Significant Labor reforms in France: what do employers need to know and do?

On 22 September 2017, the French President, Emmanuel Macron, executed five legal ordinances making important changes to French Labor law. The reforms are wide-ranging and extensive – significantly changing the relationship between employers and employees in France and providing more flexibility and certainty for businesses in France or for those looking to establish operations there. 

What are the reforms?

In summary, the main changes are:

• Employee representation: All companies with at least 11 employees must elect their own employee representative committee, called “Comité Social et Economique” (or CSE) before 31 December 2019. This new committee will replace the current employee delegates in companies with less than 50 employees, and the current Works Council and Health and Safety committee in companies with at least 50 employees.

• Collective agreements: In companies with less than 20 employees and no employee representatives, employers will have the option of executing an agreement directly with employees on any of the themes currently entrusted to trade unions (e.g., global remuneration agreements, Sunday working, employees’ right to disconnect, etc.). This agreement will be enforceable as soon as it is approved by at least two thirds of the employees. In addition, in companies with less than 50 employees and a CSE (see above), employers will have the ability to negotiate a collective and mandatory agreement directly with the CSE’s members (without having to ask for the trade unions’ prior consent).

• Economic dismissal: Where a company is incorporated within an international group, employers may consider the impact of any economic difficulties in light of the results of the group companies located in France (and not the results of the entire group belonging to the same branch of activity, as it is currently the case). The reforms also make the obligation to search for potential redeployment easier to fulfil. Employers will be able to inform employees of all available positions within the company via just their intranet. For companies which are members of an international group, employers will no longer have to provide details of the positions available in a foreign country.

• Fixed-term employment contract: If an employee is not provided with their written fixed-term contract within two days as of their starting date, the sanction payable by the employer in the event of a claim will now be one month of salary. Previously, the sanction was the conversion of the fixed-term contract into an indefinite term contract. In addition, the national collective agreement applicable to the company’s sector of activity will now be able to provide for specific rules (different from those set out in the French Labor Code) regarding the duration or the renewal of fixed-term contracts.

• Legal dismissal indemnity: All employees with at least 8 months service (instead of 12 months currently) must be granted a legal dismissal indemnity. The amount of this legal indemnity is also increased by 25%.

• Indemnity for unfair dismissal: The reforms provide for the implementation of a mandatory scale providing for the minimum and the maximum indemnity an employee could be granted by a Labor Court in case of unfair dismissal. The amount of the indemnity varies according to the employee’s seniority. This mandatory scale will, however, not be applicable in case of discrimination, harassment or any violation of a fundamental right (such as maternity leave, employee representatives’ protection, etc.). For example:

• Statute of limitation: All employees wishing to challenge the grounds of their dismissal will have to file a claim before the Labor Court within 12 months from the termination of their contract (reduced from the previous limitation period of two years).

• Homeworking: The reforms bring more flexibility to the legal regime for homeworking. There will no longer be a requirement to contractually implement a homeworking regime. An employer can simply draft a policy providing for the conditions under which an employee will be allowed to work from home; detailing how the employer’s prior consent will be obtained; how the employee’s working time or workload will be monitored; and during which hours of the day the employee must be contactable. Further, an employer will no longer have to bear the costs related to the homeworking arrangement (such as the costs of the electronic equipment, software, phone, etc.).

What happens now?

The ordinances have now been formally published and employers should start taking steps to comply accordingly. Employers should note that:

• Some of the measures in the ordinances do, however, require the execution of decrees to come into force. The French Government has confirmed that these decrees will be released over the coming months meaning that all the reforms to French Labor law should be fully applicable by 1 January 2018 at the latest.

• The measures in relation to dismissals only apply to dismissals notified after the reforms are in place (i.e. they do not apply retroactively to dismissals notified prior to that date).

Where the measures in the legal ordinances do now apply, it should be noted that the ordinances themselves are still subject to a formal ratification process by the French Parliament which should start by the end of November 2017. However, given that the majority of the French Parliament’s members belong to the President’s political party, it is considered unlikely that the Labor law reforms will be stopped or amended significantly in any way.

If you have any questions about these reforms and their impact on your business, please do not hesitate to contact your usual Osborne Clarke contact or one of our specialist employment lawyers below.