The French Parliament has now definitively passed the “Florange” law, which was a campaign promise of President Hollande.  Whilst initially the draft law envisaged an obligation to sell the site rather than close, the final version of the law imposes a financial sanction for a deemed breach of the obligation to find a buyer for a site before sale of the site.

Key provisions impacting on French employers in the event of a proposed site closure

The Law, which will come into force from 1 April 2014, imposes a new obligation for employers to seek to find a buyer for a site before definitively deciding to close the site and make redundancies[1]

The timetable for steps required in relation to attempts to find a buyer for the site before finally deciding on a closure is coherent with the new timetable applicable to collective redundancies of 10 or more employees in companies with 50+ employees, set out in the Law securing employment which came into effect on 14 June 2013[2]  – i.e. will apply over a period of 2-4 months (depending on the number of proposed redundancies).

A Decree will be issued, setting out the precise provisions for implementation of the new law.

Employers impacted by the new law:

The new law applies to[3]:

  • companies which have at least 1,000 employees;
  • groups with at least 1,000 employees with at least 150 employees in two or more Member States.

The new law does not apply to companies in collective proceedings administration or liquidation, but will apply to companies under the “sauvegarde” procedure.

Obligations in detail

Information and consultation with the works council

Employers covered by the new law which envisage the closure of a site which may result in redundancies will therefore have an obligation to inform and consult with the works council[4] in relation to such proposal no later than the date on which the procedure of information and consultation in relation to the collective redundancies commences[5].  In convening such meeting, the employer must send to the works council a document setting out relevant information in relation to the proposed closure, containing at least the following information:

  • the economic, financial or technical reasons for the proposed closure;
  • the actions the employer envisages taking to try and identify a buyer for the site;
  • the possibility for employees to make an offer to buy the site – the different models available (e.g. cooperative companies); and
  • the right for the works council to nominate an expert to advise it in relation to its examination of the proposed closure[6].

Notification to the French Authorities

The employer must also promptly notify the French Authorities of the proposed closure – sending simultaneously to the French Authorities the information provided to the works council, together with a copy of the minutes of the first meeting of the works council and any other information in relation to the convocation, agenda and nature of the meeting. The employer must also inform the local Mayor of the proposed closure at the same time.  The French Authorities then also inform the local elected representatives.

Steps to seek to find a buyer

The employer must then seek to find a buyer for a site it envisages closing where such closure will result in collective redundancies.  This will require:

  • informing all potential buyers of the desire to sell the site;
  • preparing a presentation document for the site aimed at potential buyers;
  • undertaking an environmental survey if applicable to examine potential pollution levels etc. and to present solutions to deal with any pollution;
  • giving access to all necessary information to any potential buyers (except confidential commercial information);
  • carefully reviewing any offers received;
  • responding (with detailed reasons) to the offers received within the timetable for consultation in relation to the collective redundancies[7] (i.e. within 2-4 months, depending on the number of redundancies envisaged).

The works council must be informed of any offers received no later than 8 days after receipt of the offer.  The works council is bound by an obligation of confidentiality and can give an opinion on the offer (again within the 2-4 month time limit).  The works council can also participate more actively in the attempts to find a buyer, by formulating proposals – in which case the employer must give the works council access to the information provided to potential buyers and information on the offers received and the detailed responses given by the employer to such offers.

The employer must consult the works council on any offers which the employer wishes to consider and in particular must provide the works council with information as to why it may accept such offer, in particular the ability of the proposed buyer to guarantee the future of the site and jobs.  The works council must give its opinion within the 2-4 month deadline.

If the employer either does not wish to pursue any offers or if no offers are received, at the end of the information and consultation period, it must present a report to the works council (the “Final Report”), setting out the following information:

  • details of the actions undertaken to seek to find a buyer;
  • the offers for the acquisition of the site received and their details;
  • if applicable, the reasons why such offers were refused.

Role of the works council’s expert

The works council can nominate an expert paid for by the employer to advise it in connection with this process – who must present any report within the 2-4 month deadline.  If the works council nominates an expert, the employer must also notify the French Authorities of such fact.

Role of the Commercial Court

If no offers for acquisition of the site are received by the employer, or if the employer does not wish to pursue any offers received, the works council[8] may apply to the Commercial Court within 7 days of the works council meeting in which the employer presents the Final Report if it considers that the employer has not reasonably complied with its obligations to attempt to find a buyer or if the employer has refused to follow-up on a potentially serious offer.

The Commercial Court must then set up a “chambre du conseil” to evaluate the measures undertaken by the employer (such hearing being private, not open to the public).  The Court may also appoint an expert to assist it.  It will take evidence from the works council, the French Authorities, the Minister and any other relevant individuals.

Sanctions

The Commercial Court must make a finding within 14 days[9]

If the Commercial Court considers that the employer has failed in its obligations to seek a buyer it may impose a fine or up to a maximum of the equivalent of 20 times the monthly minimum wage[10] – currently approximately EUR 28,907, subject to a cap of 2% of the annual turnover of the company[11].

If the Commercial Court has found that the employer is in breach of its obligations, in addition to the imposed fine, within 1 year of such decision the employer may also face an order for reimbursement of any State aid it previously received in relation to installation of the business, economic development or aid with job creation in connection with the site which has been closed.

Impact on the payment towards revitalising the region due from the employer

The efforts undertaken by the employer will be taken into account in assessing the payment due by the employer in connection with the obligation to revitalise the region following redundancies – currently the financial contribution is capped at 4 times the minimum monthly wage per redundant employee.

Potential challenge

It is anticipated that an application will be made to the Constitutional Committee (Conseil Constitutionnel) by the elected representatives opposed to the law, based on the argument that the new law is in breach of the general principles of freedom of business and property rights (la liberté d’entreprendre / droit de propriété).  The Constitutional Court may also be asked to review the proportionality of the measure and penalties provided for breaches, which would be ordered by the Commercial Court (rather than in criminal or administrative law proceedings).

Potential challenge

An application has been made to the Constitutional Committee (Conseil Constitutionnel) by the elected representatives opposed to the law, based on the argument that the new law is in breach of the general principles of freedom of business and property rights (la liberté d’entreprendre / droit de propriété). 

In particular, the challenge is based on the principle that the law does not permit the employer to refuse an offer unless the refusal is for legitimate grounds (defined by Article 773-1 of the Commercial Code as “putting the activity of the business in danger”.  It is argued that this does not sufficiently take account of other reasons why the employer may refuse the offer, such as the viability of the buyer, its desire to preserve jobs, risks in relation competition, price etc.

The Constitutional Court has also been asked to review the proportionality of the measure and penalties provided for breaches, which would be ordered by the Commercial Court (rather than in criminal or administrative law proceedings).