French Labor Law Reform – Update

The new labor law reform, announced during the presidential campaign, took shape on August 31, 2017 with the introduction of five draft ordinances, the adoption of which is scheduled for September 22, 2017.

These 159 pages of text contain 36 measures. The purpose of this article is to present the most significant ones.

 1. Labor Tribunal Indemnities

Today, in case of dismissal without a real and serious cause, the labor tribunal judge merely refers to indicative scales to determine the damages to be allocated to the employee. Its only constraint relates to an employee with at least two years’ seniority working in a company with at least 11 employees, who must be awarded an indemnity of at least six months’ salary.

Employers have long complained about the lack of visibility on the risk of maximum penalty and, incidentally, on the cost of dismissals. Responding to this concern, the reform sets the scales, which are now imperative.

In companies with at least 11 employees, the minimum indemnity will be one month’s salary after one-year seniority and three months’ salary beyond that; the maximum award for damages will be between one and 20 months of salary, depending on seniority. In companies with fewer than 11 employees, only the minimum-indemnity scale is provided for, allocating damages between 0.5 and 2.5 months of salary, depending on seniority.

The judge may take into account the amount of severance indemnity received by the employee in order to determine the amount of damages. In addition, the statute of limitation to challenge a dismissal will be reduced from two years to one year.

These provisions shall apply to dismissals notified after the publication of the ordinance. 

In order to “offset” these unpopular measures with employees and their representatives, the government plans to increase the amount of the legal dismissal indemnity by 25%, which will then have to be subject to a future decree. The draft ordinance already provides that such indemnity will be due to employees with eight months of seniority, instead of 12 as it stands today.

Above all, the draft ordinance provides that the above-mentioned scales shall not apply in the event of dismissals deemed null, in particular, as a result of a violation of a fundamental liberty, a discriminatory measure, or acts of psychological or sexual harassment. In these cases, the indemnity granted to the employee will not be capped and must be at least equal to six months’ salary. As a result, it is likely that employees will increasingly invoke the nullity of their dismissal, in order to circumvent the new rules of the capping of damages.

2. Boundary Assessment of Economic Grounds

Today, when a company belongs to a group, the reality and the seriousness of the economic grounds (economic difficulties, technological changes, the need to safeguard competitiveness) are assessed at the level of the group’s business activity as a whole, including its activity abroad, if applicable. This solution means that French companies, sometimes facing severe economic difficulties, are prevented from carrying out job cuts, or sanctioned for having done so, on the ground that the economic situation of the group is satisfactory beyond French borders.

Again, in response to employers’ concerns, the draft ordinance stipulates that, in the future, the economic grounds will be assessed at the level of the group’s business activity in France only, except in the case of fraud.

Furthermore, the ordinance will repeal Article L. 1233-4-1 of the French Labor Code, which requires employers, when their company belongs to a group with offices abroad, to inform their employees regarding the possibility of receiving redeployment offers outside the national territory. Does this mean that the redeployment obligation will therefore be limited only to the French entities in the group?

3. Merging of Staff Representatives

Currently, staff delegates (“délégués du personnel” or “DP”), Works Council (“comité d’entreprise” or “CE”) and Health, Safety and Working Conditions Committee (“comité d’hygiène, de sécurité et des conditions de travail” or “CHSCT”) are all autonomous staff representatives (“institutions représentatives du personnel” or “IRP”), which the employer must consult separately, sometimes on the same subjects and with the same interlocutors (especially in the case of a single delegation of staff (“délégation unique du personnel“ or “DUP”)).

In the interest of simplification, in companies with at least 50 employees, these institutions should be merged to form a Social and Economic Committee (“comité social et économique” or “CSE”). The CSE would replace only the DPs in companies employing between 11 and 49 employees.

By company-wide majority agreement (or extended branch agreement), a Company’s Council (“Conseil d’entreprise”) could be set up, regrouping the prerogatives of consultation of the CSE and the negotiating prerogatives of trade union delegates (“délégués syndicaux” or “DS”). 

4. Negotiation in SMEs/VSEs

On the basis that 96% of SMEs (companies employing 11 to 50 employees) do not have DS, the government sought to favor the negotiation process in these small structures.

In the future, companies with fewer than 11 employees (as well as those employing between 11 and 20 employees without CSE members) will be able to propose a draft agreement to employees, which, in order for it to enter into force, shall be ratified by a two-thirds majority of the employees.

In companies employing between 11 and 49 employees, without DS, collective agreements may be negotiated, concluded and revised, either by one or more employees mandated by representative trade union organizations or by one or more CSE elected members. Unlike the negotiation process in SMEs/VSEs existing to date, these collective agreements may cover all topics open to collective bargaining negotiations.

The draft ordinances contain many other measures which overturn, more or less in depth, labor law as it currently stands: the creation of a model letter of dismissal; possibility of adding reasons to the letter of dismissal after its notification; perimeter of application of the selection criteria limited to the areas of employment; framework of voluntary departure plans; the primacy of the branch agreement to define the rules applicable to fixed-term contracts, temporary work and so-called “construction site contracts”; the right to dismiss (for non-economic reasons) employees refusing collective agreements, in particular, on employment; ability to telework on an occasional basis; development of trade union training, etc.

Bersay & Associés, Paris, France, a Transatlantic Law International affiliated firm.

For further information or for any assistance with understanding and interpreting French labor law, please contact Yves Ardaillou at francelabor@transatlanticlaw.com

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