The predictability and security of labour relations, a topic at the heart of the reform supported by President Emmanuel Macron and Edouard Philippe's administration, are the subject of an ordonnance that contains a few of the most symbolic of this administration's first measures: instituting a compensation scale for dismissal without real and serious cause, changing the scope of review of the economic reason underlying economic dismissals, codifying a regime for voluntary layoffs, etc.
Below you will therefore find our initial summary of the measures in this ordonnance that we believe are the most important for companies:
► Rules applicable to all types of dismissals
1. With respect to dismissal compensation, two measures are particularly noteworthy: one institutes a compensation scale for dismissal without real and serious cause; the other changes the rules relating to the compensation for dismissal provided by statute.
The administration seems to have learned from the Constitutional Council's invalidation experience of the first attempt to institute a compensation scale through the law of 6 August 2015.
The order provides that for dismissal without real and serious cause, the court will award an employee compensation ranging from a minimum to a maximum amount depending on the employee's seniority. An employee with 10 years of seniority will therefore receive compensation of between three and 10 months of salary, the precise amount being within the court's discretion. The ordonnance provides for lower minimum amounts for very small companies (those that usually employ fewer than 11 employees), but the maximum stays the same.
Note that this scale does not apply if the court holds the dismissal to be void, for example, in the case of moral or sexual harassment, discrimination or the violation of a fundamental freedom.
In addition, the rules on the statutory compensation for dismissal will be amended:
- the requirement of uninterrupted service with the same employer to be eligible for this compensation is decreased from one year to eight months; and
- the administration has announced that it will increase the amount of this compensation by decree. It seems this would be a 25% increase.
2. With respect to procedural rules, the ordonnance sets out a certain number of measures designed to simplify and improve the security of the dismissal procedure. These measures include (but are not limited to):
- a model dismissal letter, which will be set out in a decree;
- the grounds set out in the dismissal letter may be added to by the employer or at the employee's request after the letter has been sent. If the employee does not make such a request, the letter's lack of an adequate explanation will not in itself support a finding that the dismissal lacks real and serious cause, but will merely entitle the employee to compensation of at most one month salary. This procedure will be clarified by decree;
- if there are several reasons for dismissal and one of them invalidates the dismissal, the court will be required to review all of the grievances set out in the dismissal letter when determining the employee's compensation;
- the time limit for contesting the termination of an employment contract is reduced to 12 months, as opposed to the previous limit of 24 months.
As regards the entry into force of these measures, except for the measures for which implementing decrees are required, the current draft of the text indicates that the administration intends to make them apply to dismissals for which notice is given as of the day after publication of the ordonnance.
► Rules specific to economic dismissals
1. With respect to analysing the economic reason for dismissal, the ordonnance includes a measure that was considered but dropped when the Labour Act was adopted. French Labour Code Article L. 1233-3 thus now provides that when a company is a member of a group, the economic reason is analysed at the level of the group's companies established in France operating in the same industry sector, except in cases of fraud. The industry sector is “characterized, in particular, by the type of the goods and services delivered, the customers targeted and the networks and distribution methods that relate to the same market”.
2. As regards the reassignment obligation, the ordonnance provides that it is limited to jobs available "in French territory in the company or in other companies of the group of which the company is a member and the organisation, activities, and operating location of which guarantee the exchange of some or all of the personnel." It thus partially codifies the definition of the reassignment group established through case law, but significantly differs from it by specifying that "the group is defined in accordance with French Labour Code Article L. 2331-1(I)”, i.e. according to purely economic criteria.
Precise and concrete reassignment offers will be able to be sent in writing directly to employees or transmitted by any means through a list. The terms for implementing these provisions will be the subject of a decree.
The provisions related to reassignment abroad are abrogated entirely.
3. With respect to dismissal order criteria, if fewer than ten employees are dismissed for economic reasons within the same 30-day period, i.e. with no job-saving plan, the scope of application of these criteria may be limited by the employer, but may not be smaller than the scope of the employment area concerned by the dismissals.
4. With regard to voluntary redundancy plans, the ordonnance creates a new section of the French Labour Code entitled "Mutually Agreed Termination in the Context of a Collective Agreement Instituting a Voluntary Redundancy Plan". This section concerns only voluntary redundancy plans that exclude dismissals to achieve their job-elimination objectives. The administration is informed as soon as negotiations to conclude such an agreement begin and reviews the agreement's contents before issuing a validation decision. Decrees are expected to clarify this regime. We will of course discuss the details of this new regime, which is of particular interest to companies.
As regards the entry into force of these measures, except for the provisions for which implementing decrees are required, the current draft of the text indicates that the administration intends to make them apply to economic dismissal procedures initiated as of the day after publication of the ordonnance.
► Other measures of note
The ordonnance contains measures that affect various aspects of labour law, ranging from lack of aptitude to teleworking, non-standard contracts (fixed-term, assignment-specific and site-specific contracts), night shifts and not-for-profit labour detachments. We have selected two of these measures which seem especially important.
With respect to lack of aptitude, and more specifically the obligation to reassign an employee who is occupationally or otherwise unfit for his job, the ordonnance clarifies the definition of reassignment group by taking the new definition used for reassignment following economic dismissal.
Articles L. 1226-2 and L. 1226-10 will thus provide that an employer will offer an employee "another job suited to his abilities, in the company or in companies of the group to which it belongs, if applicable, that are located in France and the organisation, activities or operating location of which guarantee the exchange of some or all of the personnel". These articles will also specify that "the group is defined in accordance with article L. 2331-1(I)".
The ordonnance thus aims to harmonise the Labour Code definition of a group, keeping only an objective definition based on relevant economic criteria.
As regards non-standard contracts (fixed-term, assignment-specific and site- or operation-specific contracts), the ordonnance draws the consequences referring to the collective industry-wide agreement for the rules on working time, renewal and the waiting period and provides rules that will apply if the applicable industry-wide agreement contains no such provisions.
In addition, the ordonnance restricts the cases for reclassifying fixed-term and assignment-specific contracts as permanent contracts: non-compliance with the obligation to give an employee their employment contract will no longer be grounds, by itself, for reclassifying the contract as a permanent contract.