The Labor Law of 8 August 2016 (referred to as the « El Khomri Law ») has introduced a “social dialogue committee” (the “Committee”) in the franchise networks above a certain size. The Committee is chaired by the franchisor and comprises employer representatives as well as representatives of the employees of the “companies belonging to the network”. For the record, the networks concerned by the introduction of the Committee are, pursuant to article 64 of the El Khomri Law: u Only the franchise networks (not the concession, license and distribution networks); u Having at least 300 employees in France; u When the franchise agreements contain provisions which affect the work organization and the working conditions in the franchised businesses. These three abovementioned conditions must be cumulatively met. The Committee has a primarily informative function. Pursuant to article 64, this Committee is informed on the occasion of its meetings of any franchisor’s decisions likely to affect the size or structure of the labor force, or to affect working time or conditions of employment and the vocational training of the employees of the franchisees. The Committee is also informed by the franchisor of the franchisees which join or leave the network. Moreover, the Committee may formulate, on its initiative, or may review, at the franchisor’s request, any proposal likely to improve working, employment and vocational training conditions of the employees of the franchise network. Article 64 of El Khomri Law left to a decree approved by the Conseil d’Etat (State Council) the task to specify the features relating to the Committee’s composition and functioning. This decree has finally been published in the Official Journal (Decree No 2017-773 Decree of 4 May 2017) and has entered into force on 7 May 2017. It gives precisions on the terms of negotiation of the agreement establishing the Committee (1) and provides for the Committee’s functioning regime in the event no agreement is reached at the end of the negotiation (2). Last, the Decree includes provisions about the settlement of disputes (3). Publication of the Decree on the setting-up of the social dialogue committees: Franchise networks having 300 employees or more in France should prepare Contacts Grégoire Toulouse Partner Franchise & Networks T: +33 (0)1 72 74 03 33 email@example.com Markus Asshoff Partner Employment T: +33 (0)1 72 74 03 33 firstname.lastname@example.org Franchise & Distribution Networks May 2017 A representative organization of employees requests the franchisor to engage into negotiations for the setting up of the Committee. The franchisees communicate to the franchisor their average number of employees over the past year (within 15 days). The franchisor informs the franchisees who employ at least 1 employee. The franchisor informs the franchisees employing at least 1 person as well as the representative organizations of employees of the setting up of a negotiation group (within a maximum period of 2 months from the date of the initial request). The franchisor informs the franchisees as well as the organization of employees, that the conditions for the setting up of a Committee are not met. Setting-up of a negotiation group (within one month from the date when the franchisor informs the franchisees). The franchisees inform their employees of (i) the opening of the negotiation, (ii) its purpose and (iii) the composition of the negotiation group. If the conditions for the setting up of the Committee are not met. If the conditions for the setting up of the Committee (see above - preamble) are met. 2 1. Negotiation procedure of the Committee’s implementation agreement The procedure of negotiation of the agreement for the setting up of the Committee follows several steps. 1.1 Convening by the franchisor of a negotiation group upon request of a representative organization of employees Comment: The negotiation procedure of the Committee’s setting up agreement may only be initiated following a request made by a representative organization of employees: without such a request, the franchisor is not required to set up the Committee. The first condition for the setting up of the Committee is the threshold of 300 employees. The decree leaves open the question of whether the franchisor’s employees should be taken into account to assess whether the threshold is reached, as well as the question as to whether the calculation should be made by reference to full-time equivalent employees or per capita. In addition, article 64 of the Labor Law provides that it is only the franchise agreements which contain provisions having an effect on the working organization and on the working conditions in the franchisees’ companies, which are concerned. Given the purpose of the Labor Law, we consider that it is careful to not limit the analysis to the mere provisions of the franchise agreement in the strictest sense, but to also include the complete set of documents which are binding on the franchisees (especially the operating manual). Comment: The decree is silent on the procedure to follow for the appointment of the members of the two colleges within the negotiation group. The organizations of employees will have to cooperate for the purpose of appointing their representatives. For the employers’ college, this lack of detail creates a practical problem. The applications to the employers’ college should be centralized, as the case may be after a discussion with the franchisees’ association (where it exists) and there should be a proposal on the method of appointment of the candidates (for example by random draw) to all the franchisees who have designated a candidate. We may wonder what would happen in the event where there would be no candidate for the franchisees. In such a case, it seems to us that the negotiation group only composed of employee representatives would be able to negotiate the agreement, given that the Committee is, first and foremost, intended to be informed of franchisor’s decisions which affect the employees’ working conditions. However, the agreement’s validity would remain subordinated to its signature by at least 30% of the franchisees employing at least 30% of the network’s employees (otherwise the supplemental provisions of the decree would apply). 