The Macron Reform: An in-depth reform of French Labour law

Known for its complexity, French Labour law has been considered for a long time as being out of tune with the current economic reality and a major obstacle to France’s economic uplift. Determined to increase France’s economic attractiveness and competitiveness, the new government presented in the fall of 2017 a reform profoundly overhauling French Labour law via five Ministerial Orders which overall goal is to secure employment relationships, simplify the social dialogue and promote collective bargaining at company-level.

I. Termination of employment

1. Simplifying and securing dismissal procedures

• Possibility to supplement the grounds stated in the dismissal letter (“employer’s right to mistake”).Prior to the reform, the grounds stated in the dismissal letter were the only grounds the Labour Court took into consideration when assessing the validity of the dismissal in case of dispute. Consequently, if the grounds were insufficient, the dismissal was deemed unfair, entitling the concerned employee to damages and employers could not, once the dismissal was notified, modify the dismissal letter. Hence, employers, or at the employee’s request, have the possibility to supplement the grounds stated in the dismissal letter after notification of same to the employee. In case the employee fails to formally request to have the grounds specified, the mere insufficiency of motivation will no longer lead to the dismissal being automatically held unfair, but will only entitle the employee to a maximum indemnity of 1 month of gross salary. However, the reform only allows to further supplement the grounds that have already been set out in the notified dismissal letter and does not grant the right to add new grounds to the letter.
• Restriction of the perimeter for assessing the economic rationale in case of economic dismissal.Under the previous regime, the economic rationale underlying an economic dismissal (e.g. economic difficulties or the necessity to safeguard the company's competitiveness), in case the company belongs to a group, was assessed at the level of the group’s “sector of activity” at international level. As of now, in case the company belongs to a group, the economic rationale must still be assessed at group level but exclusively in France. This restriction to French territory exclusively renders the justification of redundancies easier.
• Limitation of the scope of the redeployment obligation. Before making an employee redundant, companies have to make serious efforts to redeploy the affected employees and look for alternative employment within the company or the group it belongs to. In case the employer belonged to an international group, redeployment efforts could not validly be confined to the French territory but employers were obliged to inform the employee whose dismissal was contemplated of the possibility to receive redeployment offers for positions located abroad.Now, the scope of redeployment obligation is limited exclusively to jobs available on French territory within the company or in other companies of the group the company belongs to and which organization, activities and operating location ensures the exchange of part or all of the personnel. Employers are thus no longer obliged to ask employees if they would be interested by redeployment positions outside of France. Moreover, precise and personalized redeployment offers can now be sent in writing to each employee or be transmitted, by any means, through a list to all employees. This list specifies all available positions within the company or other companies of the group the company belongs to and provides the criteria to be taken into account when making a decision in case of multiple applications for a same position. In practice, it seems that it is hence possible to simply publish redeployment offers on the Company’s intranet.
• Reduction of the statute of limitation to challenge the dismissal. In order to secure the termination of employment contracts and to reduce the number of potential disputes before the Labour Courts, the statute of limitation for challenging dismissals was reduced from 2 years to 1 year (for both, economic and personal reasons), running from the presentation of the dismissal letter. This reduction does yet not concern legal actions relating to the execution of the former employment contract which remain subject to a 2-years statute of limitation unless the claims relating to the execution concern salary items, in which case a 3-years statute of limitation is applicable. Finally, actions for harassment and discrimination must be brought within 5 years of the day the employee had or should have knowledge of the facts allowing him/her to take legal action.

2. Rendering the financial consequences of (unfair) dismissals for employers more transparent from the outset

• Introduction of a compensation scale for unfair dismissal. For the past, employers denounced the lack of visibility as to the potential damages to be awarded to employees in case of unfair dismissal and the absence of damage caps. Hence, the damages to be awarded by the Courts in case of unfair dismissal are determined by reference to a mandatory pre-set scale and vary depending on the employee’s length of service and the company’s size (i.e. more or less than 11 employees).- the minimum indemnity amounts to 1 month of gross salary for an employee having a length of service of at least 1 year within a company of more than 11 employees. The minimum amount applicable within companies of less than 11 employees ranges from 0.5 (as from 1 year of length of service) to 2.5 months of gross salary;- the maximum amount ranges between 1 month of gross salary for employees having less than 1 year of service and will be capped at 20 months for employees having a length of service of 30 years and more. The precise amounts lie however within the Court’s discretion. This scale is not applicable in the event the dismissal is ruled null and void (e.g. in case of violation of a specific protection or fundamental freedom). In such case, employees would be awarded a minimum indemnity of 6 months of gross salary, in addition to the applicable severance pay. No maximum is provided in this case.
• Amendment of the rules regarding the statutory dismissal indemnity.In consideration of the introduction of caps for damages, the provisions on the statutory dismissal indemnity have been amended. First, the requirement of an uninterrupted length of service within the same employer in order to be eligible to a dismissal indemnity has been lowered from 1 year to 8 months. Second, the statutory dismissal indemnity has been increased. From now on, the minimum statutory dismissal indemnity will amount to 25% of the employee’s average monthly gross salary for the first 10 years of service and 1/3 of the employee’s average monthly gross salary from 10 years and beyond. A comparison remains to be made between the provisions of the applicable collective bargaining agreement and the legal calculation formula in order to determine the most favourable calculation for the employee.

