Consolidation of social dialogue - draft executive ordinances have been published

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On 31 August 2017, the French Government revealed the five draft executive ordinances issued pursuant to the Law authorizing the consolidation of tsocial dialogue, which was fully validated by the French Constitutional Council (Conseil Constitutionnel) on 7 September. The orders are expected to be adopted during the Council of Ministers (Conseil des ministres) on 22 September and officially published in the Journal officiel on 25 September. They would enter into force the following day, save for provisions requiring subsequent measures of implementation.

Moreover, in order to enter into force, the ordinances must be ratified by the French Parliament. As recalled by the French Constitutional Council in its decision dated 7 September, it could be requested for the review the constitutionality of the provisions of these ordinances.

These ordinances lay the groundwork for revamping France’s social model as announced during the Presidential campaign.

Although they may undergo minor changes before they are adopted, the draft ordinances aim at heavily revising the French Labor Code. The purpose of this note is to highlight the most significant measures under consideration. Further notes will be sent for each main measure.

Collective bargaining negotiations

Structuration between the company-wide / establishment-wide collective agreements and the industry-wide collective agreements

Except certain limited listed topics, company-wide and establishment-wide collective agreements prevail over industry-wide collective agreements. Exceptions to this rule are provided only in certain topics, for which:

  • The industry-wide collective agreement shall prevail at the company level (in particular regarding the minimum wage)
  • The industry-wide collective agreement may provide its supremacy over company-wide/establishment-wide collective agreements

Please note, however, that in those topics, company-wide collective agreements will be enforceable as long as their provisions provide for an equivalent protection compared to the industry-wide collective agreements. The determination of the equivalent character between collective agreement provisions will probably raise issues of interpretation.

Majority and non-majority collective agreements

The El Khomri Law dated 8 August 2016 provides for the generalization of the majority-approved collective agreements as from September 1, 2019. This generalization is now advanced up to 1 May 2018.

Non-majority collective agreements, i.e., collective agreements signed by one or several trade unions being representative within the company and having obtained at least 30 percent of the ballots at the last professional elections, may be validated through referendum at the employer’s initiative, unless otherwise objected by one of the signatory trade unions.

Mandatory collective negotiations

The draft ordinance provides that a collective bargaining agreement may set out the terms and conditions of mandatory collective negotiations, and in particular specify the topics requiring such negotiations as well as their contents, frequency, and the negotiation timeframe. Without such framework collective agreement, the supplementary legal provisions governing annual, triennial, and five-year collective negotiations shall remain applicable.

Derogatory collective agreements

A new type of collective agreement is being created to meet companies’ operating needs by allowing more flexibility in the modality of work execution (e.g., working-time reduction and job-saving agreements). The provisions of such derogatory agreement will supersede and replace ipso jure to all conflicting and inconsistent contractual clauses existing in the employment contracts. Employees refusing the implementation of such derogatory agreement can be subject to a sui generis dismissal that would have real and serious cause.

Negotiating in companies without any trade union delegate (délégué syndical)

In companies employing fewer than 20 employees and without any elected representative on the new Social and Economic Committee (i.e. the new employees' representative body), the employer may submit a draft agreement to the employees. Such agreements must be ratified in a referendum by a two-thirds majority of the personnel.

In companies employing between 11 and 50 employees and those employing at least 50 employees without any trade union delegate, collective bargaining negotiations may be conducted with an employee empowered by a trade union (salarié mandate) or a member of the Social and Economic Committee’s personnel delegation specifically empowered for this purpose. The negotiated agreement must then be ratified by the employees or the members of the Social and Economic Committee.

Date of entry into force

The provisions related to collective bargaining negotiations would enter into force on the date of publication of their subsequent implementing decrees, and no later than 1 January 2018.

Employees' representation

Merging of employees' representation bodies

A new body, called the Social and Economic Committee (SEC), is created to replace the Staff Delegates (SD), the Works Council (WC), and the Health and Safety Committee (HSC). The SEC would be mandatory in companies employing at least 11 employees. The SEC would take over the duties of the SD or the combined duties of the SD, the WC, and the HSC, depending on the company’s headcount (less than or more than 50 employees). In companies employing at least 300 employees, a health, safety and working conditions committee will be created. This committee must be composed of elected members of the SEC and may involve non-elected members, such as the occupational doctor and the labor inspector. In companies or establishments employing fewer than 300 employees, the labor inspector may require the creation of such a committee, with regard to the nature of the company's activities and/or the premises’ layout or facilities. The SEC may appoint an expert but will have to finance its cost up to 20 percent of the expert's fees, the remaining 80 percent being borne by the employer, except from several specific matters.

A company-wide majority collective bargaining agreement or an extended industry-wide collective agreement may provide for the creation of a single employees' representative body, the Company Council (Conseil d'Entreprise), that would have the authority, among other things, to negotiate collective bargaining agreements in certain areas concurrently with the union representatives, who would continue to exist.

