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The Labour Law Reform in France

Written by
Capstan Avocats, the law firm setting the benchmark for labour law in France.
Even if you do not follow French politics closely, you have probably heard of President Emmanuel Macron’s ambition to ignite an economic revival in France. Following his election, President Macron announced major reforms starting with a large-scale overhaul of labour law. So, what are the most important changes that will impact your day-to-day HR management?

In short

The main goals of this reform are to provide more security for work relationships, to give companies more flexibility, more power to negotiate working conditions directly with employees and to reduce their financial exposure in cases of wrongful dismissals.

1.     Termination of employment contracts

a. Severance pay

Employees under permanent employment contracts will be entitled to severance pay if they have been in the company for at least eight months (versus one year before).

In addition, legal severance pay has been increased by a decree published on 26 September 2017. Starting now, the minimum legal severance pay will be 25% of a month’s salary per year of seniority up to ten years of service (versus 20% before). After ten years of service, severance pay will remain unchanged (i.e. 1/3 of a month’s salary per year of seniority above ten years of service).

However, collective bargaining agreements may provide for higher severance pay which does not fall within the scope of this increase.

b. Dismissal letters

Currently, when employees challenge their dismissal before a labour court, employers may only rely on the reasons set out in the dismissal letter. If the reasons invoked are considered insufficient, the dismissal is deemed unfair and the labour court must award damages to the claimant.

Under this reform, companies will be able to clarify the reasons justifying a dismissal at a later stage (i.e. after the notification of the dismissal), on their own initiative or at the employee’s request.

If the employee does not request clarifications, the fact that the dismissal letter does not provide sufficient details of the grounds for the dismissal will no longer result in the dismissal being declared unfair and damages will be limited to a maximum of one month’s salary.

c. Redundancies

When a company belongs to a group, the economic grounds for redundancy are assessed at the level of the group or, if there are several business sectors within the group, at the level of the business sector to which the company belongs. This currently includes foreign companies operating in the same business sector.

Under this reform, only the situation of group companies established in France will be taken into account to evaluate the economic justification.

This reform also provides a definition of a business sector: a common business sector is now defined by the nature of the products, goods or services delivered, the target customers, the network and the distribution methods pertaining to the market.

d. Redeployment

Until today, in cases of redundancy, companies had to first try to redeploy affected employees. This involved searching for positions within the company and the group it belonged to in France – and abroad, if the employees expressly request to be redeployed abroad. Individualised redeployment offers had to be made in writing and be sufficiently detailed.

Under this reform, companies will still have a redeployment obligation. However, if a company belongs to a group, this obligation will be limited to companies located in France and whose organisation, activities or location result in their staff being interchangeable. In practice, this means that employees will no longer be entitled to request redeployment offers abroad.

Moreover, a new means of communicating available positions will be added. Redeployment offers will still have to be made in writing, but the employer will have the option to provide a list of available positions to all of the employees by any means (additional conditions shall be provided in an upcoming decree).

e. Voluntary departure plans

The purpose of a voluntary departure plan is to downsize a company’s workforce by eliminating jobs while avoiding redundancies. Employees are encouraged to voluntarily leave the company by offering them measures to help them find new employment. The departures take the form of terminations by mutual agreement and not redundancies initiated by the employer.

The implementation of voluntary departure plans is currently subject to the collective redundancy procedure – which is very burdensome.

Under this reform, by means of a majority collective agreement concluded with labour unions and validated by the labour authorities, these voluntary departures (now referred to as “rupture conventionnelle collective”) will have their own formal legal framework (i.e. a less burdensome procedure). Additionally, it will no longer be mandatory to offer redeployment leave (“congé de reclassement”), which represented a significant cost for companies.

Finally, it will not be necessary to provide a valid economic justification at group level or at the level of the group’s sector of activity (to which the employer belongs). This will simplify the process and make communication easier with labour unions, elected staff representative bodies, employees and labour authorities.

2.     Claims related to terminations

a. Statute of limitation to challenge the termination of employment contracts before French labour courts

Employees will now need to take legal action in relation to the termination of their employment contract within 12 months of receiving notice of termination (versus two years previously), regardless of the grounds for termination (i.e. both economic and personal reasons).

b. Amount of damages before French labour courts

Under the reform, in cases of dismissal without real and serious cause, the French labour courts must use a set damages scale.

