Wednesday, July 1, 2015

France - Recent Legal Developments

By Roselyn S. Sands, EY Société d’Avocats, Paris, France (with thanks also to Nicholas Etcheparre for his contribution)

Labor and employment law have been at the heart of the French legislative process since François Hollande’s socialist government was elected to power in May 2012. This is all the more true in 2015 as the French government submitted two new bills before French Parliament which considerably impact French labor and employment regulations: the bill for economic growth, attractivity and equal economic opportunities and the bill “social dialogue” and employment.

In addition, early in June the Government announced a “French small business act”, aimed at favoring employment in small and medium sized companies in France, whose provisions have been or will be amended into the above bills.

These new bills crystalize the paradoxical and precarious position in which France finds itself today - the continual high unemployment figures and burdensome labor & employment law regulations for companies.

In this complex political situation both bills have been the subject of long parliamentary discussions which are coming to an end. The Government has announced that both bills should be passed in the Summer 2015.

1. The bill for economic growth, attractivity and equal economic opportunities: the “Macron” bill

The bill is often referred to as being the “Macron” bill given that it was submitted to the French Parliament by the current Minister covers a variety of subjects which could have an impact on companies established in France. Its goal is to re-boost France’s economy: increasing consumption and decreasing unemployment.

• Brief overview of the parliamentary process

The plethora of subjects covered by the bill, as well as the controversy during 400 hours of debate, has made the passage of this bill difficult. To try to save the threatened bill, Prime Minister Manuel Valls made use of article 49-3 of the French Constitution, twice, to bypass the National Assembly and submit the vote directly to the Senate; the first no-confidence motion failed on February 19, 2015, and the second no-confidence vote failed on June 18, 2015. The bill will now be examined by the Senate, who will then pass it once more to the National Assembly in July.

• Measures aimed to increase flexibility

There is one key area in which the Macron law seeks to increase flexibility: working time matters. Initially, the bill also modified cumbersome rules on downsizing but the government has decided to drop these modifications.

To encourage increased consumption and employment, the new bill will allow certain businesses to open 12 Sundays per year (7 more than the current 5). Employees will be protected as Sunday work will be voluntary and a collective agreement must set increased remuneration for Sunday work.

The bill also relaxes the definition of night work in certain areas, and thus facilitates the ability of employers to open businesses from 7 a.m. to midnight. This expanded work day should encourage employers to hire new employees instead of simply resorting to the use of overtime work by existing employees, thus reducing unemployment. Employees will be protected in that night work will be voluntary and paid double.

• Measures related to tax optimized compensation

The bill also provides a series of measures which would encourage the delivery of compensation through tax efficient pension and profit-sharing schemes, by offering more optimized tax and social security treatment.

These measures could have a considerable impact on employee remuneration in France for the upcoming years. For instance, after implementing an optional profit-sharing a company should benefit from social security exemptions on all sums paid out through that vehicle for 3 years, and then benefit from a reduced 8% rate, instead of a 20% rate, for the following 6 years.

In addition, the bill intends to modify the tax rules governing certain employee equity grants which could lead to more favorable tax treatments.

• Measures to accelerate employment dispute resolution

The bill seeks to correct existing deficiencies with respect to employment litigation: the process is too slow and damage awards are unpredictable. Three specific proposed changes can be highlighted.

First, the bill provides for enhanced opportunities for parties in a dispute to resolve their differences through alternative dispute resolution proceedings, such as mediation or arbitration, in lieu of the labor courts.

Second, French labor judges would have a mandatory scale applicable when deciding on the amount of damages to award in case of unfair dismissals. (These limits will not apply in the case of discrimination or harassment claims). This provision was announced by the Prime Minister through the “French small business act” and has been the object of as much praise as it has criticism.

Third, under the new bill, either party may request that the litigation follow two alternative and potentially accelerated routes.

2. The bill on “social dialogue” and employment: the “Rebsamen” bill

“Social dialogue” is a term coined in France to describe all interaction between an employer and the employee’s representative bodies. The plethoric amount of rules and obligations on this matter has been the subject of considerable criticism over the past years, with critics pointing out that the lack of clarity renders it somewhat ineffective.

Therefore, the bill on “social dialogue” and employment, which is referred to as the “Rebsamen” bill given that it was submitted to the French Parliament by the current Minister for Employment François Rebsamen, aims to simplify these rules for most companies.

The bill aims to simplify two key aspects of social dialogue in France: employee representative bodies and mandatory information/consultation and negotiations.

3. Simplification of the regulation on employee representative bodies

Initially, there had been discussions on whether or not the thresholds applicable for the implementation of employee representative bodies would be increased. However, the Government chose to keep them as is.

The Government chose an alternative route which aims to concentrate the existing employee representative bodies in a single body.

• For companies with less than 300 employees

Currently, employers who employ less than 200 employees have the right to merge the staff representatives and the Works Council into a sole representative body.

The bill provides that the threshold will be increased to employers who employ less than 300 employees, and that the Health and Safety Committee will also be merged into the sole representative body.

In addition, the new bill will clarify the procedural rules applicable to the sole representative body. In particular, the sole representative body will have a limited amount of time to render an opinion, after which the employer may consider that its approval will have been given.
These provisions should considerably simplify the management of representative bodies in companies with less than 300 employees.

• For companies with 300 employees or more

The bill provides that employers who employ more than 300 employees will be able to collectively bargain in order to create a new representative body, which could merge with any of the following representative bodies: the staff representatives, the Works Council, the Health and Safety Committee.

The impact of this measure is harder to evaluate as it requires that unions sign a collective bargaining agreement in order to be implemented, and that a priori they are unlikely to agree to conditions which are less favorable.

4. Simplification of mandatory information/consultations and negotiations

• Information/consultation of employee representative bodies

The bill plans to merge all 17 information/consultations of employee representative bodies into 3 main information/consultations on the following subject:

- The company’s strategic orientation
- The company’s economic situation
- The company’s social policy

A collective bargaining agreement can establish conditions under which the information/consultations take place.

• Mandatory negotiations

The bill plans to reduce the number of mandatory negotiations from 12 to the following 3:

- Remuneration, working time and the distribution of value added (yearly negotiation in principle, or every 3 years at least)
- The quality of life at work (yearly negotiation in principle, or every 3 years at least)
- Management of employment and professional training (every 3 years in principle, or every 5 years at least)

In addition, a collective bargaining agreement can decide how often the negotiation must take place.


In conclusion, these new bills illustrate the French government’s approach to labor and employment law. Their current goal is to increase flexibility of the labor market in order to favor employment. In addition, it favors collective bargaining by reducing regulations yet encouraging companies to negotiate specific rules through collective bargaining.