Tuesday, September 27, 2016

France - Recent Legal Developments

By Roselyn S. Sands, EY Société d’Avocats, Paris, France

Final adoption of the draft law (the “El Khomri” law) relating to “labor, improvement of social dialogue and safeguard of professional careers”

The law on “labor, improvement of social dialogue and safeguard of professional careers” was passed by the French Parliament on July 21, 2016. The law is applicable since August 10, 2016, except for provisions requiring that specific decrees of application be published by the government. This law is the result of a tumultuous parliamentary process, which began in May 2016 and was marked by country wide strikes and demonstrations that continue today even after its passage into law.

The law contains provisions that are aimed at clarifying the general principles of French employment law, strengthening collective bargaining in France, increasing flexibility by modifying rules on working time and leave and clarifying rules on economic redundancies.

I. Rewriting the French Labor Code and its general principles

The new law profoundly reworks the general principles of the French Labor Code and modifies its general architecture. Indeed, under the new law company-level collective bargaining may result in greater flexibility for employers regarding working time, unless specified otherwise by law. This is a considerable philosophical change in French labor and employment law, where the historical hierarchy of norms principle ensured that company-level CBAs could further enhance employee rights but could not provide less protection.

The general structure of the French Labor Code is henceforth as follows:

i). Rules that must be enforced as they stand, now divided into three segments with no flexibility through company-level bargaining agreement
ii). Rules that may be modified by a company-level 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). Limits to which the rules in ii) can be modified

Overtime is a good example of how the new architecture of the French Labor Code is designed. The new Labor Code provides that:

i). Additional overtime pay must necessarily be paid to employees. This rule must be enforced as it stands
ii). Today, overtime is paid at 25% extra for the first 8 hours, however, by a company-level bargaining agreement overtime can be paid less or more than the 25% provided by law
iii). Yet, a company-level bargaining agreement cannot provide that overtime be paid at less than 10% more

Whereas the detailed application of this architecture will take a couple of years to fine tune, by exception, this architecture is immediately applicable for issues relating to working time and employee leave.

II. Flexibility through collective bargaining

The law strengthens the legally binding effect of company-level CBAs, and enables companies to achieve flexibility through collective bargaining.

Under the new law, the validity of company-level CBAs will depend on a “two-tier” system, starting September 1, 2019. Company-level CBAs will be valid if the majority unions, who have gathered more than 50% of the employee votes during the most recent election, sign or if the signatories have gathered more than 30% of the employee votes during the most recent election and the agreement has been approved by the employees through referendum.

In addition, the law provides for the following rules with respect to the company-level CBAs:

- The limitation of their duration to 5 years, unless stated otherwise in the agreement (e.g. indefinite term)
- Change of the rules pertaining to the review, modification and the termination of the agreements
- Publication on a national online database of all company-level CBAs with provisions of anonymization
- Possibility for companies with less than 50 employees to apply a special agreement provided by the national CBA.

III. Working time

The new law includes a series of measures impacting working time in order to increase employer flexibility and freedom in organizing the company, while safeguarding employee rights, in particular with regard to work life balance and health and safety at work.

As mentioned above, the new structure of the French Labor Code is currently applicable to working time related issues. Indeed, working time related issues such as the number of hours to be worked to trigger night work compensation, the maximum weekly time duration or the weekly and daily minimum rest period can now be set through collective bargaining, based on the above mentioned structure.

In addition, the law provides for a right “to disconnect, in particular from electronic devices, after working hours. This measure aims to ensure a proper balance between workload and private life with the regulation of the use of digital tools. The specific implementation of this right will be decided on a company by company basis with the union representatives during the annual negotiation on “work life balance”.

IV. Greater flexibility in the justification for collective redundancies

The law provides for new rules regarding collective redundancies, clarifying some of the reasons that can be used to justify a collective redundancy caused by economic difficulties. Indeed, the law 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, including 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).

Together with the procedural changes from 2013, the combination of these modifications facilitates the collective redundancy process in France.

V. Conclusion

French labor and employment law continues its path to creating a more employer friendly environment in order to fuel investment into France.