French Employment Law
News item added 10th March 2010
An interview with Denise Broussal, Partner at Baker & McKenzie SCP in Paris
JSB has developed a portfolio of international law programmes over the past 10 years, now covering 30 different jurisdictions. In a recent interview, Paul Secher, Head of JSB’s Employment Law Faculty, asked Denise Broussal to highlight key developments in French law which impact on UK and International employers with operations in France.
Secher: If I were an employer looking to hire staff in France for the first time, what are the main issues I should be considering?
Broussal: During the recruitment process, companies must ensure that the wording of job offers is not discriminatory. In addition, the information requested from candidates must not infringe on their private life and must be directly and necessarily linked to the position.
When the candidate(s) is/are selected, companies must keep in mind that an offer letter is a binding document. If the employee refuses to sign a subsequent employment contract, his/her employment will be governed by the terms of the offer letter. It is therefore recommended that newly hired employees sign their employment contract at the latest before the expiration of the trial period.
When hiring employees in France, the company must comply with various mandatory registrations, in particular, with the social security authorities for the payment of social security contributions. Since regulations concerning the payment of salary and the calculation of the social security contributions are complex in France, it is strongly recommended appointing a payroll agency in order to handle such formalities.
Specific attention must be paid to the clauses of the employment contract and their validity in light of French Labour law. Once the employee has agreed to the terms of his/her employment contract, the employer will not be able to change them unilaterally since any amendment to the provisions of the employment contract requires the employee’s prior and express consent.
In particular, French case law considers that the employer must obtain the employee’s express consent prior to any modification of the remuneration (including most types of bonuses), even if nothing is provided in the employment contract.
The employer must ensure that the provisions of the employment contract comply with French law as well as any applicable collective bargaining agreement, in particular concerning working time, non-compete obligations, paid vacation, trial period, etc.
The company must consider the working time organisation which is the most adapted to its activity: a factory employing workers for the largest part would require the same working time organisation as a software company employing largely engineers and executives (“cadres”).
Depending on the number of employees and the company’s activity, certain specific health and safety requirements would need to be complied with.
Secher: I know that working time is strictly controlled in France. But have the rules changed recently?
Broussal: The working time regulations were modified slightly by a law dated August 20, 2008, (“Loi portant renovation de la démocratie sociale et réforme du temps de travail”).
The main purposes of this law was to simplify the rules governing working time and increase the role of employers and employees in the determination of the details of the working time organisation through negotiations at the company level.
In addition, in order to increase flexibility, the law provides that employees subject to a global remuneration agreement corresponding to a certain number of working days per year can relinquish their additional days off in exchange for pay.
Indeed, although the maximum number of working days per year remains in principle equal to 218 days, a collective agreement may now provide for the possibility of entering into a global remuneration agreement to waive this principle. Therefore, an employee can, by agreement with his/her employer, relinquish his/her days of rest and therefore work more than 218 days per year in exchange for an increased pay (which must be at least equal to 110% of the base salary). The collective agreement allowing the employee to relinquish days off in lieu of pay can provide that the number of days finally worked by the employee can be equal to 282 days per year maximum. In this case, the employee may work on Saturdays and legal bank holidays (except May 1st). If the collective agreement does not include any specific provision on this matter, pursuant to legal provisions, the maximum number of days worked by the employee cannot exceed 235 days per year. In this case, employees may work on legal bank holidays (except May 1st) but not on Saturdays.
In any event, the employees cannot relinquish their paid vacation (25 working days per year) for pay.
The law also provides that the employer must hold an individual annual meeting with each employee subject to a global remuneration agreement in order to discuss his/her workload, the work organization in the company, the balance between work and private life, as well as remuneration.
Secher: How important an employment issue is discrimination in France? Are there a lot of tribunal cases? Are there any different types of discrimination we need to watch out for or are they the same as in the UK?
Broussal: According to the annual report for 2008 issued by The French Equal Opportunities and Anti-Discrimination Commission (“Haute Autorité de Lutte contre les Discriminations et pour l’Egalité” – “HALDE”), employment remains the primary area where discrimination is reported, accounting for 49% of the claims lodged with the HALDE. Career development discrimination (38%) comes out far ahead of discrimination in recruitment (11%) and the public sector accounts for 35%, as compared to 65% in the private sector. Origin remained the most frequently cited grounds, accounting for 29% of the total number of claims, ahead of health-disability, the second most frequently cited, at 21%.
Often cases relating to discrimination, employees consider that they were discriminated against on the basis of their functions as union delegates or employee representatives.
One of the most important areas linked to discrimination concerns the application of the principle of equality of treatment. Indeed, the French Supreme court rendered a decision on July 1, 20095, which could trigger a significant increase in various claims brought by employees on this ground.
In this case, a company agreement provided for a different number of paid vacation days depending on the employee’s status: 25 days per year for regular employees and 30 days for executive employees. An employee filed a claim before the Labour court in order to obtain back pay on the paid vacation indemnity arguing that this distinction was “discriminatory”. The employer justified the difference in treatment by “specific constraints on executives, in particular the importance of their responsibilities”.
However, contrary to all principles on which company agreements and branch collective bargaining agreements are based, the French Supreme court decided that a difference in treatment based merely on a difference in professional category does not constitute an “objective reason” justifying such a difference in treatment.
The consequences of the French Supreme court’s July 1, 2009, decision could be particularly significant: this position could also apply to collective bargaining agreements. Indeed, most collective bargaining agreements provide for differences in treatment according to professional category, without any particular justification (length of notice period, dismissal indemnity, sick pay, retirement indemnity, etc.).
