The New Labor Reform in France towards reinforcement of social dialogue: in the continuity of the major pieces of legislation implemented over the past few years but one step further

Overview of its key measures

Background

Tackling rigidities of the labor laws and regulations in France to reshape them towards more flexibility and predictability: this has been one of the key priorities on the successive Government’s agenda over the past few years.

Flexisecurity improvements have been materialized by successive major laws, starting with the “Macron” and “Rebsamen” laws in August 2015, followed by the highly debated “El Khomri” law in August 2016, which utmost unpopularity ended up crystallizing tensions among the national trade unions, political oppositions and the public.

Elected last May, the new President, with the support of his freshly created centrist party – The Republic on the Move (REM) – immediately reaffirmed his commitment to implement without delay major reforms to improve the country’s attractiveness to foreign investors (notably in finance and e-business) and restore competitiveness in key sectors with a focus on easing day-to-day running of micro-enterprises and SMEs. To do so, injecting further flexibility, simplification, security and predictability into individual and collective labour relationships came as a top priority.

Learning from the past though, to speed up the enactment reform process and to mitigate the risk of unified union obstruction and the impact of massive street protests, the Government used the ordinance process avoiding, in doing so, lengthy parliamentary debates whilst fully involving unions upstream in closed discussions and preparatory works. Let’s dare saying it: a successful strategy it proved so far.

Where are we heading now

The 5 draft ordinances – no less than 159 pages and 36 measures in total – aiming at reinforcing social dialogue were made public on August 31st, approved by the Council of Ministers and signed by the President on September 22nd. They will be officially published next week.1

Ratification laws (lois de ratification) will then be voted by the French Parliament to ratify the 5 ordinances and give them legal force. Application decrees, where required, will then be issued in the next weeks or months to set the implementation terms of certain measures (e.g., CSE).

The Constitutional Council, notwithstanding its validation by a decision of September 7th of the accreditation law (loi d’habilitation) for the Government to enact by way of ordinance (Cons. const., dec. No. 2017-751 DC, September 7th, 2017), itself published on September 16th (Law No. 2017-1340, September 15th, 2017), recalled that it could, later on, be seized of the content of the coming ratification laws or by way of constitutionality questions (QPC).

Subject to these potential actions and their outcome, the Labor Code reform should globally be effective by January 2018: by the end of September 2017 for measures with immediate effect not requiring application decrees (1st block), later in the year for those which do (2nd block) and according to schedule preset for specific measures (3rd block).

Next step for the Government will be to pursue deep labor and social reforms in 2018 by tackling additional key topics and revise their current operating models, namely: vocational training, apprenticeship, unemployment insurance service, pension and healthcare. Next draft bill is expected before the French Parliament for Spring 2018 and expected to be passed in the Summer.

Overview of the Labor Reform key measures – Before (now) and after

With this new reform, the Government put the onus on two priorities: more flexibility and more predictability, thus reducing risks (mainly for employers) but also securing certain employment arrangements and adding protections for both employers and employees.

The following main measures, as presented to date, can be pooled as follows:2

More flexibility

Collective negotiation

1. Articulation between branch and company negotiation levels

Since 2004, company-wide collective agreements can derogate from the branch-wide collective agreements, incl. in a sense less favourable to employees, except if the latter provide otherwise and subject to conditions.

This derogation possibility is however excluded by law for certain matters. The law indeed sets topics for which company-wide agreements cannot provide for clauses derogating to the branch-wide agreement’s. Those topics concern minimum salaries, classification, welfare, penibility prevention, professional equality between men and women and fund mutualisation for vocational training.

Since “El Khomri” law, company-wide agreements prevail over the branch’s with regard to working time, resting time and leaves (save exceptions provided by law).

