On June 14, 2013, France passed the Employment Preservation Law 1 (the “Law”). The Law was the result of a nationwide inter-professional agreement2 entered into on January 11, 2013 between trade unions and employers’ unions in order to introduce more flexibility and security into the French employment market. The new Law, as well as its corresponding decree published December 27, 20133 (the “Decree”), includes a combination of measures to provide employers with more predictability in the management of their workforce, while emphasizing certain employee rights.
Measures to ensure that employee representatives receive appropriate information on employers’ prospects and strategic choices are also featured. To this end, the works council consultation process was streamlined, with the introduction of time limits, as laid out below.
The Consultation Process prior to the Employment Preservation Law
Any company employing at least fifty employees in France is required to set up a works council. The primary function of a works council is to ensure the collective expression of the employees and to protect their professional, economical, social, and cultural interests. An employer is required to provide specific and written regular information to the works council, and to consult it and obtain its written opinion prior to making certain decisions.
Prior to the enactment of the Law, and of the Decree, there was no specified time frame under which works councils needed to deliver their opinions. The French Labor Code, in its previous version, simply provided that works councils shall benefit from a “sufficient time period”4 .
In the absence of a specified time limit, employers sometimes tried to pressure the works councils to meet a deadline, which deadlines could be challenged in court. In a decision dated April 16, 1996, the French Supreme Court held that the non-observance of a “sufficient time period”, regardless of the employer’s purported deadline, was constitutive of an “obviously illicit disruption”. It was ruled that, by providing the necessary information on a shareholding structure change only seven days before the works council had to give an opinion on the same, it was impossible for the works council members to have full knowledge of the facts5
. The Supreme Court, nonetheless, has never characterized what a “sufficient time period” amounted to. Such notion was therefore assessed on a case-by-case basis. Thus, works council members potentially had the power to hinder the good functioning of a company by delaying their opinion and by challenging the allotted time period. Although employers had the possibility to file summary proceedings to seek a judicial order requiring the works council to render an opinion or to consider that the works council had rendered a negative opinion6 , this has led to legal uncertainty.
Changes to the Consultation Process pursuant to the Law and the Decree
Since the enactment of the Law and the Decree, consultations with the works councils are for the first time subject to predefined time limits7
. The time frames for the consultations shall now be determined either (i) by an agreement entered into between the employer and a majority of the works council members8 , or, in the absence of such an agreement, (ii) according to the Decree9 . Under the Decree, the time period for information and consultation is one month, as from the date on which the works council is provided with all the necessary information to deliver its opinion. This time frame may not be suspended. It may be extended by agreement or pursuant to a court order10, which may be granted in summary proceedings at the request of the works council if the judge finds that additional information should have been provided by the employer11
Upon expiration of the predefined time period, if the works council has not delivered its opinion, it is deemed to have been validly consulted and to have issued a negative opinion, and the employer may implement its project12
The Law and the Decree also provide time limits for the missions of experts appointed by the works council. The time frames for those consultations involving experts shall be determined either (i) by an agreement entered into between the employer and a majority of the works council members, or (ii) two months, under the same conditions as set out above.
In addition, the time limit for a works council consultation is extended to a total of three months if one or more Hygiene, Safety, and Work Conditions Committees (so-called “CHSCT”13) need also to be consulted14.
Finally, such time limit is four months if a coordinated body for CHSCTs is in place15.
The opinion of the CHSCT(s) must be submitted to the works council at least seven days before the works council’s deadline to deliver its opinion16.
Scope of the Works Council Consultations Subject to the Newly Defined Time Limits
The above mentioned time limits apply to most, but not all, works council consultations. The newly-introduced time limits are applicable to the opinions to be delivered by the works council per Articles L.2323-6 to L.2323-60 of the French Labor Code, which include significant company matters related to:
- the organization, management, and general operation of the company;
- a modification in the economic or legal organization of the company such as a merger, a sale or purchase of a subsidiary, or a significant transfer of assets;
- collective staff dismissals or recurrent recourse to temporary employment;
- professional training;
- bankruptcy proceedings.
Furthermore, the Decree provides that the following consultations also fall under the scope of the newly defined time limits:
- consultations on employees’ right to free speech17;
- consultations related to the authorized allotment of overtime hours18;
- consultations surrounding the annual labor and employment report19.
Consultations whose time frames are already subject to specific legal provisions are, however, excluded from the new consultation procedure. Examples of such consultations include those related to technological developments20.
Practical Consequences and Evaluation
A possible downside of the reform is that, unless employers are able to negotiate an agreement providing for a shorter period of consultation, the predefined time periods could turn out to apply as a minimum time period.
On the other hand, the clear advantage of the predefined time periods is that at the end of the period, provided all necessary information has been provided to the works council, a negative opinion will be deemed to have been rendered by the works council, thereby granting such council less nuisance power to hold up a transaction by delaying giving an opinion.
This should hopefully give more certainty to employers in terms of a timetable for transactions.
However, the power of the works councils to hinder the completion of a transaction, or project, has not disappeared. In fact, if the works council can show that it has not been provided with all the necessary information within the predefined time period, it may obtain in summary proceedings an order extending the period21.