International Labor & Employment Law Committee Newsletter

Issue: April 2013

Editor: Tim Darby | Africa and Middle East Editor: Karen Seigel | Asia and Oceania Editor: Ute Krudewagen | Canada Editor: Gilles Touchette | European Editor: Paul Callaghan | Latin America Editor: Juan Carlos Varela | Law Student Editor: Irene Lehne, Earle Mack School of Law at Drexel University


Agreement on Reforming Labor Laws Reached by Management and Unions

Alice Père and Patrick Thiébart, Jeantet Associés, Paris, France

An agreement between the association of employers and the top five labor unions dealing with significant reform of the country's labor laws was reached January 11, 2013 after three months of negotiations. Both sides agreed that simplifying and liberalizing France's rigid labor law regime was necessity to increase competitiveness and drop an unemployment rate of 10.6%, the highest level since 1999. The agreement still needs to be transposed into the French labor code by Parliament by the end of May 2013.

The agreement provides more flexibility to employers while also providing more protection for employees. As discussed below, the agreement covers a wide range of current employment law issues (e.g. business reorganization, safeguarding job positions, prerogatives of employees' representatives, complementary health insurance, taxing short term employment contracts and training of employees).

New Procedural Rules in Case of Business Reorganization

The new text provides two alternative processes in case of business reorganization.

  • The employer can decide to sign a collective agreement with the majority unions containing terms and conditions for collective redundancy (e.g. number and schedule of the meetings with employees' representatives, list of documents to be disclosed by employer, conditions to hire an expert, content of the social plan, selection criteria for redundancy). After validation by the French Labor Administration, those terms will be imposed on employees.
  • Alternatively, the employer can decide to implement unilaterally a "social plan". To that end, the employer will need to get the works council's opinion and the French Labor Administration's approval.

The collective agreement and the unilateral social plan can be challenged before administrative courts within a three-month period dating from the documents' filing with the French Labor Administration. The employees can challenge their dismissals in court within twelve months after notification by dismissal letter.

In case of a site closure, the company is obligated to seek a buyer. This obligation is part of the employer's general obligation to revitalize the region where the site was located. The works council should be informed and consulted concerning this search and its outcome.

Derogation to Working Time and Remuneration to Safeguard Job Positions

Under the new rules, companies facing economic distress will be allowed to increase working time and decrease employees' salaries for a maximum period of two years if they sign a collective agreement with majority unions. This idea is borrowed from Germany, which used a similar system of shortened working hours to avoid massive layoffs in the aftermath of the financial crisis.

However, the flexibility granted to employers is counterbalanced by three measures:

  • Employers will be not allowed to circumvent the French public policy provisions on minimum wages and working time duration.
  • Employers will need employees' individual written consent to be allowed to modify employment agreements. Interestingly, an employee refusing the modification could be dismissed for economic reasons without the right to bring any claims. Refusal to consent to the modification by ten employees will no longer result in a requirement for a social plan.
  • Employers will be prohibited from terminating employees due to economic circumstances as long as the collective agreement is in force.

Employees' Representatives Get New Prerogatives

Companies with more than 10,000 employees worldwide or 5,000 employees in France will be required to permit employees' representatives to attend company board meetings and such representatives will have the right to vote at the board meetings.

Reduction of Statutes of Limitation

Under the new rules, new deadlines will apply for employees who want to go to court:

  • Employees who go to court to get the cancellation of their social plan will have three months to do so from the date of receipt of the labor administration's validation. Administrative courts will have three months to render their decisions.
  • Employees who want to get damages for abusive dismissal will have twelve months from receipt of termination letter to go to court.

Parties will be allowed to put an end to their dispute pending before the labor court by settling amicably, at the stage of the conciliation board hearing, on the basis of a lump sum ranging from two to fourteen months' worth of wages depending on the length of service of the employee.

Statutes of limitations will also be limited by the new rules. Employees will have twenty-four months instead of five years to challenge in court the performance or the termination of their employment contracts, and thirty-six months to file a court action to claim back pay if they disagree with the amount the employer paid them during performance of an employment contract.

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