Employers v. Employees: Has New Reforms to French Labor Laws Finally Declared Employers Victorious?

By Ashley Martin

In France, the balance of power has shifted. No longer does the French Labor Code favor employees over employers.[1] Prior to the reform, the dismissal of an employee could lead to large payouts[2], something not likely to happen in the United States. The new Labor Code made changes that favor employers[3], such as permitting employers to terminate employees without risk of a large payout.[4] The new reform claims to provide protections to employees, such as increasing employee severance pay by 25%.[5] However, the response to the new reform comes with mass layoffs by French employers.[6] After years of a strong labor code that favored employee rights[7], has this new reform gone too far in favor of employer rights?

            Two specific improvements to the French Labor Code appear to swing the pendulum in the employer’s favor: (1) “an imperative scale of damages” and (2) “reform the rules governing dismissals.”[8] Prior to the reform, employers with eleven employees or more, who terminated an employee without legal cause were subject to heavy damages.[9] In these cases, employers could be forced to pay not less than six months of salary to an employee with at least two years of service.[10] There was no cap on the amount of damages.[11] For employers with less than eleven employees or disputes involving employees with less than two-years of service, the uncertainty was worse.[12] No minimum or maximum existed, and the amount of damages were left within the discretion of the judge.[13]

The reform creates both a minimum and maximum amount of damages and is billed as a benefit for employees.[14] The minimum amount of damages depends on a number of factors such as, the number of employees employed by the company and how long the employee worked for the employer.[15] In most cases, the minimum salary owed will range between zero and three months.[16] The maximum amount of damages will also depend on how long the employee worked for the employer, but cannot exceed twenty-months of gross pay.[17]

            The floor and ceiling set on damages in termination without legal cause cases creates great benefits for employers.[18] Employers can now better predict how expensive a dismissal without legal cause will be and litigation costs have decreased.[19] Employees do receive one benefit from the reform: a change in eligibility requirements.[20] Pre-reform, to bring a cause of action for termination without legal cause, employees must have been employed for a minimum of twelve months.[21] Post-reform, employees need only be employed for eight months.[22] This benefit is really a double-edged sword. Even if successful, employees with a shorter term of employment will be limited in the amount of damages they can recover.[23]

            With regards to dismissal reforms, changes have been made across the board, but one reform provides significant benefits to companies with employees in multiple countries, and the effects of this change are being felt already. Layoffs no longer require the employer demonstrate financial difficulty at an international level.[24] The assessment of financial hardship is based on the employer’s operations in France only.[25] Prior to the new reforms, employers had to demonstrate financial difficulties at an international level before a layoff was justified.[26] However, an employer who wants a reduction in force now has two options that do not require any showing of financial hardship.[27] The first option is a mobility leave.[28] A mobility leave is a period where employees are paid to search for a new job, and if a new job is found and accepted by the employee, then the prior employment contract is “mutually terminated and [therefore,] could not be qualified as a dismissal or a resignation.”[29] Mobility leave was available before the reform, but the reform just allowed more employers to take advantage of it.[30] For an employer to offer mobility leave, the employer must employ 300 or more employees and a collective bargaining agreement must be in place.[31] The new reform eliminated the requirement that a mobility be offered in the face of an impending layoff and eliminated tax and social obligations on indemnities owed to employees for one year.[32] The second option is a collective mutual-termination agreement (CMTA).[33] Under the reform, employers may now collectively bargain to terminate employment with employees.[34] Employees may consent if they wish, and the CMTA must be approved by labor officials.[35] Under this model, no forced termination of employment is permissible.[36]

            These reforms to large-scale dismissals primarily benefit the employer, who now know it can terminate large numbers of employees and eliminate the risk of litigation for termination without legal cause. Mobility leave and CMTAs do provide benefits to the employee, the employer primarily reaps the benefits. Even though employees are paid while they search for new employment or have consented to termination of employment, certainty of employment is eliminated.[37] Because employers are no longer required to show legal justification to offer mobility leave or engage in CMTA negotiations, an employer can reduce its force at any point.[38] French employers have already begun to take advantage of these new changes.[39] In early 2018, large-scale reductions in force occurred at France’s large auto manufacturer, supermarket chain, and clothing retailer.[40]

            The new reforms have indeed swung the pendulum in favor of the employer. Employees terminated without legal cause are limited to a maximum of twenty-months of gross pay,[41] and job certainty has been eliminated in light of a new reduction in force techniques.[42] These reforms have been in effect for less than a year, but only time will tell how employer-favored these reforms truly are.

[1] Liz Alderman, French Companies Have Newfound Freedom . . . to Fire, N.Y. Times (Jan. 23, 2018), https://www.nytimes.com/2018/01/23/business/france-labor-jobs.html.

[2] Adam Nossiter, Macron Takes On France’s Labor Code, 100 Years in the Making, N.Y. Times (Aug. 4, 2017), https://www.nytimes.com/2017/08/04/world/europe/emmanuel-macron-france-economy-labor-law.html?_r=0&module=inline.

[3] Alderman, supra note 1.

[4] Labour Law Reform, Gouvernement.fr, https://www.gouvernement.fr/en/labour-law-reform (Last Visited Nov. 11, 2018).

[5] Id.

[6] Alderman, supra note 1. As of January 23, 2018, over 4,000 employees had been laid-off. Id.

[7] Id.

[8] Gouvernement.fr, supra note 4.

[9] Roselyn S. Sands, What’s new in French termination-of-employment law? A lot!, Practicing L. Institute 1, 4 (2018).

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Gouvernement.fr, supra note 4. The floor and ceiling on damages only applies to termination without legal cause cases. Sands, supra note 9, at 4.

[15] Sands, supra note 9, at 4.

[16] Id.

[17] Id.

[18] Id. at 5.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] See id. at 4–5.

[24] Eleanor Beardsley, Why French Unions Aren’t Taking To The Streets Like They Used To, NPR (Feb. 1, 2018), https://www.npr.org/sections/parallels/2018/02/01/581534140/why-the-french-dont-take-to-the-streets-like-they-used-to.

[25] Sands, supra note 9, at 7.

[26] Id.

[27] Id. at 10.

[28] Id.

[29] Id.

[30] Id.

[31] Id. at 10–11.

[32] Id. at 11.

[33] Id.

[34] Id.

[35] Id.

[36] Id.

[37] See generally id.

[38] Id. This assumes the employer meets the requirements to open a mobility period and the CMTA is approved by labor officials. Id.

[39] Alderman, supra note 1.

[40] Id.

[41] Sands, supra note 9, at 4.

[42] See id. at 10–11.