In the continuity of “El Khomri” law, further reshaping articulation is made between branch-wide and company-wide collective agreements around three blocks; thus widening possibilities to negotiate at company-level whilst securing essential rights and employees’ protection at branch-level:

  • Block 1: 11 topics considered fundamental for employees’ protection will be covered by branch-wide agreements and those terms prevail over company-wide agreements. This concerns minimum salaries, classification, welfare, certain working time terms, CDDs and temporary contracts, permanent contracts for specific projects (contrat de chantier), professional equality between men and women, employees transfer where TUPE does not apply, trial period, fund mutualisation for parity financing and vocational training
  • Block 2: Four topics (risk prevention, work for handicapped employees, union representation track, premium for risky/unsanitary works) where the branch will be free to decide its primacy (or not) over company-wide agreements by way of locking clauses (clauses de vérouillage)
  • Block 3: For all topics not listed above, as a matter of principle, company-wide agreements will prevail over the branch’s. The branch-wide agreement will only apply in the absence of company-wide agreement

The Labor Code provisions on mandatory collective negotiations at branch and company levels will be redrafted.

2. Majority company-wide agreements

As per “El Khomri” law, to be valid all company-wide agreements will need to be signed by the majority of the union representatives (+50%) as of September 1st, 2019.

So far, the rule imposing majority company-wide agreements (+50% or, failing which, +30% and approval by the majority of the employees) has been applied to certain topics only (incl. working time, resting time, leaves, employment protection and development for instance).

Regarding other topics, the rule is still 30% and the absence of opposition by unions.

Several employment-related collective agreements co-exist: RTT, working time modulation, employment maintaining and mobility, employment protection and development.

To date, as a matter of principle, a collective agreement not favourable to employees cannot modify the employment contract (and a dismissal in the context thereof would likely expose the employer to a risk of unfair dismissal).

To be valid, all company-wide agreements, on any topics, will need to be signed by the majority of the union representatives (+50%) as of May 1st, 2018.

In the absence of majority, possibility to validate the agreement by referendum at the employer’s initiative if unions do not object to it.

The existing employment-related collective agreements would be unified into a single majority agreement, which can address working time, work organisation, compensation and work mobility matters.

Its provision would prevail over those contained in employment contracts. In case of contradiction, if the employee refuses the change, he/she could be dismissed based on a sui generis ground deemed a real and serious cause.

3. Easing negotiation in micro-enterprises and SMEs without union representatives (DS)

In the absence of union representatives in companies below 50 employees, company-wide agreements can be negotiated with a mandated staff representative or, in the absence thereof, a staff representative not mandated or, in the absence thereof, a mandated employee, subject to conditions.

In companies with less than 11 employees without union representatives: possibility to negotiate collective agreements on all topics opened to negotiations directly with the employees to be ratified by a 2/3rd majority. Same applies in companies with between 11 and 20 employees without elected CSE members.

In companies between 11 and 49 employees without union representatives and Enterprise Council: possibility to negotiate a collective agreement on all topics opened to negotiations with a mandated employee or a CSE member.

In companies with at least 50 employees without union representative and Enterprise Council: possibility to negotiate a collective agreement with a mandated staff representative or, in the absence thereof, a staff representative not mandated or, in the absence thereof, a mandated employee, subject to conditions (no change).

CSE consultation will be framed within 1 month as of the first meeting.

4. Branch reorganisation and extension conditions

Upon the expiry of a 3-year period as of the “El Khomri” law enactment, launching of the project to merge branches, which have not executed agreements or amendments over the past 7 years.

Upon the expiry of a two-year period as of the “El Khomri” law enactment, launching of the project to merge branches with less than 5,000 employees (new) and/or which have not executed agreements or amendments over the past 7 years.

New condition to extend branch-wide agreements: need to set specific provisions for companies below 50 employees or, in the absence thereof, need to justify this absence.

Government’s new prerogatives with regard to extension terms notably in favor of companies below 50 employees.

5. Securing collective agreements

Lack of specific legal provisions on burden of proof with regard to validity of the agreements.

Likewise, the time limit to launch a nullity action will vary depending on the nature of the claim, the matter concerned and the court seized.

A collective agreement considered null and void cannot have any effects even for periods prior to its annulment.

Collective agreements are presumed negotiated and executed in compliance with law.

The time limit to launch nullity actions will be 2 months as of the agreement publication or notification depending on the circumstances.

In case of annulment by the courts, the opportunity of its retroactive effect will be appraised by the judge and may not be applied or could be mitigated depending on circumstances.

