Lessons from Recent Reforms to French Labour Law

Wednesday, August 24, 2016 | Published by

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The El Khomri Law (“loi Travail”), published on 8 August 2016, contains the most recent reforms to French labour law. The law, introduced by Labour Minister Myriam El Khomri in February 2016, was subject to extensive debate, both within society and before both houses of the French parliament. France has not been isolated in such a debate: for instance, Belgium has also faced strong opposition to similar reforms proposed by Meryem El Khomri’s counterpart, particularly given the comparative strength of the Belgian unions.

The French Government was ultimately able to pass the law through enlivening – three times – the mechanism contained in article 49-3 of the French Constitution, which allows for the requirement of a vote on the bill to be bypassed through a no-confidence motion. After months of criticism, the loi Travail, along with the procedure for its adoption, was finally found to be constitutional on 4 August 2016.

The new law addresses a vast range of topics, from collective negotiations and company transfers through to labour doctors and employee performance. Key amongst these reforms are the reformulation of dismissal on economic grounds, the introduction of company agreements on preserving and developing employment, and the inversing of the hierarchy of norms applicable to working time.

Economic dismissal

One of the main reforms of the loi Travail is the redefinition of the notion of economic dismissal. The grounds for economic dismissal provided under the French Labour Code were previously economic difficulties and technological changes. These statutory grounds have now been expanded to include two further grounds already existing in case law, namely the cessation of business activity and where such measures are necessary to safeguard the competitiveness of the company.

As for the first ground of economic difficulties, the loi Travail now provides criteria for determining when such difficulties are present: (1) where there is a slowdown in orders or in turnover during a specified period of time; (2) where there have been exploitation losses or a serious degradation of cash flow or the gross operating surplus; or (3) any other element which may demonstrate economic difficulties.

Further, there was much controversy over the purview of the business sector to be taken into account in assessing these economic grounds. While there were proposals for reducing its scope to the French territory, ultimately the parliament chose to retain a global purview, meaning that multinational companies must continue to analyse their economic situation on a global level and not simply within France.

Company agreements on preserving and developing employment

The loi Travail also creates a new type of collective agreement in order to provide flexibility for companies and security for employees. This company agreement, intended to preserve employment, can substitute its provisions for those of the employment contract: for instance, it may modify wages and working time, although it cannot lower monthly remuneration. The employees concerned are entitled to refuse this substitution, although such refusal affords the employer a legitimate ground to dismiss them without following the complex collective redundancy procedure. Specific support is granted to employees who are laid-off in this manner, both through an allowance and through job search assistance and training.

Such agreements are not entirely new to French labour law. However, previously they could only be made in cases of existing and short-term (cyclical) economic difficulties. Now, it is possible to act before the company faces such economic problems, as the new agreement can be negotiated and implemented in order to protect the competitiveness of the company or even to expand the business.

Working time

A further reform introduced by the loi Travail concerns the hierarchy of norms applicable to working time. Usually, branch agreements take precedence over company agreements, the latter only applying where they exceed the minimum benefits set out in the former. However, the loi Travail stipulates that company agreements may override branch agreements with regard to working time, even where they are less favourable.

This new reform extends to matters such as overtime, night work and requirements for daily rest. Therefore, while statutory laws will continue to provide the minimum standards to be complied with in terms of working time, branch agreements regulating such matters will only be applicable where a company agreement does not exist.

Conclusion

The majority of reforms introduced by the loi Travail came into force on 9 August 2016, the day following its publication. However, the law also provides for 127 decrees to be declared in the months to come, along with specific commencement dates for certain sections of the law, including the provisions on economic dismissal, which will enter into force on 1 December 2016.

These reforms constitute part of a broader trend towards increasing flexibility in the job market, both in order to ensure economic growth and to protect against unemployment. By adopting such an approach, including through the introduction of the above measures on economic dismissals, employment preservation and working time, the loi Travail is a clear manifestation of the growing convergence between left and right. The resulting controversy surrounding the new law may be but a precursor to France’s 2017 elections.

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Co-Author, Jennifer Sorby-Adams (sorbyadams@flichy.com), Attorney at Flichy Grangé Avocats

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Image Credit: Dinkum (Own Work) [Public Domain], via Wikimedia Commons