Introduction of significant changes to the French Labour Code in relation to company-level agreements, redundancy, TUPE and changes to collective status

The Employment Law which came into force on 8 August 2016 (referred to as the El Khomri law n°2016-1088) introduced significant changes to the French Labour Code. Most of these changes will become effective in 2017 as and when dozens of implementing decrees will be issued. The key changes introduced are to:

  • Company-level agreements relating to working time, rest time, and vacation can now provide less favourable provisions than agreements entered into at a higher level if signed by unions representing more than 50% of the employees or by unions representing more than 30% of the employees and then approved by the majority of the employees through a specific referendum process. These new regulations relating to company-level agreements are applicable as of 1 January 2017 and will otherwise be more generally applicable as of 1 September 2019.
  • Redundancy plans, by defining more precisely the economic grounds which must be put forward in order to proceed with a valid redundancy. Effective as of 1 December 2016, the Labour Code provides a more detailed definition of “economic difficulties”, to be reflected or evidenced by objective criteria, i.e., a decrease in orders or turnover, or operating losses, erosion of reserve fund, or of the gross operating surplus, or by any other element likely to justify these difficulties. The Code will also then specify the minimum duration for relevant decreases in orders or turnover reflecting economic difficulties, i.e., at least one quarter for a company of less than 11 employees, at least two consecutive quarters for a company of 11 to 49 employees, at least three consecutive quarters for a company of 50 to 199 employees, and at least four consecutive quarters for a company of 300 employees or more.
  • The TUPE regulations which apply on a transfer of an undertaking, provide that all employment agreements assigned to the transferring business are automatically transferred to the purchaser. The transferor was therefore not allowed to implement redundancies prior to the transfer. Effective since 9 August 2016, article L. 1233-61 of the Labour Code allows the transferor to implement redundancies prior to a transfer in limited circumstances, thereby preventing the transfer of employment agreements to the purchaser.
  • The simplification of the harmonisation process where employees with different benefits derived from different collective bargaining agreements are brought together, for example by way of a merger.

New rules applicable to employment-related litigation at first instance and appeal level

Following the issuance of a Decree on 20 May 2016, and effective as of 1 August 2016, new litigation rules will significantly impact the litigation process applicable to employment-related claims, including mainly:

  • the obligation for the plaintiff to detail his/her claims and communicate his/her supporting evidence when initially filing claims in the first instance labour court;
  • employees filing a claim before the labour courts are no longer prevented from filing subsequent claims in connection with the same employment contract; and
  • in the case of appeal, appellants are no longer entitled to plead their case themselves, they must be assisted by a lawyer or union representative.

Revision of unemployment benefit scheme

The unemployment insurance scheme currently applicable in France is the result of a negotiated agreement between employers’ and employees’ organizations. The unemployment insurance scheme is financed through contributions paid on employees’ salaries. The amount and duration of benefit payments depend inter alia upon the period during which the claimant has contributed to the scheme and total contributions paid. Monthly unemployment benefits are usually equal to approximately 57% of the employee’s previous compensation (within the limit of €12,872 per month in 2016) and are served during a maximum two-year period, extended to three years for employees aged 50 or over.

The unemployment benefits scheme is being renegotiated by employers’ associations and employees’ unions organizations in the coming months as it is no longer sustainable considering the current unemployment level in France (the debt of the unemployment benefits scheme will reach €29.4 billion by the end of 2016 and €35 billion by 2018).


Merger of the consultation procedure with works council by reduction of topics under Rebsamen Act

As of 1 January 2016, the 17 topics to be discussed with works councils each year are organised into three consultation rounds regarding respectively (a) the strategy of the company, (b) its economic and financial situation, and (c) social policy, working conditions, and employment.

Furthermore, the Rebsamen Act has also modified the frequency of works council meetings as of 19 August 2015 to:

  • every two months in companies having less than 300 employees; and
  • every month in companies having 300 or more employees.

Merger of negotiations with unions by reduction of topics under Rebsamen Act

As of 1 January 2016, employers can now decide to reduce the number of mandatory negotiations to be conducted with unions each year from 12 to three, i.e., (a) professional equality between men and women and well-being at the workplace, (b) salary, working time, and profit-sharing ((a) and (b) to be conducted each year in any company), and (c) management of employment and career development - to be conducted every three years in companies which have 300 or more employees.

Increased flexibility for work on Sunday and evening work under the Macron Act

In certain areas in retail (under certain circumstances), some stores are entitled to open on Sundays and in certain international tourist areas, employees of retail shops including large department stores can work at night (i.e. between 9:00 p.m. and midnight), provided, in both cases, that employees are volunteering, eligible for increased compensation, and are entitled to accompanying measures (e.g., transportation means to be paid by employer) and to time off in compensation.

All those items are to be negotiated between employers and unions. Most French unions remain opposed to the softening of work schedules and to date, few company-wide collective agreements have been entered into.

Increased flexibility to renew fixed-term employment agreements under the Rebsamen Act

Most fixed-term employment agreements can now be renewed twice but the total duration of the fixed-term agreements, even renewed twice, must not exceed the maximum limits of 9, 18, or 24 months applicable depending on the terms of the fixed-term agreements.