Staff representation

Simplifying staff representation

Co-existence of 3 staff representative bodies in companies with at least 50 employees with distinct prerogatives and operating models:

  • Staff Delegates – DP (in place in companies with at least 11 employees)
  • Works Council – CE
  • Health and Safety Committee – CHSCT

Since “Rebsamen” law of August 2015, possibility to implement a Single Personnel Delegation (DUP)  in companies below 300 employees, where the Staff Delegates constitute the personnel delegation at the Works Council and Health and Safety Committee. The three bodies retain their respective prerogatives and operating models though (save certain adjustments).

Before “Rebsamen” law, the DUP was only possible in companies below 200 employees and only covering Staff Delegates and Works Council (excl. CHSCT).

As a matter of principle, staff representatives have consultative prerogatives, whilst union representatives have negotiation ones.

Simplifying staff representation by merging the three existing bodies into a single one called “Social and Economic Committee” (Comité Social et Economique – CSE).

CSEs can be implemented at site and central levels.

A specific commission for health and safety issues will be mandatory in companies or sites with at least 300 employees (and could be imposed by the labor inspection in smaller companies/sites).

Proximity representatives, among the CSE members, can be put in place by way of agreement.

Personnel delegation at the CSE would hold a four-year representative mandate to be renewed up to 3 times (but no cap in companies below 50 employees).

The CSE will meet at least once per month in companies with at least 300 employees and once every two months in companies below 300 employees, being noted at least 4 of those meetings will have to deal with health, safety and work conditions matters (like for existing “new version” DUPs).

CSE will co-finance most kinds of expertise (80% employer – 20% CSE (new)).

CSE budget and its contribution rules will be revised.

New negotiation powers (based on German model): by a company-wide majority agreement or extended branch-wide agreement, the CSE could become a single body, called “Enterprise Council” (Conseil d’Entreprise) having competence to negotiate and co-decision right in certain fields (e.g., vocational training).

Transition period for CSE implementation in companies with staff representatives in place: CSE to be implemented upon the expiry of the existing staff representative mandates (with a possible 1-year extension) and at the latest on December 31st, 2019. During this period, DP, CE and CHSCT current laws and regulations will continue to apply.

More predictability

Contract termination

1. Dismissal letter

No possibility to rely on an existing standard letter.

French law provides for mandatory terms to be stated in the dismissal letter including dismissal justification.

Lack of precise justification stated in the letter entails the consequences of an unfair dismissal.

Certain procedural irregularities can have for consequences that of an unfair dismissal.

Implementation of a standard dismissal letter by way of a cerfa form (like for mutually-agreed terminations).

Dismissal justification could be provided after notification of the dismissal at the employee’s request or spontaneously by the employer.

Lack of justification gives right to a 1-month indemnity (no longer damages for unfair dismissal).

Certain procedural irregularities (e.g., absence of pre-dismissal meeting) will give right to damages of up to 1-month salary (no longer damages for unfair dismissal).

2. Mandatory severance pay

For employees with 1-year of service minimum.

1/5th of monthly salary per year of service; 1/3rd as of 11 years of service.

To be extended to employees with at least 8-months of service and increased by 25%.

The calculation terms will be set by upcoming application decree.

3. Time limit to seize the labor courts in case of contract termination

Commonly between 1 and 2 years (2 years in case of dismissal for personal reasons).

To be unified and limited to 1 year save exceptions – Applicable to both redundancy and dismissal for personal reasons.

4. Damages caps in case of unfair dismissal

No caps set by law. Only a 6-month threshold for employees with at least 2-years of service in companies with at least 11 employees.

In case of null and void dismissal, damages cannot be below 6-months’ salary with no cap.

Null and void redundancy as a consequence of social plan insufficiency or absence of validation gives right to damages of 12-months’ salary minimum (if at least 2 years of service).

Damages for unfair dismissal (therefore excl. discrimination, harassment and breach of fundamental rights) will be framed with thresholds and ceilings based on employee’s length of service and company’ size (+/- 11 employees):

  • Companies below 11 employees: ½ month (1-2 years of service) up to 20 months (30 and + years of service)
  • Companies with at least 11 employees: 1 month (1 year of service) up to 20 months (30 and + years of service)

In case of null and void dismissal, damages cannot be below 6-months’ salary with no cap.

