Release of Plans to Reform French Labor Law Makes Waves

French President Emmanuel Macron's boldest mission, reforming France's nearly untouchable labor laws, received mixed reviews as his plans went public late last week. The changes would promote negotiation at a company level and without unions, add a voice for small businesses, and create easier ways to hire and fire employees.

The measures meant to foster growth, reduce the nation's stubbornly high unemployment, and revolutionize the way the French work will get a hearing in the streets, with two protests planned for September.

Restructuring France's complex labor laws, which authorities say have proved a hindrance to investors and employers, is part of a larger program by Macron to stimulate France's slow-moving economy. The introduction of this extremely politically-sensitive plan comes just as the new 39-year-old president's popularity is sinking. But the promise to make the French labor market more flexible was at the core of his election campaign.

The key components of the reform are:

  • Extension of the scope of collective bargaining at the company level: employers with fewer than 20 employees will be able to negotiate directly with employees via a referendum. Previously, employers were bound by industry-level agreements.
  • Merger of the various staff representative bodies: a single institution called Social and Economic Committee will replace the current staff delegates, works council, and health and safety committee. Under some circumstances, the Social and Economic Committee could also include unions.
  • Economic layoff: If an employer has international operations, it may provide an economic justification for laying off employees at the French location only except in cases of fraud.
  • Easing of dismissal rules: Employers would have the ability to correct and modify the reason for layoffs, even after sending the dismissal letter. In addition, procedural irregularity will no longer affect the validity of the layoff.
  • Collective mutual terminations: employers will be able to set up collective mutual termination plans via collective agreement approved by the French Employment administration.
  • Statute of limitations for claims against termination: any legal action to contest the termination of an employment contract must be filed within 12 months of the notification date.
  • Damages floor and cap set for unfair dismissal: For unjust dismissal cases, the new changes set a mandatory compensatory damages scale with a minimum and a maximum amount that can be awarded.

President Macron intends to act quickly in the coming months, using presidential decrees to quickly implement these labor law reforms.  Although Parliament must then ratify the labor law reform bills, the decrees will have already taken effect.  

We will continue to monitor these changes and report on any significant developments. 

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.