In June 2017, the French government unveiled its plan to renew French social model, such program includes notably reforming employment law, French pension and unemployment insurance systems.
As a first step of this comprehensive reform strategy, five ordinances reforming French labor laws were adopted on 22 September 2017 and issued on 23 September 2017 (the Reform).
Unless specifically provided otherwise, the measures introduced by the Reform will enter into force on the day after the publication of the required implementation decrees (expected as from end of October 2017 onwards), and at the latest on 1 January 2018. By exception, certain measures are applicable since publication of the ordinances (e.g. regarding dismissals, temporary work and teleworking). In addition, transitional arrangements may allow existing employee representation to remain in place for the duration of the current mandate but until no later than 31 December 2019.
A ratification bill for each of the ordinances should be passed in Parliament within 3 months of their publication, failing which the ordinances would lapse.
The main measures proposed by the Reform are hereafter outlined :
- Securing the dismissal process and mitigating litigation risks
Caps on damages granted in case of unfair dismissal. The Reform introduces a mandatory scale for the court’s determination of damages awarded in case of unfair dismissal.
This scale determines a minimum amount (between 1 and 3 months) and maximum amount (between 1 and 20 months as from 30 years of seniority) depending on the length of service of the employee. Lower minimum thresholds apply for companies with less than 11 employees.
The Reform thus marks a break from previous rules where the amount of damages was unlimited and the minimum for an employee with at least two years’ of service was 6 months’ pay.
These new caps however do not apply to dismissals held null and void, in particular in case of harassment, discrimination, violation of a protective status or infringement of the employee’s fundamental liberties.
The amount of certain indemnities granted to employees as compensation for specific loss/violations are also reduced (e.g. non-compliance with re-hiring priority in case of economic dismissal or with the redeployment obligation in case of dismissal of an unfit employee).
Rules regarding enunciation of dismissal grounds are made more flexible. The employer will have the possibility to specify the dismissal grounds stated in the dismissal letter either on his own initiative or at the employee’s request. In the absence of such request, the inadequate statement of reasons in the letter would no longer deprive per se the dismissal of its real and serious cause. An irregularity due to an insufficient justification of dismissal grounds in the dismissal letter will only entitle the employee to an indemnity representing one-month’ salary maximum.
In an attempt to reduce litigation (and in particular litigations related to procedural irregularities), the Reform also introduces standard templates of dismissal letters which will be issued by decree. Such decree is expected early November 2017.
Reduction of the statute of limitation. The Reform reduces the statute of limitations applicable to termination related claims from 2 years to 12 months.
- Increase of legal dismissal indemnities
The legal dismissal indemnity will be owed to employees with at least 8 months’ service, instead of one year previously.
The amount of the severance pay is also increased by 25% for the first ten years of service.
- Streamlining rules regarding redundancies
Reduced scope for assessment of economic grounds. The scope for assessment of the existence of valid economic grounds in case of redundancies is now restricted to a national level when the company belongs to an international group. The “group” and “business sector”, setting the frame within which the economic grounds are assessed, are defined in line with solutions reached by the French Supreme Court.
Reduced scope and simplified process for the redeployment obligation. The redeployment obligation in the context of collective redundancies is alleviated. The employer may either, as previously, send the redeployment offers in writing to the employees or communicate these by any means via a list. In addition, the employer is no longer required to inform the employees about the possibility they have to receive redeployment offers abroad.
Greater flexibility and security for collective dismissals of less than 10 employees. In redundancies of fewer than 10 employees over a 30-day period, the scope of application of the redundancy selection criteria can be set at the employment area level and not necessarily at company level. Furthermore, the information consultation procedure of the Social and Economic Committee (former works council and health & safety committee, see Employee representation) on the redundancy project will last for a maximum of one month as of the date of the Social and Economic Committee’s first meeting.
- Implementation of a “collective contractual termination” (voluntary departures plan)
A set of rules regulating voluntary departures plans is enacted. The Labor Code being silent in that regard, rules on voluntary departures plan were mainly those applicable to collective dismissals with some flexibility and adjustments given by case-law. By introducing a “collective contractual termination”, the Government regulates voluntary departure plans, promulgating a slightly lighter version of the procedure that was previously followed and making negotiation central since the plan cannot be unilaterally adopted by the employer.
The “collective contractual termination” or voluntary departures plan may only be implemented where the plan excludes the recourse to dismissals in case the target number of departures is not reached.
The content of the voluntary departures plan must be determined by collective agreement (validity subject to signature by 30% of the representative trade unions then 50% as from 1 May 2018, see Collective bargaining) setting forth in particular the maximum number of projected departures, the conditions to be met to benefit from it, the terms and conditions for the Social and Economic Committee to be informed and follow up on the plan and measures in order to facilitate external redeployment (e.g. indemnities, funding of professional training, coaching). The agreement will have to be submitted to the administration for validation.
