By Roselyn S. Sands
EY Société d’Avocats
In the context of high unemployment and complex labor & employment laws, France has taken a step towards a “flexi-security” model. Indeed, the new law on the securisation of work (known as “LSE”) grants employers greater flexibility and safeguards to adapt to the difficult economic environment, while providing increased protections and flexibility to employees to help them adapt as well. The key features of this new law are summarized below.
Increased Flexibility for Employers and Employees
The LSE law aims to increase flexibility in the way in which employers and employees manage their labor relationships. Through groundbreaking modifications of the French labor rules, companies, when facing serious economic difficulties, may now achieve flexibility through collective bargaining, thus reducing HR costs, either by reducing compensation or increasing working hours. For the duration of this agreement, the employer must commit not to engage in redundancies.
Additionally, again through collective bargaining, employers can now further modify the employment relationship by unilaterally changing employee positions or job locations, without employee consent.
In a novel new measure, the LSE law also allows employees greater flexibility in the way they manage their careers and gain new professional experiences. In companies of over 300 employees, employees may experiment working in another company without losing the ability to return to work if they so choose. At the end of the period, employees can either resign and choose to remain with their new employer or return to their previous employer.
Increased Protections for Employees Impacting HR
Costs for Employers
Costs for Employers
Under the new LSE law, all employees will be entitled to additional health insurance in 2016. Indeed, as of January 1, 2016, all employees must be covered by a top-up health insurance, in addition to the current compulsory Social Security health insurance. The employer will bear at least half of the cost of this new health insurance. Additionally, unemployed workers will be entitled to the continuation of health insurance at the employer’s expense for 12 months.
The new law encourages full-time work and open-ended employment contracts. Part-time work must be at least 24 hours per week, unless a shorter working time is expressly requested by the employee, with increased pay of 10 to 25%. The costs of overtime pay for part-time work will also be increased by 10% starting January 1, 2014. In addition, recourse to fixed-term employment contracts will be made more expensive for employers, through an increase of the employer’s unemployment contribution rates.
Reinforced Role for Works Councils and Employee Representation
In order to facilitate the transmission of information to Works Councils and employee representatives, companies of over 300 employees must create a dedicated database containing various economic, financial and social information. This database will only be accessible by employee elected representatives.
The new LSE law also creates two new mandatory consultations of the Works Council: one annual consultation regarding the company’s general strategic orientations, and one annual consultation regarding the use of the available new tax credit for companies (“CICE”).
In companies with total headcount of at least 10,000 worldwide or 5,000 in France, employees must now be represented at the governance body level defining the company’s strategy, e.g.,
the board of directors or supervisory board.
Modification of Large-Scale Redundancy Process
One of the great difficulties for employers in France in a redundancy process is managing the timeline of the Works Council process and its completion. For this reason, the new law provides that a redundancy process may be more carefully managed through two potential avenues:
(i) A collectively bargained company-wide agreement with unions. Among other things, this agreement can fix the number and agenda of meetings with the Works Council, fixed periods of time between such meetings, the list of documents to disclose, the conditions under which an expert may be called upon by the Works Council, the selection criteria and the content of the social plan. This agreement is to be validated by the Labor administration within a 15-day period.
(ii) Labor administration validation, whereby the employer unilaterally files a document with the Labor administration, containing the above measures. The administration has 21 days to reject this plan otherwise it is deemed accepted, and redundancies may begin and must be communicated to the Works Council. Under this method, a maximum period of time is set for the duration of the Works Council process, based on the number of employees to be terminated.
The Works Council consultation process must be completed within 2-4 months depending on the number of redundancies.
This significant change to redundancy laws aims at eliminating the uncertainty factor in the timing and costs of the redundancy process.
Specifically, when the closure of a company or establishment is considered, the employer must now search for a purchaser as soon as the announcement of the shut down project is made. The Works Council must be informed and consulted about this search, and can seek the analysis of an expert for the sale process, its methodology and scope to permit it, to assess the information available to potential purchasers and comment on the sale projects. When a potential purchaser presents an offer to buy the company, the Works Council must be informed and consulted so that it may render a non-binding opinion on this offer prior to acceptance by the company.
Simplification of the Litigation Process
The statute of limitations for employees to file a legal action for wrongful termination of the employment contract will now be reduced from five to two years (the statute of limitation was 30 years before 2008!). Claims based on payment of salary have a 3-year statute of limitation. Claims of discrimination or harassment have a 5-year statute of limitation.
Conciliation of employee litigation at an early stage of the procedure will be encouraged, by the creation of a suggested indemnity scale. The amount of this indemnity varies depending on the employee’s years of service, from two months salary (under two years of service) to 14 months salary (as from 25 years of service).