On Tuesday 23 May 2017, new French President Emmanuel Macron met with the social partners to discuss reform of the Labor Code.

As this project was one of his top priorities during his presidential campaign, Emmanuel Macron plans to use a special process to proceed quickly. This process permits the Government - with Parliament's authorization - to legislate by ordinance on matters within the Parliament's jurisdiction.

As of this Summer, we can expect to see progress on 3 main priority areas:

  • the primacy of company-level agreements over industry-wide agreements;
  • merging staff representatives bodies;
  • capping allowances compensating for dismissal.

Primacy of company-level agreements over industry-wide agreements

Following the approach taken by the El Khomri law, Emmanuel Macron wants to make company-level agreements the standard labor law norm. As such, he intends to strengthen their primacy over industry-wide agreements (which is something that has existed since 2004, but only in very strict and limited circumstances). These local company agreements would, however, still need to provide set minimum labor protections for employees.

Merging staff representatives bodies

As part of his proposed reforms of the Labor Code, President Macron committed to creating a single staff representative body.

As the law stands, in companies with 300 or less employees, the employer can decide that employee delegates will carry out the roles of the Work Council and the Health and Safety Committee through a "Délégation Unique du Personnel". In companies with 300 or more employees, the option to have this single staff body depends on a collective agreement complying with specific conditions having been adopted by an enhanced majority (50% of the votes cast, rather than the 30% required for ordinary agreements).

Emmanuel Macron wants these merged staff representatives bodies to become the norm. In other words, he wants to create a single staff representative entity in all companies, regardless of their size. The coexistence of the three existing bodies (staff delegates, works council and health and safety committee) would become the exception, rather than the rule.

Capping allowances compensating for unfair dismissal

Currently, should an employee succeed with unfair dismissal claim before court, he/she is entitled to damages, the amount of which depends on his/her length of service and company' size. In addition, an indicative scale of damages was issued in November 2016 which judges may take into account when setting the level of damages. This scale sets the indicative amount of the indemnity based on an employee's age, seniority and prospects in the labor market with the option for the amount to be increased in certain circumstances related to the age of the employee and the labor market. The amount of the indemnity provided by the decree varies from 1 month of salary (for employees with less than one full year of service) to 21.5 months of salary (for employees with at least 43 years' service) which is combined with the existing legal indemnification provisions. This scale of damages is, however, indicative only meaning that the courts may continue to exercise their own judgment when assessing and granting damages to unfairly dismissed employees.

Under Macron's proposed reforms, the damages scale would become mandatory, with a view to providing employers more visibility and certainty about their financial exposure in labor disputes.

Achieving these changes could potentially be challenging, in particular if Parliament authorizes their implementation by way of ordinance as this would require ordinances to be submitted to the State Council for its opinion ("Conseil d'Etat"), to be adopted by the Ministers' Council ("Conseil des Ministres"), and to be ratified by Parliament. In this context, the outcome of the upcoming legislative elections in June will be significant when appraising the chances of these reforms being successfully implemented.