1.2 Composition of the negotiation group The negotiation group is composed in the following manner: u A college of employees composed of the delegates of the representative organizations of employees within the sector, or, where the franchisees operates in different sectors, by the representative organizations of employees in the different sectors; u A college of employers composed of one franchisor’s representative and of representatives of the franchisees. These colleges shall be constituted by an equal number of representatives. 1.3 Validity conditions of the Committee’s setting-up agreement First validity condition: To be valid, the agreement must be signed by: u The franchisor; u One or several representative organizations of employees within the sector or within the sectors in which the network operates, and having received in the last employees’ representatives elections at least 30% percent of the votes; u At least 30% of the companies operating in the network who employ at least 30% of the employees of the companies of the network. Second validity condition The agreement must not be challenged by one or several representative organizations of employees having received alone or together in the last employees’ representative elections the majority of the votes at the sector(s) level(s) (this opposition must be notified within eight days from the date of signature of the agreement). 3 Franchise & Distribution Networks May 2017 Comment: Surprisingly, the decree uses for this agreement the validity conditions of collective bargaining agreements that were in force until the Labor Law and which were dropped by the Labor Law. 1.4 Formalities after the agreement The agreement must be filed with the regional directorate for companies, competition, consumption, work and employment (referred to as “DIRECCTE” in French) by the most diligent party. 1.5 In the absence of an agreement, the franchisor must prepare a notice of disagreement Absence of outcome within six months after the start of the negotiation Decision of a majority of the group members (including the franchisor’s representative) to extend the negotiation Notice of disagreement established by the franchisor Setting of an additional period of time for the conclusion of the agreement Transmission of the notice of disagreement to all the members of the negotiation’s group 1st hypothesis 2nd hypothesis In the event of failure of the negotiation at the end of the additional period 1.6 Convening to the first meeting Whether an agreement is reached or not, the franchisor must proceed with the convening of the Committee’s first meeting within two months from the filing of the agreement, or, as the case may be from the establishment of the notice of disagreement. 2. Appointment of the representatives and operation of the Committee in the absence of an agreement The decree provides for the conditions for the setting-up and operations of the Committee in the event no agreement has been reached at the end of the negotiation. 2.1 Appointment of the representatives within the Committee In case of a failure of the negotiation, the Committee will be composed of two colleges: u A college representing the employees; u A college representing the employers. 4 The number of members in each college is the following: u For a network between 300 and 1,999 employees: 3 titular and 3 substitute u For a network of 2,000 employees and more: 4 titular and 4 substitute Within the employers’ college, the franchisor has, by right, one of the titular’s seats and one of the substitute’s seats. Moreover, the franchisor chairs the Committee, pursuant to article 64 of Labor Law. Appointment of the employers’ representatives This appointment takes place in two steps: 1. Transmission, by the employers wishing to seat within the Committee, of their name or of the name of one or several of their employees qualified to represent them; 2. Appointment of the representatives by the franchisor (titular then substitute) following the order of a list established retaining the names with an alternation between a representative coming from the franchisee with the largest number of employees and a representative coming from the franchisee with the lowest number of employees until all positions are filled. A same franchisee can’t have two seats within the Committee, except if seats still remain unfiled and if these seats cannot be assigned to another franchisee. Appointment of the employees’ representatives Two steps must be followed: 1. The representative organizations of employees within the sector or within the sectors in which the network operates, appoint a number of