles of this Law, one of the goals of which is to liberalize labor law , Article 64 establishes a new requirement for large franchise networks.

If such networks comprise at least three hundred employees, including those of the franchisees and franchisor alike, and the terms of the franchise agreement have “an effect on the organization of work and working conditions”, then, if a union so requests, a body for social dialogue must be set up within the network.

Social Dialogue Body

Three preliminary points should be noted relating to initiating this obligation:

• In addition to the number of employees threshold, the franchise agreement must include provisions relating to “the organization of work and working conditions”; otherwise, the franchise network is not required to implement a social dialogue body;
• It is also necessary that a representative trade union or union delegate seeks the setting up of this social dialogue body, failing which it is not necessary to do so.
• Finally, the Law will apply only after the promulgation of a decree of the State Council currently scheduled for the month of December 2016 .

At that date and if the creation of such a body is legitimate and sought, what will be the procedure?

The intention of the legislation is to allow the so-called social partners to provide as freely as possible, by agreement , the arrangements for the implementation and functions of this body.

The decree set for the month of December 2016 should preserve contractual freedom by scheduling only the essential milestones of the proceedings. Meanwhile, the Law of 8 August 2016 already provides a minimum framework that all of the involved parties must comply with.

Setting Up

Upon the union’s request, the franchisor must initiate negotiations for setting up this body, which will be chaired by the franchisor and composed of representatives of the franchisor and franchisees. The organization of professional elections within the network is not necessarily required.

Attributions

The social dialogue body is not intended to become a new works council with the prerogatives granted thereto by the Labor Code.

Rather, the social dialogue body will be a less structured forum that will meet at least twice a year; no minimum operating budget is expected.

Without having to be consulted as is the case of a works council, this body will be the recipient for information regarding staffing and working conditions within the franchise network (companies entering or leaving , conditions of employment, vocational training , etc.)

The members of this body will be entitled to make non-binding proposals, destined to improve working conditions and provide additional collective guarantees (for example, health insurance contracts.)

What about the independence of the franchisor and the franchisee?

Article 64 of the El Khomri Law, by establishing a direct dialogue between the franchisor and franchisee’s employees, may undermine the independence of the franchisee vis-à- vis its franchisor, which independence goes to the very heart of the franchise relationship.

The greatest risk might be a request by an employee to be regarded as co- employed by the franchisor and franchisee .

This should lead to increased vigilance on the part of the franchisor in the drafting of franchise agreements, in particular by avoiding provisions which arguably “have an effect on the organization of work and working conditions” such as fixed working day and week schedules or common uniforms for all franchisees’ employees, and thus could potentially trigger a request for establishment of a social dialogue body.

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