On 21 July 2016, the law “on employment, the modernization of social dialog and the securization of professional careers” (also known as the “Labor law” - “Loi Travail”) was finally adopted by the French Parliament pursuant to article 49.3 of the Constitution, without motion of no confidence.

It was immediately referred to the Constitutional Court by more than 60 Senators, pursuant to article 61.2 of the Constitution, thus suspending the time limit for enactment of the law. The Constitutional Court has one month to decide whether the provisions contained in the law are constitutionally valid.

The highly controversial “Labour law” has given rise to demonstrations everywhere in France and has been in the headlines for several months.

Which are the articles that have been written about so extensively? The key provisions of this law are set out here below.

Establishment of a committee of experts responsible for rewriting the French labor code

Article 1 of the law provides for the establishment of a committee of experts and practitioners of social relations, responsible for proposing to the government a new labor code within a time frame of two years from the date of enactment of the law.

Company agreement takes precedence over branch agreement on working time - article 2, the focus of the contention

Former "article 2" (article 8 of the law) provides that with respect to working time and in certain areas, company agreement may take precedence over branch agreement.

This is nothing new. Precedence of company agreement over branch agreement has already been established in a number of areas, and notably in the number of hours worked, by:

  • the law of 4 May 2004, which provided for a general possibility of derogation of the company agreement from all branch agreements concluded after 2004 (article L. 2253- 3 of the French Labor Code);
  • the law of 16 April 2008 (concerning national solidarity day); and
  • the law of 20 August 2008 (in the following areas: annual quota of overtime, mandatory compensatory rest time, annual lump-sum days or lump-sum hours, distribution of working hours over a period of several weeks or over the year, time savings account).

Article 2 is therefore less innovative than what has been indicated by many commentators.

The “Labour law“ essentially provides for possibilities of derogation in the following areas:

  • The company agreement may derogate from the branch agreement on payment of overtime. However, the increased rate of overtime hours has not been changed - thus the legal increased rate of overtime hours remains at 25%, with the possibility for the company or branch agreement to provide for a different increased rate, which cannot be lower than 10%.
  • The maximum number of daily working hours may, by company agreement, be increased to 12 hours (instead of 10) in the case of increased activity or for reasons of corporate organization.
  • It will now be possible, by company or branch agreement, to increase the maximum average number of weekly working hours. Currently set at 44 hours over a period of 12 weeks, it may henceforth be set at 46 hours (without the company requiring authorization by Decree or from the labour inspectorate).

Removal of acquired individual advantages

In the case of denunciation or challenging of a collective agreement, the employees will no longer maintain their acquired, individual advantages (“Avantages individuels acquis”) even if the revoked or challenged convention or agreement has not been substituted at the end of the survival period.

Yet a collective agreement may be at the origin of certain remuneration elements of the employees. The law specifies in this case that the employees retain “a remuneration of which the annual amount, for an equivalent number of hours worked to that provided in their employment contract, may not be less than the remuneration paid over the last twelve months“.

Majority requirement for the conclusion of a collective agreement

The law provides that in order to be valid, the collective agreements must:

  • be signed by trade union organizations having obtained at least 50% of the votes cast in the last corporate elections of the Works’ Council (instead of 30% currently);
  • Or be signed by trade union organizations having obtained at least 30% of the votes cast in the last corporate elections of the Works’ Council and be confirmed by internal referendum.

Under these circumstances, a representative trade union, even with a majority, will no longer be able to oppose the entry into force of a company agreement. The employees’ role is thus reinforced, potentially to the detriment of trade unions who were not party to the agreement.

Possibility to conclude agreements for job preservation or development

The law provides for the possibility for companies to conclude agreements for job preservation or development with majority trade union organizations.

Short term serious economic difficulties  in  the  company (as is the current case for agreements on job preservation), will no longer be requisite for these agreements, which will be able to be concluded by any company with a view to job preservation or development (these criteria not being defined by the law).

The provisions of these agreements will replace ipso jure clauses that are contrary and incompatible with the employment contract, including with regard to remuneration and number of hours worked (without the agreement having the effect of reducing the employee’s monthly remuneration).

Employees refusing the amendment of their employment contracts may be dismissed without a need for the company to justify economic grounds, the refusal of the amendment being deemed sui generis cuse for dismissal.

Increase in the hours of delegation of trade union representatives

The hours of delegation of trade union representatives will be increased by 20% (12 hours for companies with fewer than 151 employees, 18 hours for those with less than 500 employees and 24 hours beyond).

Objectivation of dismissals on economic grounds

The law resumes the case law of the French Cour de Cassation namely the need to safeguard competitiveness and the cessation of the Company’s activity.

In addition, the criteria leading to the recognition of economic  difficulties  are  defined  (in  the  sense  of  a relaxation in comparison with current case law), the evaluation being differentiated according to the size of the companies.

Pursuant to future article L. 1233-3 of the French Labor Code, a valid economic ground for dismissal may be characterized in one of the following cases:

  • Economic difficulties characterized either by the significant evolution of at least one economic indicator, such as a drop in orders or turnover, operating losses or deterioration of cash flow or gross operating surplus, or by any other factor likely to justify these difficulties. A significant decline in orders or in turnover is constituted once the duration of this decline is, in comparison with the same period of the previous year, at least equal to:
    • A quarter for a company with less than 11 employees;
    • Two consecutive quarters for a company of at least 11 but less than 50 employees;
    • Three consecutive quarters for a company of at least 50 but less than 300 employees;
    • Four consecutive quarters for a company of 300 and more employees; or
  • Technological changes or
  • Corporate reorganization necessary for the safeguarding of its competitiveness; or
  • The cessation of the company’s activity

Key provisions removed

For the record, the provisions which were included in the original draft bill relating to the establishment of  a  labor court indemnification scale and the assessment of economic grounds at company level in France (and not of the group’s sector of activity) have been deleted.

This means that the assessment of economic grounds will be made as previously, at the level of the sector of activity of the group to which the company belongs.