3. Collective mutual termination plans- a new form of termination. A collective agreement defines the conditions to implement a mutual termination plan, whereby employees apply to a voluntary departure plan excluding redundancies to achieve the job-elimination objectives without the necessity to provide for an economic rationale if no forced redundancies are contemplated. Employers must inform the Labour authority (DIRECCTE) of their intention to negotiate a company agreement implementing collective mutual termination. This company agreement determines in particular:

• The modalities and condition to inform the new “Social and Economic Committee, SEC”, which will supersede and replace the current Works Council;
• The maximum numbers of envisaged departures and related job eliminations and
• The conditions to be met by the applicant (employee) to be eligible to such process, in particular with respect to his project after termination and;
• The terms and conditions of calculating the concerned employee’s severance payments.
• The terms and conditions of concluding an individual mutual termination agreement between the employer and the employee and the right to exercise their respective withdrawal right and
• The period during which the termination of employment agreements can be implemented on the basis of this company agreement. Once concluded, the collective agreement must be sent to the Labour Authority for validation and same benefits from 15 days as of reception to verify its content and the regularity of the information of the SEC (silence is deemed validation of the agreement). Once the agreement validated, the employer’s acceptance of the employee’s application for a voluntary departure will entail the mutual termination of the employee's employment contract.

II. Liberalization of the rules relating to fixed-term employment contracts

As regards the fixed-term and temporary employment contract, an extended industry-wide agreement may deviate from the strict legal provisions and determine (i) the total duration of the contract, (ii) the maximum numbers of renewal and (iii) the modalities of calculating the mandatory waiting period (“delai de carence”) between two successive contracts. Failing such agreement, the legal provisions will apply. Moreover, employers hence benefit from a “Right to mistake” (e.g. in case of late remittance). While late remittance of the fixed-term employment contract entailed for the past the automatic requalification into an indefinite-term employment contract, late remittance is now only sanctioned by a financial penalty amounting to a maximum of 1 month of gross salary.

III. Simplifying the social dialogue

The reform provides for the merger of three employee representation bodies, i.e. the staff delegates (“délégués du personnel”), the Works Council (“Comité d’entreprise”) and the Health and Safety Committee (“CHSCT”) within one single body, the so-called Social and Economic Committee (“SEC”), which will have to be set up on January 1st, 2020 at the latest. The setting up of the SEC becomes mandatory for companies employing at least 11 employees over a consecutive 12-month period. In companies having a workforce of between 11 and 20 employees, no elections will have to be held in the event of lack of candidates. In addition, the SEC does no longer have an “alert right” (“droit d’alerte”) in companies employing between 11 and 49 employees. Finally, a majority agreement can provide for the possibility to set up a so-called Company Council (“Conseil d’entreprise”) which, in addition to performing the functions of the SEC, will be entitled to negotiate and enter into collective bargaining agreements.

IV. Enhancing collective bargaining at company level.

New terms of negotiating in companies deprived of trade union delegates. Given that only 4% of the companies employing between 11 to 49 employees count a trade union delegate, the government felt the urge to take action and provide specific solutions to these companies. These solutions differ in accordance with the company’s headcount:

• Companies of less than 11 employees and those of 11 to 20 employees without elected employees. Employers, in companies of less than 11 employees, have the possibility of submitting a draft agreement to their employees on all topics open to collective bargaining at company-level. Its validity is subject to its ratification by means of referendum by a majority of two-thirds of the votes cast. This new ratification method is also applicable within companies of 11 to 20 employees deprived of elected employees.
• Companies employing 11 to 49 employees.The Ministerial Order on enhancing collective bargaining increases the flexibility of employers of 11 to 49 employees by providing them with 2 equal options of negotiation in case no trade union delegates exist. Company-level agreements or agreements entered into at establishment-level can hence be negotiated, concluded and amended:- Either with one or several employees who have been mandated by representative trade unions at industry- or, failing so, at national level. In case the mandated employee is not a member of the SEC, the agreement’s validity is subject to its ratification by the employees at the majority of the votes cast. - Or, by one or several members of the SEC. Here, the validity of the agreement is conditioned on its signature by the members of the SEC representing the majority of the votes cast at the occasion of the latest professional elections.

Consolidation of company-level agreements. The reform further strengthens the importance of company agreements and provides for a new coordination of company- and industry-wide agreements.

• In certain areas, such as minimum wage and job classification, the provisions of an industry-wide agreement still prevail over a company agreement, regardless of the fact that the company agreement is subsequent to the industry-wide agreement, unless the company agreement provides for benefits which are at least equal to those of the industry-wide agreement.
• In other areas, such as the prevention of hardship in the workplace, an industry-wide agreement can expressly provide that its provisions prevail over those of a company agreement. Failing such a specific clause, a company agreement which is subsequent to an industry-wide agreement may provide for less favourable provisions and reduce the employees’ benefits.
• Finally, in all other areas (e.g. notice period, length of the initial trial period, 13 month premium etc.), the provisions of a company agreement prevail over an industry-wide agreement, even if it is less favourable for the employees and regardless of whether the company agreement is prior or subsequent to the industry-wide agreement.