Recently, the French government has profoundly modified employment law in France, through the adoption of a major overhaul of key provisions of the French Labour Code. The key aspects relate to the simplification of the staff representative structures and significant efforts to secure dismissals. There are plenty of other measures of importance, as detailed below. This reform accelerates the trends already initiated under President Hollande through three major labour laws respectively entered into in June 2013, August 2015 and August 2016.
A. Changes to negotiating collective bargaining agreements
By way of background, it should be noted that in France, employers must comply with the labour code, but also with the applicable sectorial collective bargaining agreement (CBA), if any. A sectorial CBA is a collective bargaining agreement entered by Unions representing employees on the one hand and Unions representing employees on the national level in a defined business sector. Once extended by the Labour ministry, it becomes mandatory for any company whose activity falls within the scope defined by the agreement. On the other hand, a company may always enter into company collective bargaining agreements with Unions being present in said company. The Macron reform provides for some important changes in this area.
B. Improved Capacity to Break with Sectorial CBA’S
Until recently, it was not possible to derogate to sectorial CBA’s with a company-wide agreement, unless it was more favourable for the employees. This has progressively changed, starting in 2008 as far as working time is concerned, then in 2016, and most recently with the Macron labour law reform that has created three different categories or “blocks”:
“Block 1” matters: the sectorial collective agreement prevails over company agreements on a list of 11 topics. For example, minimum wage provided for by the CBA cannot be derogated by a company agreement.
“Block 2” matters: the sectorial agreement prevails over former company agreements if the sectorial CBA provides for it. This concerns 4 topics. For example, policies regarding the insertion of handicapped individuals into the workforce.
All other subjects not included in the previous two blocks constitute “Block 3”: Company agreement prevails over the sectorial CBA.
C. New Majority Rules for Entering into a Company Collective Bargaining Agreement
Under French law, company agreements are entered into by the employer and the Union delegates (being employed in the company) having been appointed by Unions based on the results of the votes in the first round of the last elections of the works council (only unions are able to present candidates over this first round).
The principle of the majority collective agreement applies to all company agreements as of 1 May 2018: to be valid, the agreement must then be signed by one or more trade unions that received 50% of the votes cast.
However, if the signatory representative trade union organisations only have 30 to 50% of the votes, it is possible to then use a new backup plan: revert to a company referendum meaning that all the employees’ opinions in relation to the agreement may be sought in order to render the agreement enforceable.
Increased Capacity to Enter Into a Collective Bargaining Company Agreements in Small Companies or Without Trade Unions
In France, some matters require a collective agreement, such as the recourse to specific working time arrangements. Small businesses without unions were struggling to enter into an agreement where needed. The Macron reform has therefore facilitated the ability to enter into an agreement, by enabling to sign, if no union would appoint an employee, with an elected staff member or even with the workforce directly, under a certain conditions.
Securisation of Companies’ CBA
Since case law can be quite unpredictable and because changes are commonplace, the Government wished to protect employers against consequences of a ruling invalidating an agreement or some of its provision, which would then trigger consequences for the future, but also for the past, as it is admitted that civil case law has a retroactive effect. The law now states that if it appears that the retroactive effect of that annulment will have manifestly excessive consequences, there is the possibility for a judge to decide that the cancellation of all or part of an agreement will only bear an effect for the future or to modulate the effects of his decision in time.
Frequency and Content of Mandatory Negotiations
Companies where unions are present are required to conduct negotiations on some items listed by the Labour Code, under a certain frequency. The most important one is the annual negotiation on wages, working time and profit sharing.
It is now possible to set out by company agreement, the topics of mandatory negotiation in the company and the content of each theme. However, some issues, set out by law, must be negotiated at least once every 4 years.
Topics that can also be set out by agreement:
- the frequency of compulsory negotiations (up to 4 years);
- the calendar and meeting places;
- information provided by the employer (or employers’ organisations) and the date of delivery;
- the procedures for monitoring the commitments entered into by the parties.
Such a company agreement is concluded for a maximum duration of 4 years and can set the periodicity of its renegotiation.
D. Staff Representation: the CSE (The Social and Economic Committee)
The Macron Reform has significantly simplified staff representation in companies. Up to now, there have been three types of staff representative bodies, all of which are chaired by the employer:
- in companies with 11-49 staff: staff delegates (délégués du personnel);
- in companies with 50 and above: staff delegates, a works council and a health and safety committee.
