French Labor Law Reform: A Breakdown of Key Items in the Overhaul

by McDermott Will & Emery

McDermott Will & Emery

In Depth

One of French President Macron’s core campaign promises was to reshape France’s social and economic landscape by simplifying French laws, reforming the labor market and demonstrating that France is committed to supporting businesses. To accelerate the path to labor reform, President Macron used ordonnances (decrees) to bypass extensive parliamentary debate.

On August 31, 2017, the government announced the changes which the aforementioned decrees would bring to the labor laws. Overall, the contemplated reform promotes two key principles: flexibility and improved predictability, at both the collective and individual level.

The decrees should be approved by the president on September 22, 2017. The parliament would have to ratify the decrees in the coming months. Their ratification is not expected to undergo major hurdles.

The mains amendments are presented below.

Key Reforms to Improve Flexibility

Merged/Joint Representation for Employee Representation

For companies with more than 50 employees, the three current types of employee representation (workers’ council, staff representatives and health and safety committees) shall merge into a single unified employee representative body: the Social and Economic Committee. This is to allow employers and employees to discuss, through a streamlined system, all issues related to economic and social safety and well-being in a more efficient manner.

A specific commission dealing with health and safety matters would have to be implemented in companies with more than 300 employees.

Negotiation in Companies without Unions

As a principle, the unions had the monopoly to negotiate the collective bargaining agreement, but according to the Minister of Labor, union delegates are absent in 96 percent of small and medium-sized enterprises (SMEs). The envisaged reform would allow companies not having unions to negotiate those agreements.

Indeed, under the reforms, in companies with fewer than 20 salaried employees and without elected staff representatives, employers may directly negotiate with employees, then submit agreements to referendum on all subjects of negotiation, such as remuneration, work hours or work organization.

In companies with 20 to 50 salaried, employers may directly negotiate with an employee temporary appointed by a unions or an elected staff representative.

Key Reforms to Improve Predictability

Capped Damages

Before the reform, the French labor code was providing only for employees with more than 2 years’ service in companies which have more than 11 employees, damages that are a minimum of 6 months’ salary— but did not provide any specific amount for employees with less than 2 years’ service on termination or in companies with less than 11 employees. Therefore such damages were to be assessed depending on the factual circumstances of the case (employee’s family circumstance, age, length of service, job search prospects, etc.).

In an effort to increase visibility in situations of dismissal, labor compensation in the event of unfair dismissal will fall within a set floor and ceiling. With two years of service, the cap will be three months’ salary, with an incremental increase of one month per year of service up to 10 years. After 10 years’ service, the incremental increase is capped at half a month per year, for an overall 20 months for 30 years at the same company.

The minimum salary upon dismissal will be 15 days in companies with fewer than 11 employees, one month for all other companies, and up to three months based on years of service.

The legal severance indemnity currently fixed at one-fifth of the monthly salary per year of service will now be set to one-fourth of the monthly salary.

One-Year Delay for Seizing Employment Tribunals

The current time limit of one to two years to challenge a dismissal will be harmonized to one year for all types of employment contract termination.

Restrictions to the Assessment of Economic Dismissal and the Obligation of Redeployment

Perhaps the most interesting point of the reforms relates to economic dismissal. Thus far, the grounds put forward by a company to justify redundancy were taken into account at the level of the group to which the company belongs. In other words, the economic situation was not assessed at the company level, but at the level of the group’s business sector, across all relevant countries. Therefore, if the sector was profitable at the group level, the dismissal was deemed unfair even if the company in France was facing economic difficulties. Under the reforms, redundancy grounds will be assessed at the French level.

Prior to dismissing an employee, an employer should make his/her best efforts to identify available positions matching the employees' skills and professional qualifications. The redeployment obligation is key in the context of collective dismissals because if it is not properly implemented, the dismissal will be deemed unfair. Currently the scope of such obligation is very broad, since the employer must propose any available position in France or abroad. Under the reforms, the obligation will be simplified. The final provisions have not yet been issued, but the possibility for an employee to ask for redeployment abroad would be suppressed.

We will provide you with updates on this reform and its consequences on companies and employment in France once it has been approved.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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