French Law on Social and Solidarity Economy: The Employees Are Empowered!

by Dechert LLP

Executive Summary

The French Parliament recently enacted the law of July 31, 2014, which empowers employees to play a role before businesses embark on certain projects – similar to a works council consultation.

The law includes three noteworthy components:

  1. Employees' right to general information related to the purchase of a business
  2. Employers' obligation to inform employees of intent to sell
  3. Expanded provisions of the Florange law on purchase of viable sites

Businesses must be careful to meet all obligations, not only vis-à-vis the employee representative bodies but also vis-à-vis the employees.

(To read the French version, please click here)

  • Employees' right to general information related to the purchase of a business

From now on, an employer must inform its employees of the legal conditions in which the latter can purchase a business, its benefits, the difficulties to be expected and the type of assistance employees can expect to achieve such purchase. This information must be provided at least once every three years. 

The practical modalities for this information remain to be defined by a decree.

The objective of this law is to prepare the employees to the possible situation where their employer will be willing to sale his business. It will enable them to react efficiently in such a case. 

  • Employers' obligation to inform employees of intent to sell

In companies with more than 50 employees, there is already an obligation to inform and consult the works council in case of sale of the share capital of the company or its business. The new law provides an additional obligation for the companies that had less than 250 employees at the end of their last financial year.

From now on, employers must inform employees of their plans in the two following situations:

- in case of sale of the business for which the employees are working (whether the employer is or is not the owner of the business);

- in case of sale of more than 50% of the share capital of an SARL, or the shares or share instruments giving access to the majority of the share capital of a joint-stock company.

Employers will be required to notify employees for all sales concluded after November 1, 2014. The objective of the Parliament is to enable the employees to present their offer to purchase either the business or the share capital.

Employees must be informed prior to or at the same time as the works council. In companies with less than 50, employees or having between 50 and 249 employees but without employee representatives, this information must be given at least two months prior to the intended sale. 

The information must be given to the employees by a mean that indicates the date on which the information is being delivered. A decree will provide additional information in this respect.

In case of failure to comply with this prior notification of employees, the sale may be cancelled at the request of any employee. Such action is possible within two months of:

(i) the official publication of the sale of the business or
(ii) the publication of the sale of part or all of the share capital or
(iii) the date on which all employees have been informed. 

  • Expanded provisions of the Florange law on purchase of viable sites

The law of March 29, 2014, created an obligation for businesses to search for a buyer prior to the closing of a site. The objective of the Parliament was to react to the specific situation created when Arcelor Mittal decided to close the Florange site while this site was considered by some economic and social actors as viable. 

The law of July 31, 2014, strengthens the existing provisions and provides that the search for a buyer is now a condition for the approval of a social plan by the administration. Therefore, from now on in case of closure of a site, approval of a social plan will not take place without this prior search for a buyer for the site.

What this means for businesses

Prior to implementing projects, businesses must be careful to meet all obligations, not only vis-à-vis the employee representative bodies but also vis-à-vis the employees. The sanction could indeed be extremely severe in some cases (cancellation of the sale) and therefore be used by employees as a “formidable weapon”!


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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