Saturday, June 11, 2016

France - Update on the Bill for 'New Freedoms and Safeguards for Companies and Workers'

By Roselyn Sands and Nicolas Etcheparre, EY Société d’Avocats, Paris, France

In early March the French government reviewed a draft billed entitled “New Freedoms and Safeguards for Companies and Workers”, that impacts numerous aspects of labor and employment law in France.

This draft bill (the “El Khomri” bill based on the name of the Minister for Labor who submitted it) contained provisions which aimed at clarifying the general principles of French employment law, strengthening collective bargaining in France, increasing flexibility by modifying rules on working time, and rendering damages for wrongful termination more predictable.

The philosophical changes

The new bill has created quite a bit of uproar in France. The underlying reason for this is a philosophical change in the construction of employment laws, most notably, under the new proposed law, company-wide collective bargaining can result in less protection for employees than the Labor Code or industry-wide collective bargaining agreements, on matters such as working time. This is a considerable shift in French labor and employment law, where the principle has been that company-wide collective agreements can only be more favorable to employees than existing law or industry wide agreements.
Indeed, article 2 of the bill provides that under certain conditions established by law, company-wide collective agreements passed with unions can provide for rules which are less favorable to employees within limits set by law.

Indeed, this article sets forth a new structure of French law and distinguishes employee rights on three levels:

i) The rules that must be enforced as they stand, regardless of the contents of the applicable company-wide bargaining agreement

ii) The rules that may be modified by a company-wide bargaining agreement if agreed to by at least 50% of the representative unions, or 30% of the representative unions and 50% of the employees

iii) The limit to which the rules in ii) can be modified

For example, as to overtime:

i) Overtime work must necessarily be paid at a higher rate to employees, in principle 25% more for the first 8 hours of overtime work

ii) A company-wide bargaining agreement can provide that overtime be paid less or more than 25%

iii) But a company-wide bargaining agreement cannot provide that overtime be paid less than 10% more

The other key changes

The bill provides for new rules regarding collective redundancies, clarifying some of the reasons that can be used to justify a collective redundancies caused by economic difficulties. Indeed, the bill provides that in addition to the already existing reasons (i.e. the company’s closure, or the safeguard of the company’s competitiveness, or considerable technological changes) two new reasons could be used: a drop in the company’s turnover for a period of time depending on the size of the company (e.g. 4 consecutive quarters for companies with more than 300 employees).

The bill also contain measures aimed at reducing unemployment among young employees who have little if no professional experience or training by providing for State paid training, as well as measures allowing companies to modify employees’ remuneration or working-time when faced with job-threatening difficulties through collective bargaining.

The parliamentary process

The draft bill was submitted before the Assemblée Nationale for discussion on March 24, 2016. More than 5,000 amendments were submitted by both the right-wing opposition and the pro-governmental left-wing parliament members. The opposition felt that the concessions made were too important and had considerably altered the law’s efficiency, whereas the pro-governmental parliament members felt that the bill threatened employee rights.

Faced with this considerable amount of amendments and divergence of opinions, Prime Minister Manuel Valls made use of article 49-3 of the French Constitution, which allows him to bypass the Assemblée Nationale and submit the vote directly to the Senate unless a no-confidence motion is passed by the parliamentary members. The no-confidence motion failed on May 12, 2016 and the Senate is currently examining the bill. The Assemblée Nationale will proceed with a final review of the bill from June 13 to June 24.

Strikes and demonstrations: the heart of the issue

The unions that had not agreed to the earlier compromise challenged the use of article 49-3 of the French Constitution, and called its members, in particular those working in strategic sectors such as oil refinery, public transports and trains, to go on strike and to demonstrate.

Even if part of the unions demand that the government drop the bill, most of the unions request that article 2 be removed from the bill. The government has however explicitly stated that it will not back down and that the bill will be passed with its article 2 in its current state.

Even if most strikes in oil refineries have ended, strikes in the public transports sectors are still ongoing. The situation is however very complex, as the heart of the issue is that strikes and demonstrations are also often tied to claims specific to sectors. For instance, train conductors are currently renegotiating their working time agreement with their governmental employer and are taking advantage of the situation to increase their bargaining power on that specific issue.


The bill itself provides for new interesting tools that aim to render French labor and employment laws more flexible. However, the country’s political situation makes it difficult to know whether or not the bill will pass. The government seems bound to pass the bill as dropping it would too dangerous politically, and the unions seem bound to pursue their strikes as giving up without obtain anything in exchange would threaten their legitimacy as partners in the future and disappoint their members.

Even if the bill has been significantly modified since it was first introduced in February of 2016, it still contains interesting and groundbreaking provisions that should increase flexibility for employers working in France, and increase the attractive position in France for foreign investment.