The staff delegates were in charge of relaying claims regarding the day-to-day working life of the company staff, while the works council is mainly in charge of economic matters, and the health and safety committee deals with health and security matters.
One of the main points in the Macron reforms is the merging of the current three staff representative bodies into one. The Works Council, Staff Delegates, and Health and Safety Committee are now combined into the Social and Economic Committee: the CSE. Note that it will also be possible, subject to the existence of a collective agreement, instead of a CSE, to implement a Conseil d’entreprise. This body would basically have the same prerogatives as the CSE but would, in addition, be able to enter into and revise collective agreements, instead of trade Union delegates that would no longer exist.
Timeframe for the CSE to be Implemented
The minimum threshold for mandatory implementation is when the company employs at least 11 employees for 12 consecutive months. In principle, the CSE is set up at the end of the current mandate of the elected staff representatives, or at the renewal of one of these bodies. In any case, the very latest for the implementation of the CSE is 31 December 2019.
The body has the same configuration, regardless of the size of the company. It must include a health, safety and working conditions commission in companies and separate establishments that have at least 300 employees.
The number of seats to the CSE vary in proportion to the staff headcount. It ranges from 1 representative for companies with 11 employees to 35 representatives for companies with over 10,000 employees.
CSE’s responsibilities in companies with fewer than 50 employees
There has been a carry-over of most assignments formerly entrusted to the Staff Delegates:
- they can therefore present individual claims relating to wages, the application of the labour code, etc.
- they will have a role in the promotion of health, safety and working conditions in the company, investigation of accidents at work or occupational illnesses.
- they can refer to the labour inspectorate all complaints and observations relating to the application of legal provisions.
CSE’s responsibilities in companies with 50 or more employees
There has been a carry-over of the powers previously assigned to the Staff Delegates explained above as well as those previously assigned to the Works Council:
- the CSE remains informed and consulted on matters concerning the organisation, management and general operation of the company.
- the CSE remains informed and consulted periodically on:
- the strategic orientations of the company;
- the economic and financial situation of the company;
- the social policy of the company, working conditions and employment
- finally, the CSE has prerogatives that were formally those of the Health and Safety Committee (CHSCT).
Changes to rules regarding dismissals
In the past, some employers have been sentenced to pay damages, because they failed to comply with certain formal legal requirements regarding the way the dismissal letter should be motivated.
The Macron labour law reform has simplified the requirements regarding the letter, although the procedural requirement involving a pre-dismissal meeting remains unchanged.
To help employers in the process, the Government issued a template form that may be used for dismissal. Also, a specific procedure has been set up, that allows the employee to ask for more precision on the grounds for his dismissal explained in the dismissal letter.
The employee now has 15 days to make the request for further explanation.
If the dismissal letter is ruled as insufficiently motivated, this will trigger the payment of damages for unfair dismissal (see below).
Under French law, dismissal triggers the payment of a statutory severance or, if more advantageous, the severance provided for by the applicable sectorial CBA, if any. The Macron reform increased the statutory severance and makes it mandatory for employees whose length of service is of 8 months (instead of one year).
The formula is now the following:
- 1/4 of a month’s salary per full years of service up until 10 years;
- 1/3 of a month’s salary per full years of service (as of) above 10 years.
The reform does not change the fact that a dismissal for gross or serious misconduct (faute grave ou lourde) does not trigger the payment of any severance.
STATUTE OF LIMITATIONS TO CHALLENGE A DISMISSAL
Over the past decade, Parliament has periodically reduced the statute of limitations.
Just as for economic dismissals, the statute of limitation to challenge a dismissal based on personal grounds is now one year.
The reform contains specific provisions to deal with ongoing time limitations for dismissals notified before 24 September 2017.
This time limitation does not apply to disputes in relation to the contract’s execution nor to situations triggering a nullity (violation of protection of pregnant women, discrimination, etc.).
Please note that the 3-years statute of limitations still applies for claims in relation to wages and overtime, in particular.
French regulation was criticised by employers because of the uncertainty as to their potential financial exposure once they have dismissed an employee.
Indeed, Labour Courts could be quite severe and the amount of damages granted could vary depending on the jurisdiction ruling the case.
