Employment Securization Agreement: a Compromise between more Flexibility for Employers and more Rights for Employees in France

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1 Labor & Employment Client Service Group Bryan Cave, Paris January 22, 2013 Employment Securization Agreement: a Compromise between more Flexibility for Employers and more Rights for Employees in France Employee and employer representatives in France were able to reach a national interprofessional agreement (so-called ANI) last January 11 th on employment securization, in order to try to stop the increase in unemployment, which now exceeds 10%, and restore the competitiveness of companies. This agreement is due to be signed by three unions (CFDT, CFTC and CFE-CGC); most of its measures will then be transcribed in a bill, which will be examined by Parliament in view of being promulgated next May. Although somewhat disconnected from the purpose of the ANI, in particular to curb unemployment, one of the major advances of the text is the introduction of more flexibility for the employer, in particular with a remodeling of the collective dismissal procedure. The text also contains employee-favorable measures (for example, wide-spread complementary health insurance for all employees). The main measures are set forth below 1. It remains to be seen how they will be transposed and if they will be useful in the current context of economic crisis and austerity politics. Modification of the collective dismissal rules (10 employees or more) in companies of 50 employees or more In the new ANI, the economic dismissal procedure and the content of the employment preservation plan (so-called PSE ) will be defined in a majority collective agreement 2, or a document prepared by the employer and approved by the Direccte 3. Majority Collective Agreement: In this collective agreement, the parties may agree not to comply with certain of the legal economic dismissal provisions, in particular the number and calendar of the meetings with the personnel representatives, the list of documents to submit, the conditions and time period for appointment of an expert, the selection criteria for the order of the dismissals and the content of the plan. The agreement will specify the date on which internal relocations may 1 Without this list being exhaustive. 2 Agreement signed by one or several union organizations having obtained at least 50% of the votes on the first ballot of the professional elections of the permanent personnel representatives. 3 French labor authorities : «Direction Régionale des Entreprises, de la Concurrence, de la Consommation, du Travail et de l Emploi» This Client Bulletin is published for the clients and friends of Bryan Cave LLP. Information contained herein is not to be considered as legal advice. This Client Bulletin may be construed as an advertisement or solicitation. Bryan Cave LLP. All Rights Reserved.

2 be implemented, which may take place before the end of the procedure. All of the time periods set out in the agreement will be firm time periods, which cannot be extended or suspended. Approval: If the employer chooses to have the agreement approved by the authorities, it will prepare the document which will first be submitted to the works council for its opinion, and then transmitted to the French labor authorities (so-called Direccte ), which will then have 21 days to approve it, its silence being deemed to be an approval. Relocation measures may be implemented as from the approval. If the approval is refused, (the reasons for which refusal will need to be set out), the employer must prepare a new document and submit it to the Direccte. The procedure will be subject to a maximum firm time period determined according to the number of employees concerned, running from the presentation of the document to the works council, which may not be suspended or extended: 2 months for projected dismissals between 10 and 99 employees, 3 months between 100 and 249 employees and 4 months beyond that. To provide for a maximum firm time period for the dismissal procedure is a major advancement which may incite companies to favor the approval procedure, as currently there is no certainty as to the duration of the procedure, given that the personnel representatives often try to prolong the procedure (e.g., request for additional information, appointment of an expert, summary proceedings). Relocation Leave: Its duration will be increased from 9 to 12 months so it is harmonized with the duration of the so-called CSP (Contrat de Sécurisation Professionnelle). Order of the Dismissals: The professional competence criterion will be preeminent, although the other criteria must also be taken into account to determine who will be dismissed within a single professional category. Shorter Timeframes for Filing Disputes: Any action contesting the validity of the agreement or its approval must be filed within 3 months of the filing of the agreement or obtaining of the approval; Any employee dispute as to the grounds for the dismissal or the employer s compliance with the determined provisions must be filed within 12 months of notification of the dismissal. Internal Mobility: Entreprises wishing to put into place organization measures without reducing headcount (for example, changes in position or work locations) may impose this internal mobility on their employees, without any decrease in salary/professional classification & qualification. If the employee refuses, s/he will be dismissed for personal reasons with the right to be entitled to measures destined to encourage relocation outside the enterprise (skills assessment or increase in the hours of the personal training account). The organization of this mobility will be negotiated every three years. Rationalization and Decrease of Ligitation Risks Shortening of the Statute of Limitations 12 months for collective dismissals; 2 years, instead of 5, for disputes related to the execution or termination of employment (for example, personal dismissal, economic dismissal of less than 10 employees), except for claims based on discrimination; 3 years for salary payment or reimbursement claims (instead of 5) based on Article L of the French Labor Code. Lump-sum Indemnities for Labor Court Conciliations: Parties will be able to bring an end to their labor dispute before the conciliation board, which represents the mandatory first step in any 2