representatives that is proportional to their audience in this or these sectors following the rule of the highest average; 2. The organizations of employees inform the franchisor of the name of the appointed representatives as well as their quality of titular or substitute. Comment: In the absence of details provided by the decree on this issue, we may assume that the substitute will attend the meetings of the Committee together with the titular, as is the case within the employee representative bodies. Comment: The Committee being chaired by the franchisor, we may wonder how the mandate of president of the Committee, which belongs to the franchisor is going to work with the mandate of franchisor’s representative within the employers’ college. Is it the same seat or two different seats? In the latter case, the franchisor would de facto benefit of two representatives within the social dialogue Committee. Comment: If the method of appointment of the employees’ representatives is usual, the method of appointment of the employers’ representatives is innovative and shows the Government’s wish to ensure equal representation of big and small franchisees. However, this method may raise practical difficulties to determine the order on the list of the candidates, in particular on how to decide between franchisees having the same number of employees. These difficulties tend to show that reaching a negotiated agreement with the franchisees and the representative employee organizations might be the best solution. In the absence of any candidate to the employers’ representation, it seems to us that the instance might be able to work with the employees’ representatives only. In the (unlikely) adverse hypothesis where there would be no candidate to the employees’ representation within the Committee, it is questionable whether the Committee might be constituted while any social dialogue would be de facto impossible within a Committee solely composed of employers’ representatives. 5 TWF_0017_0517 © Taylor Wessing 2017 This publication is intended for general public guidance and to highlight issues. It is not intended to apply to specific circumstances or to constitute legal advice. Taylor Wessing’s international offices offer clients integrated international solutions. Though our offices are established as distinct legal entities and registered as separate law practices, we are able to help our clients succeed by providing clear and precise solutions with high-level legal and commercial insights. For further information about our offices and the regulatory regimes that apply to them, please refer to taylorwessing.com/regulatory.html and rhtlawtaylorwessing.com. Europe > Middle East > Asia taylorwessing.com Franchise & Distribution Networks May 2017 In each case, the appointments must take place within 45 days from the establishment of the notice of disagreement by the franchisor or from the agreement’s validation when the agreement has not covered the appointment conditions of the Committee. The appointments take place every four years. 2.2 Change of representatives Each titular leaving the Committee is replaced by his or her substitute. When a titular employer leaves the franchise network, the replacement must take place within one month from the date the employer effectively leaves the network. Each replacement terminates at the date on which the mandate of the replaced member would have expired. 2.3 Conditions to which the mandates of the representatives are subject If a Committee’s employee representative cumulates his/her mandate with a mandate of employees’ representative within the company which employs this representative, the travel time and the attendance time to the Committee’s meetings will not be charged on its credit of hours as an employee representative of the company. Time spent by the employees’ representatives within the Committee is regarded as effective working time. Accommodation and travel costs of the representatives, as well as the costs incurred for the operation of the Committee and the organization of the meetings are advanced by the franchisor, who may however request a contribution up to half of the costs to the franchisees (pro rata, on the basis of the number of employees they employ). 3. Settlement of disputes All the disputes relating to the implementation and the operation of the Committee are settled by the Tribunal d’Instance (first instance civil court) having jurisdiction in the territory where the head office of the franchisor is domiciled. For foreign franchisors, the Tribunal d’Instance of Paris 15th has exclusive jurisdiction. The decisions of the Tribunal d’Instance can be appealed only before the Cour de cassation (the French Civil Supreme Court). If you wish to discuss the impact of the new Decree and more generally of the Labor Law on your operations in France and the practical conditions of implementation of a Committee within your franchise network, please do not hesitate to contact our team. Comment: Article 64 of the Labor Law provides that, in the absence of an agreement, the Committee meets twice every year. There is no provision which obliges the franchisor to inform the Committee before taking a decision having an impact on the employees of the franchisees. Given all the elements mentioned hereabove, we consider that it is advisable for the franchisor and for the employees to reach a negotiated agreement providing for a satisfactory functioning of the Committee.