A significant new employment law was adopted by the French Parliament on 14 May 2013 (Loi relative à la sécurisation de l'emploi) setting out a number of important new measures affecting employers in France. The law has not yet been officially published - the text has been referred to the Constitutional Court (on 15 May 2013) and a decision of the Constitutional Court is pending.

If the law is found to be constitutional and once the law is officially published, in relation to the measures in relation to collective redundancies, these will apply to procedures commenced after 1 July 2013.

Key changes for employers to note1 are:

  • Collective redundancies : the law provides for greater certainty in relation to the timing of the procedure but also includes stricter obligations on the part of the employer to actively seek out a buyer in the event of the proposed closure of a site.
  • Measures to promote competitiveness : there are new measures to seek to promote flexibility in the organisation of working time and in relation to remuneration, to seek to avoid redundancies becoming necessary.
  • The possibility to agree maximum time limits for opinions from the works council.
  • Employee representation at board level and increased information to be given to the works council : new measures are introduced and the new law extends the types of information relating to the business which must be given to employee representatives.

Importantly, the new law does not however provide any greater flexibility in relation to the very strict real and serious economic grounds required to justify redundancies – these are still examined based on the business sector at group level (and are not limited to the employing entity in France).

1. Measures in relation to collective redundancy exercises and efforts to maintain competitiveness

Greater certainty for employers on the timing of collective redundancy procedures

The new law provides for maximum time limits for the information and consultation procedure with the works council in relation to proposed collective redundancies:

  • a maximum of 2 months for collective redundancies of less than 100 employees;
  • a maximum of 3 months for collective redundancies of 100-249 employees;
  • a maximum of 4 months for collective redundancies of 250 employees or more.

If at the end of such period the works council has not given its opinion, the opinion is deemed to have been given.

This is a positive development for employers and means that, provided that all relevant information has been provided to the works council and all relevant questions have been answered by the employer within the maximum time limit referred to above, the works council's opinion is obtained (either expressly or impliedly). The employer therefore has more certainty as to the procedure timetable.

This is the first time under French law that a deemed opinion has been provided for in legislation and should limit the works council's ability to delay the procedure.

In the event that a collective agreement in relation to the social plan cannot be reached at the end of the consultation period, the new law provides the ability for the employer to unilaterally prepare the terms of the social plan and submit this for validation to the French Authorities. The French Authorities are required to communicate the decision in relation to validation within a period of 21 days – silence is deemed validation. Any challenge to the decision must be brought within 2 months and the Administrative Tribunal determines the challenge within 3 months.

  • A stricter requirement to seek a buyer in the event of the closure of the site

The employer now has a stricter obligation to seek to find a buyer in the event of the proposed closure of the site. The company must also inform the works council of such efforts at the beginning of the procedure of information and consultation in relation to the proposed closure and redundancies.

The works council can appoint an expert to assist it in relation to reviewing the measures taken by the employer in this regard.

The works council is also informed of any formal offers (the general obligations in relation to confidentiality of information given to the works council apply) and may give an opinion on these (to be given within 2-4 months, depending on the number of proposed redundancies).

The maximum period of redeployment leave is increased from 9 months to 12 months

In larger groups2 , redeployment leave must be offered to the redundant employees – the period previously being between 4-9 months. The new law increases the maximum period to 12 months.

Reduction in the limitation period for employee claims

The time limit for employees to bring claims in relation to a challenge to the economic grounds for the redundancy has been reduced from 5 years to 2 years (from notification of the dismissal)3 .

2. Measures to promote flexibility in an attempt to avoid redundancies

  • Agreements to promote competitiveness

A collective agreement may now be entered into between the employer and trade union representatives4 to implement measures to seek to reduce costs and assist the business continue its activities in order to avoid collective redundancies. Such measures are in return for guarantees from the employer not to make redundancies within the term of the agreement. The agreement is for a maximum of 2 years.

These agreements may, for example deal with matters such as:

  • temporarily reducing working time;
  • temporarily reducing remuneration (provided this does not fall below 120% of the national minimum wage – SMIC);
  • temporary amendments to the means by which work is organised etc.

Individual employees have the right to refuse the measures which have been collectively agreed – in which case the employees can be dismissed on economic grounds which are not challengeable (following the procedure for individual redundancies – i.e. in particular avoiding the requirement to put in place a social plan).

These agreements also require the management team to "participate" in the efforts5 e.g. in particular in relation to their remuneration. Equivalent provisions also apply to the officers of the company and in relation to dividends paid to shareholders.

The agreement must include a provision in the event of an improvement in the position of the company – i.e. for the measures to be suspended/to end.

  • A new regime has been put in place for partial unemployment measures effectively merging and simplifying the existing regimes.
  • Secured voluntary mobility

In companies/groups of companies6 with 300+ employees, any employee with at least 24 months' service (whether or not consecutive), can with the employer's consent, now benefit from a period of "secured voluntary mobility". This permits the employee to work for another company, during which time his original employment contract is suspended. The employee may, within a certain period given notice to the original employer that he/she wishes to reintegrate the original contract. If the employee does not notify the original employer of such wish within this time period, the original contract is considered terminated by grounds of deemed resignation (i.e. with no termination payments or right to bring a claim).

An amendment to the employee's original contract sets out the terms for the duration and any notice period to be given to the employee to return to the original employer.