The 6-month sanction would also apply in case of social plan insufficiency or absence of validation (v. 12-month before) and work-related accident or sickness.

Additional claims (e.g., back pay) are not concerned by the above ceilings and caps.

Redundancies

1. Economic rationale for redundancy in international groups

Economic justification (economic difficulties, technologic changes, need to safeguard competitiveness) is assessed at group’s level worldwide in the relevant business sector (not defined by law).

The economic rationale will be narrowed to French territory within the relevant business sector, except in case of fraud (e.g., arrange artificial insolvency of the French affiliate), meaning that when French affiliates would face for instance economic difficulties unlike the group, redundancies could be deemed valid.

Legal guidance is provided as to the definition of relevant business sector.

2. Prior redeployment obligation in case of redundancy

To be conducted both in France and overseas (subject to employee’s request), failing which dismissal will be deemed unfair.

The obligation will be narrowed to France with simplified implementation terms (e.g., list of vacant positions to be communicated by any means).

Redeployment implementation terms will be set by upcoming application decree.

3. Selection criteria to set order of dismissal in the absence of social plan (i.e., below 10 redundancies within 30 days)

Application scope at the whole company’s level.

The application scope will be narrowed to employment zones (like with a unilateral document in case of social plan).

4. Staff representative consultation for small collective redundancy plans (i.e., below 10 redundancies in 30 days)

Up to 4 months consultation.

CSE consultation will be framed within 1 month as of the first meeting.

5. Voluntary departure plans (PDV)

PDVs specificities are not framed by law, only case-law.

PDVs will be framed by law using a mix of two sets of rules: social plan and mutually-agreed termination (“rupture conventionnelle”).

Specific employment arrangements

1. Telework

Requires specific formalism; strict implementation terms; no probative obligations to develop this practice.

Occasional telework is not framed by law.

Telework can be implemented by way of a company-wide agreement, failing which, a charter issued by the employer after consultation of the CSE.

Occasional telework will be possible without specific formalism as provided by law.

The employer’s refusal to a telework request from an eligible employee would have to be explicitly justified (reversal of the burden of proof).

2. Permanent contracts for specific projects (CDI de Chantier ou d’Opération)

Those are permanent contracts (CDI), which term is preset by the completion of the project. Save if provided otherwise by a collective agreement, the contract termination is not subject to redundancy rules but to dismissals for personal reasons’.

Mostly used in building sector.

Those contracts will be generalized and applied to other business fields if covered by a branch-wide agreement within limits set by law.

In the absence of said agreement, this contract can still be used in sectors where it is customary practice on 01/01/2017.

3. Fixed-term contracts (CDD)

Term commonly limited to 18 months including renewal; renewals limited to 2; specific time periods to apply in case of successive CDDs on a same role.

Failure to communicate a CDD or temporary contract within 2 days following hiring entails requalification into permanent contract (CDI).

Those terms could be set by a branch-wide agreement within limits set by law (same for temporary work).

Failure to communicate a CDD or temporary contract within 2 days following hiring no longer entails requalification into permanent contract but an indemnity of up to 1-month salary.

4. Loan of workmanship

Save in the context of specific work services (e.g., temporary agencies, portage companies, companies providing services to individuals, outsourcing), such loan is illicit if lucrative.

For a maximum 2-years period, loans of workmanships between a group or companies of a significant size (5,000+ employees) and a company with less than 8 years of existence or an SME are deemed not to be lucrative even if the amount invoiced by the supplying company to the user company is below salaries, social contributions and professional expenses.

Health at work

1. Penibility prevention at work

The obligation to negotiate or put in place an action plan in companies with at least 50 employees is triggered in case at least 50% of the employees are exposed to certain work-related risks .

The obligation is extended to the case where work-related accidents and/or sicknesses would reach certain thresholds set by law.

The penibility prevention scheme will be globally reorganised with the implementation of a prevention professional account.

Declaration obligation by the employer will be reduced.

2. Redeployment obligation in case of physical inaptitude to work

For groups of companies, the redeployment application scope covers all companies which activities, organisation or operating location allow for personnel permutation (incl. overseas).

.

The application scope will be narrowed to the French territory.

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