By Roselyn Sands, EY Societe d'Avocats
President Emmanuel Macron of France won the May 2017 election promising to significantly reform the French labor & employment laws as a priority by September 2017. As we stated in our article in May 2017, the purpose of this Reform is to increase flexibility and reduce unemployment. While the new legislation will not have the force of law until later in the Fall, below we summarize the key features of the Macron labor law reform.
Use of Special Procedures to Achieve Speed
In order to achieve such accelerated timing, the French Government will enact the contemplated reform by way of ordinance (“ordonnance”). In French law, this statutory instrument allows the Council of Ministers (“Conseil des Ministres”) to enact laws in areas of law that are usually reserved for legislative enactment. In order to allow such abbreviated process, the Parliament adopted a law (“loi d ’habilitation”) on August 2, 2017 allowing this procedure. Draft ordinances were made public on August 31, 2017 and should be adopted by the Council of Ministers September 22, 2017. The legislative process, is targeted to end in October/November 2017, with the ratification of the ordinances by the Parliament which will give force of law to the Macron Labor Law Reform.
A part of the French opposition to this reform is gaining some momentum and they are trying to slow this process down. Indeed, a demonstration on September 12 was the first and another one is planned in late September. However, it is not believed that the demonstrations or strikes will weigh heavily enough to change the current state of affairs.
General philosophy of the Macron labor law reform
There are 3 main general themes of paramount importance:
• Ability to customize applicable labor rules within a company through negotiation
• Streamlining of employee representatives
• Predictability of damages and further simplification of the termination process
1) Ability to customize applicable labor rules within a company through negotiation
The traditional architecture of French labor law is a pyramidal structure starting at the top with the French Labor Code, then the industry-wide collective bargaining agreements, and then the company-wide collective bargaining agreements. Each additional layer traditionally could only enhance employee protections, never taking any rights away.
This new Macron Labor Law Reform reverses this hierarchy of norms and allows collective bargaining at the company-wide level to achieve greater flexibility even if employee protections are reduced.
There are exceptions and many details on how to collectively bargain, but overall the important message of the reform is that companies are now more able to negotiate at the company level in order to create custom-made rules.
2) Streamlining of employee representatives
One of the most important measures of the Reform is the merger of all employee representative bodies. As of January 1, 2019, all companies will only have one representative body replacing the existing Works council, “délégués du personnel”, and health & safety committees. The new Social and Economic Committee (“Comité Social et Economique”) will exist in all companies with 11 or more employees. The scope of the CSE will increase depending on the number of employees within a company.
In certain circumstances, the new CSE will have the power to negotiate and collectively bargain with the employer, traditionally reserved to unions in the past. Under certain conditions, employee referendum will be required to confirm the agreement.
3) Predictability of damages and further simplification of the termination process
As promised by Macron during the French election campaign, a minimum floor and maximum ceiling will be applicable in the award of damages for wrongful termination by the French Labor Courts. To illustrate, the maximum ceiling for damages for an employee with 10 years of service is 10 months; and for 30 years of service, 20 months of salary. (This is in addition to the legal termination indemnities, which do not change.) This will apply to unlawful terminations with the exception of matters involving the violation of fundamental rights like harassment or discrimination cases, for example.
Moreover, to minimize the risk of form over substance, a “template” for termination letters will be available for employers, and the termination letter itself will no longer be the only proof possible to demonstrate the legal grounds for the termination. Both the employer and the employee will have the availability to give or ask for complementary information on the termination grounds, after formal notification of the termination letter.
As to the substance itself of legal grounds, in economic redundancies, a significant effort has been made to simplify the legal economic grounds: only economic difficulties in France will be taken into account, not the economic situation of the group in the world. The redeployment offer process will be also be significantly simplified in the context of economic termination.
The key take-away is that we have a new ballgame in France on labor law with a fundamentally different philosophy!