  • Geographic mobility

The employer may enter into negotiations relating to the conditions for professional or geographic mobility internally within the company, within the context of collective measures relating to the current organisation of the business (outside of a redundancy procedure). The collective agreement resulting from such negotiations should deal in particular with:

  • details of the limits imposed on this mobility (taking account of the respect for the private and family life of the employee);
  • measures aim at reconciling the professional life and family life;
  • measures to aid with mobility.

The agreement may not have the effect of resulting in a reduction in the employee's remuneration or classification. The agreement must be notified to each employee – the provisions are applicable to the contract of employment and the clauses of the contract of employment which are different are suspended automatically. If one or more employees refuse the application of the agreement to their contract, they may be dismissed for economic reasons (by way of an individual dismissal procedure, i.e. there is no requirement to put in place a social plan).

3. Measures involving the interaction of the works council in management decisions and the operation of the company

Representation of employees at board level

There are new provisions applying to larger companies/groups in France, relating to employee representatives on the board7 - requiring the election or nomination of two employee representatives for companies with 12+ board members (administrateurs) and one employee representative for companies with less than 12 board members.

The measures apply to the following larger companies/groups:

  • those companies with a head office in France employing at least 5,000 permanent employees on average as at the end of the last two financial years (or where the company and its direct and indirect French subsidiaries together employ 5,000 permanent employees as at such dates); or
  • companies and their subsidiaries (whether direct or indirect) with at least 10,000 employees (whether the registered offices are in France and/or overseas) which have an obligation to put in place a works council in France.

Where the parent company has the obligation to elect/nominate employee representatives, the direct or indirect subsidiaries of such company are not also subject to this obligation – i.e. only applies to the Top-Co.

The nomination/election process for the employee representatives is to be set out in the Articles of Association (Statuts), which must be amended within 6 months of the end of the second financial year in which trigger number of employees are employed8. The election/nomination process must then take place within 6 months of the amendment of the Statuts. It should follow one of the procedures set out in the new law (e.g. election by the employees in France, designation by the applicable works council or representative trade union etc.). Where two employee representatives are required to be nominated, in groups with a European Works Council ("EWC") or European Companies ("EC"), the second employee representative is nominated by the EWC or EC committee. Measures are also set out in the new law to deal with possible situation of non-approval of the employee representatives by the shareholders.

For those companies to which these provisions apply, the employee representatives must be elected / appointed to the Board no later than 6 months after the shareholders meeting amending the Statuts, which must itself be held in 2014.

  • Agreements in relation to maximum time limits for opinions from the works council

Other than where there are specific legislative provisions, an agreement may be reached between the company and the majority of the members of the works council (or in the absence of an agreement, a decree of the State Council (Conseil d'Etat)) setting out the maximum time limits for the works council to give its opinion in the cases of consultation required by the French Labour Code under articles L.2323-6 to L.2323-60 of the French Labour Code.

The consultation procedures covered by this measure include proposed corporate transactions e.g. in the event of a proposed sale/purchase of a company, the transfer of an undertaking, changes to production methods, implementation of new technology etc.

The time period must be a minimum of 15 days and must also be sufficiently long to permit the works council to properly be consulted – i.e. the time limit must be coherent with the importance/complexity of the issue upon which the works council are being consulted. The time period must also take account of the obligation to inform and consult with the health and safety committee, where this is relevant.

At the end of the time limit, if no opinion is expressly given by the works council, it is deemed to have given its opinion (i.e. a negative opinion) – this is a major new change in French law – as previously the works council could potentially delay the procedure by refusing to give its opinion and therefore causing delay/uncertainty. However, to take advantage of the provisions, employers will of course have to first enter into an agreement with the works council as to the maximum period applicable.

  • Consultation of the works council on the strategic direction of the business

Each year the works council must now be specifically consulted on the strategic orientation of the business and the consequences of this on the business, employment, the evolution of jobs and competencies and recourse to contractors/temporary staff.

The works council may propose alternative approaches and may appoint an expert to assist it in this regard (a maximum of 20% of the costs of the expert are paid from the works council's budget, the balance is paid by the company) .

  • Provision of additional information in relation to the company to the works council – a permanently accessible information database

With effect from:

  • 1 year from the date the new law is officially published for companies with 300+ employees; and
  • 2 years from the date the new law is officially published for companies with less than 300 employees,

the works council must now be provided with additional economic and social information, updated on a regular basis (included within a permanently accessible information database once this particular provision is in force). The information must cover (i) the current year, (ii) the two previous years and (iii) perspectives in relation to the next three years. A decree will define the type of information required more precisely (stricter obligations are likely to apply to companies with 300+ employees), but this information is likely to relate to:

  • information in relation to investments in connection with the employees : in particular in relation to temporary and part-time workers, training and working conditions
  • capital and debt
  • remuneration of the employees and the management team
  • social and cultural activities
  • remuneration to finance bodies
  • payments to the company e.g. from public aid and tax credits
  • sub-contracting
  • intra-group commercial and financial transfers.

From a date fixed by decree, or at the latest 31 December 2016, the database must also include the other information which is regularly provided to the works council (under existing provisions).

A general confidentiality obligation applies in relation all such information provided.

Employers already have obligations to supply certain information to the works council at regular intervals and certain of the above information may be already included in the existing obligations. However, the new law extends more widely the types of information which must now be provided, in particular in relation to company finances.

Information and consultation of the works council on the use of tax credits

The works council must now be informed and consulted before 1 July each year on the use of tax credits received by the company and may require explanations in the event that it notes any breach of the provisions of the Tax Code, ultimately also establishing a report and bringing this to the attention of the supervisory board and shareholders.