Any employee working in a company employing at least 11 employees and having 2 years of service could obtain indemnification of 6 months’ salary in case his dismissal was ruled unfair, which could happen quite often. On the other hand, there was no cap.
The Macron reform now imposes a binding grading scale to the Labour Court based on the employee’s seniority accrued within the company. For example, 2 years of seniority will entitle the employee to damages between 3 and 3.5 months of salary (in companies with at least eleven employees). 10 years of seniority will entitle the employee to damages between 3 and 10 months of salary (again, in companies with at least eleven employees). This grading scale does not apply in case the dismissal is ruled null and void. Neither does it cover particular prejudices, nor does it apply to claims in relation to the execution of the employment contract.
Since 2013, the French Government and Parliament aimed at making the economic dismissal procedure easier or at least a bit less severe towards large groups and companies.
The Macron reform deals with:
- The perimeter within which the economic rationale shall be assessed.
Before the reform, the economic rationale was assessed at the level of the business sector of the Group to which the French company belongs to worldwide, and not only in France or in the E.U. This would then trigger damages to be paid for “unfair dismissal” even in case the French subsidiary was experiencing losses for many years, because the “business sector” of the Group itself was quite profitable worldwide.
This economic rationale is defined as either “economic difficulties” or the “need to safeguard the competitiveness” or “technological changes” or, finally, the total and definitive shut down of a French legal entity. The law did not change this, nor the fact that the Group’s situation still needs to be taken into account; it also maintained the reference to the “business sector” of said Group.
However, it is now possible to only focus on the Group’s economic situation in France alone. Indeed, Section L.1233-3 of the labour code provides that: “Economical issues, technological transformation or the necessity to safeguard competitiveness, are assessed at the company level if it does not belong to a Group and, otherwise, it must be assessed under the scope of the other companies of the Group, operating in the same business sector, and established on the national territory”.
This section then provides for some definitions of the Group depending on where the “dominant” company (parent company, basically) is located.
Finally, the law now indicates that the “business sector is characterised, in particular, by the type of products, goods, or services, the targeted customers, the distribution networks and methods, all relating to the same market”. This enumeration seems to confer a significant importance to the “market” criteria, but it might be subject to a different interpretation from the courts.
- The internal redeployment duty: the reform puts an end to the duty to search for internal positions within the company’s Group abroad.
This fundamental requirement is now limited to France alone, still within the Group’s perimeter. The reform also eases the process for proposing redeployment opportunities.
The employer may now start by delivering a list of available positions within the Group in France only. The employee has 15 days to show interest.
AGREEMENTS ORGANISING COLLECTIVE TERMINATIONS BY WAY OF AGREEMENT
Since 2008, entering into a mutual termination agreement with an individual employee is possible. This agreement has to be submitted to the labour administration’s approval, which can be implicit.
This scheme has proven to be very popular and not conflictual.
On the other hand, since 2013, the mass layoffs proceedings (at least 10 job eliminations in companies of 50 employees or more) had been placed under the labour administration’s control, and negotiation of the redundancy package with unions were strongly encouraged. This reform proved to have a positive outcome as the proceedings became less conflictual, and their duration and outcome more predictable.
Although those “forced departures” plans have become less conflictual, it remains a trauma for the workforce, and a significant source of financial exposure for the company. Also, this process, even in case an agreement is being reached with unions, still involves quite a long consultation process with the Works Council and the Health and Safety Committee.
Conscious that entering into forced departure plans might not always be the best way to deal with a need to reduce the size of the workforce, when voluntary departures appear to be possible, the Macron Government imagined a new scheme called “mutually agreed termination”, placed under the labour administration’s control, and subject to an agreement being reached with Unions representing the majority of the workforce.
Entering into this agreement does not require a consultation of the elected staff representatives, but they must be informed.
It may be implemented only to organise voluntary departures, meaning that an employee who would belong to a targeted job category must not have his job eliminated or substantially altered if he is not a candidate to this collective departure, that is proposed by the employer.
The Macron reform brings telework provisions into the 21st century, with the possibility of its implementation by collective agreement or, failing that, by a charter drawn up by the employer after a possible consultation with the CSE in some cases. In the absence of a charter or collective agreement on telework, it is possible to set up telework via an agreement between the employer and employee, formalised by any means