In light of this decision, such provisions of collective bargaining agreements, linked only to the employees’ classification, risk being contested in the future. It will therefore be up to the employer to demonstrate "objective reasons" for this difference in treatment, even if it is allowed per se by collective bargaining agreement. Will the working conditions or workload be sufficiently objective to justify the granting of different compensation?
Since this decision, one Court of Appeal has already decided to apply the analysis of the French Supreme court to the difference provided by a collective bargaining agreement concerning the amount of the dismissal indemnity and the duration of the notice period. Indeed, the court considered that the employee who had non-executive status should have received the same dismissal indemnity and benefit from the same notice period as that paid and granted to executives.
Secher: What are the possible grounds for termination of employment in France?
Broussal: The employer may terminate an indefinite term employment agreement at any time, but it must demonstrate a real and serious cause (“cause réelle et sérieuse”) for the termination of the employment agreement and comply with the applicable dismissal procedure which varies depending on the grounds for dismissal (the dismissal procedure for a dismissal based on personal grounds is shorter).
There are two basic types of real and serious reasons for dismissals: the employee’s poor performance or his/her negligence (personal grounds), and job elimination/modification resulting from economic reasons.
French law does not provide for an exhaustive enumeration of the reasons that can justify an employee’s dismissal based on personal grounds.
However, depending on the seriousness of the employee’s conduct, the employee will either be dismissed for (i) real and serious cause (“cause réelle et sérieuse”) or for a more serious reason such as (ii) gross misconduct (“faute grave”) or (iii) willful misconduct (“faute lourde”).
The classification of the employee’s dismissal in one of these three categories will mainly impact the employee’s entitlement to certain severance payments. An employee dismissed for gross misconduct is only entitled to the paid vacation indemnity (and not to the dismissal indemnity provided by the Collective Bargaining Agreement or to a notice period). An employee dismissed on the basis of a wilful misconduct (i.e., a misconduct deliberately harmful to the Company) is not entitled to any severance payments.
Examples of conduct which have been held as a valid personal ground for a dismissal are, for example, poor work performance, lack of discipline, professional errors, poor work attendance or unjustified absences, etc. These various examples would need to be substantiated in writing whenever possible in order for the dismissal to be valid.
An economic dismissal is defined as:
(i) a dismissal for one or more reasons unrelated to the person of the employee dismissed, and
(ii) a dismissal resulting from the elimination or transformation of a position or from a substantial modification resulting from, inter alia, economic difficulties, technological changes or a reorganization of the company.
The dismissal must therefore result from the elimination or the modification of the positions held by the employee dismissed in the framework of, in particular, a reorganization decided for valid economic reasons such as a serious slow down of the company’s activities or from continuous losses requiring the closing of the activities in France. The economic justification best received by the French courts is financial losses.
Secher: In the run-up to the last Presidential Election in France, there was a lot of talk about the need to ‘modernise the labour market’. To what extent has this happened so far?
Broussal: A law dated June 25, 2008, on the modernization of the Labour market was adopted.
The most significant initiative of this law is the mutual termination agreement (“rupture conventionnelle”) which allows employers and employees to terminate the employment relationship without having to carry out a dismissal (for the employer) or to resign (for the employee). The main advantage of this type of agreement is that the employee can obtain unemployment benefits.
Although the amicable termination agreement is a step in the direction of more flexibility, this new termination option is quite complex and still somewhat uncertain. Indeed, as from the date of signature of this agreement, each party has 15 calendar days to withdraw its consent. After this initial 15-day period, the agreement must be sent to the French Labour authorities (generally by the employer) for ratification by the latter. The Labour authorities benefit from 15 business days (as of receipt of the request) to ratify the agreement. In the absence of response within this 15-day timeframe, ratification is deemed obtained. The Labour authorities may however refuse to ratify the agreement in which case the employment contract remains in force.
Since its creation, the mutual termination has been quite popular as more than 270,000 requests for ratification have been received by the Labour authorities (“DDTE”) between August 2008 and December 2009 (80 to 90% of the agreements are ratified).
The law on modernisation of the Labour market also provides for a new regime for trial periods. The trial period shall enable the employer to evaluate the employee’s abilities in his/her work, notably with respect to his/her experience, and shall enable the employee to assess whether the position held suits him/her. In addition, the law states that the trial period and the possibility for renewing it is not automatic and must be expressly provided in the engagement letter or the employment contract.
The law provides for the maximum duration of the trial period, depending on the category of the employee, which is longer than what was previously allowed by French law. Subject to certain conditions, an employee with executive status (“cadre”) can be subject to a 4-month trial period.
The law also created a new type of fixed-term employment contract for a defined purpose (“CDD à objet défini”) applicable to engineers and executives. The duration of such contract can be between 18 months and 36 months. The end of the contract is actually the date of completion of the defined purpose for which the contract was entered into.
However, in order to be able to enter into such type of fixed-term employment contract, the company must be covered by a Branch level collective bargaining agreement (rendered mandatory by a Government Decree) or, in the absence of same, a company agreement. For the time being, it appears that only a few sectors of activity are covered by a collective agreement containing specific provisions on this matter (e.g, banking industry).
This contract is implemented for an experimental five-year period, i.e. until June 25, 2013.
Denise Broussal is a Partner at Baker & McKenzie SCP in Paris. Denise is Franco-American and covers all aspects of French employment law, including issues relating to mergers and acquisitions, Sarbanes-Oxley compliance, outsourcing and individual and collective dismissals. Denise works with JSB In-company clients and is a regular speaker on JSB’s Employment Law France seminar and the annual Employment Law Europe Conference.