Transitional measures

The draft ordinances provide for transitional measures for companies having employees' representative bodies (ERBs) on the date the ordinances are published. Such companies must implement a SEC at the end of the current ERB mandates, and in any event by no later than 31 December 2019. The draft ordinance also provides that any ERB mandate expiring between the date the publication of the ordinance and 31 December 2018 may be extended for a one-year period maximum by an unilateral decision of the employer and after consultation with the ERB. If the ERBs are renewed after the date of publication of the ordinances but before the adoption of the implementing decrees, their mandate will automatically end on 31 December 2019.

Date of entry into force

The provisions related to the SEC and the Company Council would enter into force on the date of the publication of their subsequent implementing decrees, and, in any event, no later than 1 January 2018.

Securing labor relations

Damages scale for dismissal without real and serious cause

In its most advertized measure, the draft ordinance sets out a mandatory scale that will be applicable for damages for unfair dismissals. This damages scale would not apply if the dismissal is declared null and void, in particular due to a violation of a fundamental freedom, harassment or discrimination. In such cases, a minimum of six months’ salary applies, and there will be no maximum. We can therefore expect increased level of litigations based on these legal grounds, allowing the removal of the proposed damages scale.

The damages scale provides for minimum compensation ranging from half a month’s to three months’ salary, depending on the employee’s length of service and the company’s size (i.e., under 11 employees or over). The ordinance also sets out a maximum ceiling, from one month’s salary for less than one year of service to 20 months’ salary for an employee with 30 or more years of service. Unlike the current damages scale, which is provided for information purposes only ( Art. R. 1235-22 of the French Labor Code,), the new scale does not take the employee’s age into consideration. The damages scale would apply to dismissals notified after the publication of the ordinances.

Legal severance indemnity

It is contemplated that the length of service used as a threshold by an employee for his/her entitlement to a legal severance indemnity will be reduced from twelve to eight months.

Although the ordinances are silent on the issue, the French Government has announced that the legal severance indemnity would increase by 25 percent pursuant to a decree that may be published at the same time as the ordinances.

Procedural irregularities

The draft ordinance allows employers to specify or further explain the grounds of dismissal as set out in the dismissal letter, either at its own initiative or upon the employee’s request. If the employee does not make such a request and challenges the dismissal’s real and serious cause, s/he cannot seek unfair damages by claiming that the grounds for dismissal were not adequately explained. Instead, s/he would receive only damages of up to one month’s salary based on a procedural irregularity.

These provisions would apply to dismissals notified after the publication of the ordinances.

Time limit for legal action

The time limit for filing a litigation based on the termination of the employment contract would be decreased from 24 to 12 months. This provision would apply to statutes of limitations that are already running on the date of the publication of the ordinance.

Reassignment for unfitness for work

When an employee is found to be unfit for work, the territorial scope of the employer’s obligation to reassign the employee is limited to France. These provisions would enter into force at the date of publication of their subsequent implementing decrees, and, in any event, no later than, 1 January 2018.

Voluntary departure plan

The draft ordinance provides for a codification of the voluntary departure plan that, subject to a majority collective agreement, allows the termination of the employment contract on a mutual consent basis of employees willing to leave the company within such autonomous voluntary departure plan. Their refusal of such departure shall not be followed up by their dismissals. The collective agreement must be validated in advance by the administrative authority, like the current mutually-agreed termination (rupture conventionnelle).

These provisions would apply as of the date following the publication of the ordinance.

Economic dismissal

Scope of appraisal of the economic rationale

For companies belonging to a group, the economic reason is no longer assessed at the international level but at the level of the group companies operating in the same industry sector and located in France only. These rules would apply to economic dismissals initiated after the publication of the ordinances.

Obligation to reassign internally

Reassignment offers may be notified to employees by any means, through a specific list and according to the terms and conditions of a decree. There would be no longer an obligation to notify such reassignment offers in writing to each employee individually.

The scheduled abrogation of Article L. 1233-4-1 of the French Labor Code indicates that employers would be able to limit the reassignment search to France.

These provisions would enter into force at the date of publication of the subsequent implementing decrees, and, in any event, no later than 1 January 2018.

Damages in case of an Economic Dismissal declared as null and void

The minimum amount of damages an employee may claim if their economic dismissal is declared null and void due to the absence or insufficient social plan or the absence of any decision of validation or approval of the social plan, will be decreased from the current 12 months’ salary to 6 months' salary.

Specific types of work

Teleworking

Teleworking may be instituted through a collective bargaining agreement or a policy drafted by the employer. When performed on an occasional basis, teleworking may be implemented by mutual agreement between employer and the concerned employee, without any specific formalities. If an accident occurs within the telework place and during the teleworking hours, such an accident will be deemed as an occupational accident.

Fixed-term employment contracts

The conditions of recourse to fixed-term contracts may be set forth by an industry-wide collective bargaining agreement, which may in particular determine the total duration of fixed-term employment contracts or the maximum number of renewals.

Other new provisions also deserve close consideration, notably in relation to the resources of members of the SEC and the union delegates, the occupational health-risk prevention account, the operation-specific employment contract (CDI de chantier), and lease of personnel (prêt de main-d’oeuvre).