Thereafter, the acceptance by the employer of an employee’s application for voluntary departure will entail a termination of the employment contract by mutual agreement. The indemnity paid to the employee in connection with the voluntary departure, which should not be less than the legal severance pay in case of redundancy, will be subject to a favorable social and tax treatment which has not been determined yet but should be aligned on the indemnities paid in the context of a redundancy plan (“PSE”).
- Employee representation
Merging the employee representatives’ bodies
The three employee representatives’ bodies – staff delegates, works council and health & safety committee – are merged into one single body, so-called “Social and Economic Committee” (SEC). In practice, the current employee representatives’ bodies will remain and the new Social and Economic Committee will only be set up once the current mandates expire (but no later than on 31 December 2019).
The prerogatives of this body correspond to those of the staff delegates, works councils and health & safety committee and depend on the company’s headcounts, with the same applicable thresholds of 11, 50 or 300 employees as previously. In companies with at least 300 employees, a Health & Safety Commission will have to be established within the Social and Economic Committee.
Even though prerogatives remain mostly unchanged, some rationalization should result from this Reform since for example, it will not be needed anymore to gather the opinion of both the works council and the health & safety committee and to carry out two distinct information-consultation procedures. A decree on the number of representatives elected to the Social and Economic Committee and the number of hours granted to its members is expected by the beginning of November 2017. Agreement with the unions should also take a part in defining the functioning of the Social and Economic Committee.
By agreement, a “Company Council” can now be set up. It not only replaces the staff delegates, works council, health & safety committee (like the SEC) but is also vested with negotiation powers and with a veto right on specific matters.
- Collective bargaining
- Giving company agreements greater primacy over branch agreements
Aiming at giving more room to company-level bargaining, the Reform divides into three “blocks” the areas open to collective bargaining:
- Firstly, a list of areas in which branch agreements (industry wide agreements) should take precedence over company agreements which is adjusted. In addition to the list previously set out in the Labor Code, new areas of negotiation are added, in particular with regard to fixed-term contracts and temporary work (see Temporary work).
- Secondly, the areas in which a branch agreement may take precedence over the company agreements signed after its entry into force unless the company agreements provide for more favorable provisions. The areas in which a branch agreement is allowed to stipulate that it will prevail on company agreements are now restricted.
- Finally, a third block entailing all other areas open to collective bargaining, and in which company level agreements are given primacy over branch-level agreement (that is that a branch agreement only applies in the absence of a company agreement dealing with the same matter).
- News rules on signing a collective agreement as from 1 May 2018
As from 1 May 2018, the validity of a collective agreement will be subject to the following conditions:
- Signature by one or more representative trade union organizations which have received more than 50% of the votes cast in favor of representative organizations in the first round of the last professional elections; or
- Signature by one or more representative trade union organizations which have received more than 30% of the votes cast in favor of representative organizations in the first round of the last professional elections, provided that the collective agreement is ratified by referendum organized at the initiative of the signatory trade union organizations or, failing that, of the employer on condition that – in the latter case – the referendum does not meet the opposition of the unanimity of the signatory trade unions organizations.
These conditions imply the development of actions sensitizing employees to the agreement at stake upstream in addition to conducting negotiation with trade unions.
- Facilitating collective bargaining in small or medium-sized companies
Over the past few years, several laws have been passed in order to facilitate the signing of collective bargaining agreement in companies with no trade unions. The Reform contains a new attempt to boost collective bargaining in small or medium-sized companies.
In companies with less than 11 employees or with 20 or fewer employees and no staff representatives elected at the Social and Economic Committee, the employer can now directly propose a draft agreement, covering all the subjects open to collective bargaining, to employees and gather their approval by way of referendum. To be valid, this agreement should be ratified by a two-third majority of the staff.
In companies with fewer than 50 employees, without a trade union delegates or a works council/Social and Economic Committee, agreements at company or establishment level may now be negotiated either by one or more mandated employees, or by a staff representative.
- Fixed-term contracts and temporary work
Two measures should open up and secure the recourse to temporary workers and fixed-term contracts:
- A branch agreement can now stipulate the maximum duration of temporary contracts or fixed-term contracts, the maximum number of renewals, the waiting time period between successive temporary contracts or fixed-term contracts and situations where no waiting time period applies. On these items, the branch agreement will prevail on legal provisions even if less favorable. In the absence of such provisions, legal provisions should apply;
- As from 24 September 2017, failure to provide the employee with his employment contract or placement contract within the required timeframe only entitles the employee to an indemnity of one-month salary maximum while it previously caused per se a reclassification of the contract into a permanent contract.
Few adjustments have been made to rules on teleworking, mainly:
- Teleworking can now be implemented by collective agreement, or, failing that, by an internal policy drawn up by the employer after consultation with the Social and Economic Committee, if it exists. Resorting to occasional teleworking by simple agreement of the employer and the employee is now allowed;
Any employee occupying a position eligible for teleworking can ask to benefit from it. In this case, the employer’s must justify his refusal.