3 wrongful dismissal claim, by paying a lump sum indemnity, considered as damages for labor and tax purposes, determined according to the employee s seniority: 2 months between 0 and 2 years seniority, 4 months between 2 and 8 years, 8 months between 8 and 15 years, 10 months between 15 and 25 years, and 14 months beyond 25 years. Although this scale is designed to be used only during conciliation, it may de facto be applied by the labor court judges when they render their decision, which could enable to decrease, or refocus, the amount of damages granted. Other Flexibility Measures Simplification of Partial Unemployment: The need for prior authorization shall be maintained but the partial unemployment set of measures will be unified and simplified; indemnification will be more favorable if employees choose to train during partial unemployment period. Agreement Regarding Maintaining of Employment: The employer may enter into agreements with unions for up to two years providing for a decrease in salary and/or increase in working time in exchange for an undertaking to maintain employment; guarantees will need to be provided in the agreement (sharing of economic profit), as well as sanctions in the event of non-compliance. If the employee refuses, s/he will be dismissed for economic reasons, but the obligations resulting from collective dismissals will not apply and the employee may not contest the reason for the dismissal. New Rights for Employees Widespread Complementary Health Insurance Coverage: Professional branch agreements must be negotiated to put into place mandatory complementary health insurance for companies at the latest on January 1, Failing agreement, a minimum basket of treatment/care is provided, to be financed 50% by employees, 50% by employers. Extension of the Portability of Complementary Health and Contingency Coverage for Former Employees of an Employer, who are Job-seekers: The maximum length shall be increased from 9 to 12 months. Taxation of Short-term Contracts 4 to Encourage Recruitment under Indefinite Term Contracts (so-called CDIs): Increase in the employer s unemployment coverage social charge: This social charge, which currently is 4 %, shall increase, as from July 1, 2013, to 7% for fixed term contracts (so-called CDDs) of less than one month, 5.5% for CDDs of one to three months, and 4.5% for so-called special practice or usage contracts of less than three months (which are authorized in 21 sectors, including restaurant and show industries) 5 ; Implementation of a indefinite term hiring subsidy: The employer will be exempted from unemployment employer social charges for 3 or 4 months if it hires a person younger than 26 years old, whose contract continues beyond the trial period. Creation of a Secure Voluntary Mobility Period: This period may be set up in enterprises of 300 or more employees for employees having at least two years seniority who have obtained their employer s approval via a contract amendment for the employee to join another company to try a new job. After this period, the employee may choose to come back to the company, in which case s/he would resume her/his former job, or a similar job, with the same remuneration and classification conditions. If s/he does not return, the employee will be deemed to have resigned. An early return may be authorized by the employer or provided in the contract amendment. 4 CDDs today represent almost 80% of new hires. 5 Replacement CDDs, seasonal jobs and hires with a CDI following a CDD would not be concerned by this measure. 3

4 Part-time Work: The ANI has set a minimum period of 24 hours per week of work for part-time employees, except with respect to private individual employers, young employees of less than 26 years old who are still students or pursuant to a written and justified request of the employee. Working hours above this 24 hour limit must be paid with an increase of 10% until they reach 1/10 th of this weekly or monthly duration; beyond, the increase will amount to 25%. These provisions must be implemented at the latest on December 31, Professional branches employing at least a third of their headcount as part-time employees must undertake negotiations within three months of the entry into force of ANI, notably regarding the distribution of working time to enable employees to complete their working time with another employer. Rechargeable Rights to Unemployment Benefits: Employees who have found new jobs will be able to keep the remainder of their rights to unemployment benefits which they have not used, in order to add them if they should lose their new job; this measure will be implemented when the next agreement with the unemployment representatives ( Unedic ) is implemented. Employee Information on the Company s Prospects and Strategic Choices Reinforced Forecasted Information and Consultation of the Personnel Representatives: A single data base will be implemented within the company (within one year for companies of 300 employees or more, 2 years for the others) containing economic and labor information on the current year and the next 3 years. This base will replace information given periodically to the personnel representatives. It may be consulted by them and will need to be updated (it will not, however, replace the information to be disclosed to the personnel representatives in respect of specific events). The employer may identify information that is sensitive and must remain confidential in order to guarantee its confidentiality and must indicate the reasons for and length of confidentiality. Requests for information or clarification from the personnel representatives will be more regulated: the personnel representatives will need to render their opinion in a fixed time period, in order not to hinder the good functioning of the company. Failure to render an opinion will be deemed a negative opinion. The personnel representatives may be assisted by an expert-accountant to analyze information, within the limits of costs determined according to a scale determined by the expert-accountants association and financed to the extent of 20% from the functioning budget of the personnel representatives. If a matter is referred to the Health, Safety and Work Conditions Committee (so-called CHSCT) and if there are several establishments, then a coordinated board of the local committees will be implemented, with the appointment of a sole expert if the CHSCT decides to obtain expert assistance. Representation of Employees in Company Governance Body: Companies having at least 10,000 employees world-wide or 5,000 in France must appoint employee representatives with voting rights within their board of directors or surveillance boards. Information-consultation on Search for Company Rescuers: If a company is to close, the works council will be consulted with the possibility to be assisted by an expert-accountant of its choice and to render an opinion on the offer of a potential purchaser. Delay in Threshold Effect: A period of one year shall be granted to put into place the obligations related to reaching the 11 and 50 employee thresholds if the personnel representative elections are organized within three months of the threshold being reached. 4

5 For more information on this subject, please send your questions to your contact at Bryan Cave, or to: Sarah Delon-Bouquet Office: Paris Direct Dial: sarah.delon-bouquet@bryancave.com Kathie Claret Office: Paris Direct Dial: kathie.claret@bryancave.com Bryan Cave's Labor & Employment Briefings are available online at If you received this alert/bulletin/briefing automatically and would like to stop receiving it in the future please meika.willmot@bryancave.com with the subject line "opt-out" and specify which alert/bulletin/briefing you would like to stop receiving. Information contained herein is not to be considered as legal advice. Under the ethics rules of certain bar associations, this alert may be construed as an advertisement or solicitation. 5