By Nicolas Etcheparre, Roselyn Sands EY Societe d'Avocats
Early in 2015, the French Government announced a series of measures to favor employment, including modifications to employment dispute resolution rules. After several months of debate before the French National Assembly and Senate, the law for growth, activity and equal economic opportunities (referred to as the “Macron” law, after the Minister of Economy who proposed it) came into force on August 7, 2015.
The “Macron” law modifies two key aspects of employment dispute resolution rules: employment dispute resolution and alternative dispute resolution.
1. General context
One particularity of Labor Courts in France is that they are composed of a council of four magistrates, elected every five years: two are elected by employers and two are elected by employees. Labor Court decisions are taken by a majority vote, and if there is a tie, the case is reheard up to 12 months later, with an additional judge from the court of general jurisdiction.
French Labor Courts are often criticized for the lack of speed with which they render decisions. Indeed, parties can wait 10 to 18 months from the time the complaint is filed to the rendering of the decision, excluding appeal. France has been sentenced by the European Court of Human Rights for failing to provide justice to persons with claims before the Labor Courts within a reasonable timeframe.
In France, before a labor law case can go to trial, the parties must attend a conciliatory hearing during which they are encouraged to agree to an amicable resolution. However, these hearings rarely result in settlement.
In order to hasten proceedings, the “Macron” law implements three changes to employment dispute resolution rules: a reduced court for deciding dismissal cases, the possibility of referring directly to the labor court formation including a judge of the court of general jurisdiction for deciding more complex cases, and new rules when awarding damages for wrongful dismissals.
The “Macron” law also provides for the possibility of alternative dispute resolutions, in order to unburden Labor Courts.
2. New employment dispute resolution rules
The “Macron” law has made considerable modifications to the rules regarding legal proceedings before Labor Courts.
A. The option for a reduced court in dismissal cases
According to the new law, during the conciliatory hearing, parties in dismissal cases may agree that their case be heard by a reduced court of only 2 judges, 1 elected by employers and 1 elected by employees. This reduced court will render decisions within 3 months.
It is difficult to predict at this stage the impact this new measure will have on legal proceedings before French Labor Courts.
B. Direct referral to a judge of the court of general jurisdiction
According to the new law, during the conciliatory hearing, if the nature of the case requires it or if the parties request it, their case can be directly heard by 4 labor court magistrates and an additional judge of the court of general jurisdiction. (Normally, a case would be heard by 4 labor court magistrates and referred to the formation including an additional judge of general jurisdiction only in the case of a tie.)
The purpose of this measure is to avoid having the case heard twice if a tie-break decision seems inevitable, thus accelerating the proceedings.
C. Damages awarded to employees and the “Macron” law on scales and ceilings
When a court decides that an employee’s dismissal is wrongful, the employee is awarded damages, the amount of which may vary depending on the employee’s personal situation (e.g. age, salary, years of service). If the employee has more than 2 years of service in the company, and if the company employs more than 10 employees, awarded damages must equal at least 6 months’ salary (the statutory minimum).
There is no statutory ceiling or scale to calculate the damages which might be awarded to a wrongfully dismissed employee. Therefore once a dismissal is challenged, there is no way for an employer to assess the amount of potential damages which might be awarded.
Employers argue that this lack of visibility burdens France’s labor market, as they are less likely to hire employees if they are unable to evaluate the potential cost of dismissing them. For this reason the French government proposed to introduce two new measures to the much disputed Macron bill: i) an indicative scale to allow courts to award damages based on various criteria and ii) ceilings providing for maximum amounts of potential damages awarded.
The indicative scale was implemented by the Macron law, whereas the ceilings on damages was not.
i). The indicative scale
Under the new law, labor judges will have available an indicative scale which will allow them to better assess the amount of damages to award in cases of wrongful dismissal. The exact amounts indicated in the scale should be published shortly by administrative decree, and likely will be based on the employee’s years of service, age and employment situation.
This scale will be purely indicative, meaning that judges may decide not to apply it. However, the scale can become binding if both parties request its application during litigation.
ii). Ceilings on damages
The ceilings on damages proposed were based on the employee’s years of service and the number of employees in the company.
The fact that the ceilings were based on the number of employees in the company was challenged and deemed by the French Constitutional Court as unconstitutional. According to the Court, the principle of a ceiling itself is lawful, however its amount cannot be tied to the size of the company, as it is not linked to the damage caused to the employee.
Thus, the French Government has officially announced that the ceilings will be the subject of a new upcoming law, which will likely further modify the Labor Court system in France.
3. New alternative dispute resolution opportunities
Finally, the “Macron” law makes available for employers and employees two new alternative dispute resolution options.
First, an employer and employee can agree to mediate any potential dispute, prior to any court hearing. Mediation was previously restricted to multi-jurisdictional disputes but now is an available remedy to any type of dispute.
Second, employers and employees can now pass agreements by which both parties will agree not to litigate before the Courts for a set amount of time and will, instead, seek an amicable resolution to any future dispute. However, such agreements only apply to future litigation and require that each party be represented by a lawyer when entered into.
Both of these options for alternative dispute resolution have been available since the publication of the “Macron” law on August 7, 2015.
In an effort to facilitate doing business in France and favor future economic growth, the French government has passed the “Macron” law, bringing considerable improvements to employment dispute resolution rules in France. Rules regarding proceedings have been modified in the hopes of allowing justice to be brought more swiftly in labor and employment law matters.
In addition, the new evaluative scale, as well as new ceilings for damages awarded to wrongfully dismissed employees, should give employers more visibility on the costs of dismissing employees in France.
Furthermore, alternative dispute resolution opportunities have been created, allowing for disputes to be resolved outside crowded courthouses.