Thursday, March 13, 2014

France - New French Law is a "Game-Changer" on the Redundancy Process

The new French law on the securization of employment (known as LSE) modified significantly the redundancy procedure starting July 1, 2013.

As the redundancy process is rather complex in France, this law aims at eliminating the uncertainty factor in the timing and costs of the redundancy process. Indeed, one of the key difficulties for employers in France has been managing the timeline of the Works Council process and its completion. This new law clearly defines the timeline for the Works Council process, a pre-condition to implementation of a redundancy project.

However, under the LSE, the role of the Labor administration is now key: no redundancies can take place without the approval of the Labor administration. So under the new law, both Works Councils and the Labor Administration must be presented with documentation explaining the project and make observations and proposals concerning the procedure or the social measures provided for by the redundancy plan (Plan de Sauvegarde de l’Emploi). The employer is obliged to take these observations or proposals into consideration.

Moreover, the process now gives the employer the option either to prepare these documents unilaterally or to prepare them in negotiation with the unions.

The LSE also changes the jurisdiction of the French courts: it is now the administrative court judge who has jurisdiction and only to challenge the Labor Administration’s decision to approve or reject the project. However, once approval has been given the administrative judge should, in principle, only verify that the process through which the redundancy plan was designed respects the law. In addition, 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 shutdown project is made.

It is too early to tell whether the changes brought in by the LSE will render the French redundancy process more easy or less so for employers. As of this writing, the timeline for the process appears simplified yet the process itself is more complicated.

Recent case law under the new LSE law

Recent case law has highlighted two interesting trends in the manner in which the French courts interpret the new law.

Firstly, certain commentators feared that the French civil courts, who previously had sole jurisdiction over issues related to the validity of redundancy plans and its process, would be reluctant to hand over its jurisdictional powers to the administrative courts. However, in two decisions dated October and November 2013, the French civil court of Nanterre applied the strict letter of the law and deemed that it had no jurisdiction over the matters brought forward by unions, over the validity of the process through which the redundancy plan was designed. It is therefore unlikely that civil court judges will search for means to circumvent the new law and declare jurisdiction over such issues.

Secondly, questions were raised regarding the manner in which the administrative courts would use its new-found powers. Most commentators were skeptical and feared that they would be overzealous in a subject they did not necessarily master, and thus would not be satisfied with a simple verification of the procedure and would therefore overstep the boundaries of their prerogatives. However, the first administrative decisions, rendered by the courts in December 2013, show that the administrative judges merely verify that the legal process has been respected by the employer. As such, once the redundancy plan is approved by the Labor Administration, it appears the administrative courts will simply verify that the legal process was properly respected.

Roselyn S. Sands
EY Société d’Avocats
Dual Qualified Attorney –at-Law US & France