The amount of damages which may be granted depends on (i) the employee’s seniority within the company and (ii) the size of the company, as follows:

  • Companies with fewer than 11 employees:
    • Minimum damages: 0.5 months of gross salary (as from one year of seniority);
    • Maximum damages: 2.5 months of gross salary (as from nine years of seniority).
  • Companies with at least 11 employees:
    • Minimum damages: one month’s gross salary (as from one year of seniority);
    • Maximum damages: 20 months of gross salary (as from 29 years of seniority).

For example, in a company with at least 11 employees, an employee with ten years of seniority could be awarded between three and ten months’ gross salary.

When applying the scale, the labour court may take into account any severance already paid by the company in excess of the required minimum.

By way of exception, these rules will not apply in specific circumstances: for example, discrimination or harassment. In such cases, the amount of damages will remain uncapped.

3.     Simplification of staff representative bodies

Under this reform, the three elected staff representative bodies which currently exist – Staff Delegates (“délégués du personnel”), Works Council (“comité d’entreprise”) and Health and Safety Committee (“comité d’hygiène, de sécurité et des conditions de travail”) – will be merged into a single staff representative body called the “Social and Economic Committee” (“comité social et économique”).

The new Social and Economic Committee’s exact powers will depend on the company’s headcount, but will be quite similar to the powers of the three existing staff representative bodies. In practice, this will simplify day-to-day management of staff representatives (e.g. number of meetings and number of protected employees).

In general, in companies that already have elected staff representative bodies, the new Social and Economic Committee will be put in place at the end of the current term of office of the elected members. In all cases, the terms of office of the members of the existing bodies must come to an end by 31 December 2019.

By means of a majority company collective agreement, a Company Council (“conseil d’entreprise”) can be created. It will have the powers of the Social and Economic Committee and those of the trade union representatives (e.g. signing company collective bargaining agreements).

4.     Collective bargaining

  1. Coordinating bargaining at the sector and company level

This reform will simplify the rules as follows:

  • a company-level collective bargaining agreement may derogate from a sector-level agreement, even to introduce provisions reducing employee benefits or protection;
  • in a certain number of areas (e.g. minimum pay, job classifications and equality in the workplace), the provisions of the sector-wide agreement will still prevail over a company-level agreement, unless the company-level agreement contains equivalent or better benefits;
  • in all other areas, a company-level agreement may derogate from a sector-level agreement, in full or in part, whether it was entered into before or after the sector-level agreement.
  1. Broadening the possibilities of negotiating company agreements in small businesses

This reform promotes the conclusion of collective bargaining agreements at the company level in businesses where no trade union representatives have been appointed. Depending on the size of the company, company agreements can be concluded with members of the Social and Economic Committee or with non-elected employees empowered by labour unions. In businesses with fewer than 11 employees, the company can even ask the employees to approve a draft company agreement.

5.     Telework

The rules concerning telework will be simplified. However, a company will have the possibility to put in place telework only if it has concluded a company agreement or implemented a telework policy which will set:

  • the conditions for the transition to telework and the conditions for returning to work on the company’s premises;
  • how the employee can agree to the terms regarding telework;
  • the method of monitoring working time or regulating the employee’s workload;
  • the hours during which the teleworker must be reachable.

Employers should keep in mind that under French law, many companies must put in place policies regarding the employees’ “right to disconnect” from digital tools.

What Are the next steps?

The measures relating to dismissals, statutes of limitation and voluntary departure plans apply starting 25 September 2017.

Most of the other measures will enter into force on the date on which the corresponding implementing decree is published.

Provided that the French government moves forward as announced, the next reforms to be launched should concern, for example: the unemployment insurance scheme, career development and the French pension systems.

NB: This article only presents the main measures of the overhaul and is not exhaustive.

Guillaume Bordier
Partner - France
Capstan Avocats
Ji Eun Kaela Kim
Associate - France
Capstan Avocats
Basile Moore
Lawyer - France
Capstan Avocats
Stéphanie Poussou
Senior Associate - France
Capstan Avocats
Fadi Sfeir
Counsel - France
Capstan Avocats