The essential labour law in France

These are the highlights if you want to know more about the essential labour law in France. This entry was drafted by PECH DE LACLAUSE, BATHMANABANE & ASSOCIÉS. Link to E-Iure network.

This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case PECH DE LACLAUSE, BATHMANABANE & ASSOCIÉS is an excellent option in France.

Introduction

French labor and employment rules, both individual and collective employment relationships between employers and their employees, are governed by the traditional hierarchy of rules, from (i) the French Constitution, including the Declaration of the Rights of Man and the Citizen (a fundamental legal source from the time of the French Revolution), (ii) European Union legislation and case law, (iii) the French Labor Code, together with the applicable regulations, (iv) industry-wide collective bargaining agreements and (v) case law.

Individual relationships are also governed by the individual employment contract, customs, unilateral undertakings from employers and the internal rules and policies applicable within the companies.

The French Labor Code has recently been modified by six Ordinances (published in the official journal on September 23, 2017), in the extension of the Habilitation statute of August, 2 2017, in order to strengthen the “social dialogue”.

These Ordinances overhaul the French labor’s rules relating in particular with respect to (i) collective negotiations, (ii) termination of the employment contract (collective economic dismissals, individual dismissals and more flexibility in the rules for dismissal), (iii) staff representatives’ bodies, (iv) the number of areas which are open to negotiation have been increased, (v) employee representative bodies have merged, (vi) small and medium businesses will be granted the possibility to enter into agreements directly with employees where no trade unions are present in the company and (vii) the establishment of a scale applicable to damages awarded by Employment courts for unfair dismissal.

Some of these new measures are applicable starting from September 24, 2017. Others shall come into force after the publication of Decrees implementing them, on January 1, 2018, at the latest.

Employment

Employment contracts

Under French law, the employer and the employee may enter into a fixed term contract (CDD), an open-ended term contract (CDI) or a temporary work contract (“interim”).

A contract can be written, oral or result from an exchange of correspondence.

Fixed-term employment contracts and temporary work contracts must be written and have to comply with restrictive regulation, in particular with regard to their purpose and their duration. In case of breach of these rules, the employment relationship can be judicially converted in an open-ended employment contract.

Employment formalities

The employer must file social security returns for new hires. Moreover, under French law, specific rules exist with regard to the employment of foreign employees, under which the employer must satisfy specific formalities before employing a foreign employee. Employing a foreign employee who has no authorization to work, or without checking the validity of the authorization of a foreign employee is a criminal offence.

Criminal sanctions in Employment law

• Discrimination

During the employment process, French law prohibits employment discrimination, in particular discrimination based on the origin, race, religion, age, sexual orientation, political opinions, or union status.

Any breach of this rule may be criminally sanctioned and lead to damages.

Unreported work (“travail dissimulé”) is the offence constituted by:

• Paid employment (production, business, services, etc.) without being registered with the French authorities (employment, tax, or the social security organisms), or

• Failure to (i) declare the hiring of an employee, (ii) provide a pay slip, (ii) mention on the pay slip the accurate number of hours worked or (iv) report the full salary (including benefits) paid to social security organizations.

• Illegal loan of workers

Under French law, exclusive and for-profit loan of workers is reserved to the temporary work and work-share agencies.

Employers are therefore forbidden to receive a financial gain from loaning their employees for the benefit of other employers, even to affiliates in a same group. A company may loan one or several workers to another company, as long as it generates no financial gain from this operation. There is no financial gain when the cost charged to the beneficiary of the loan is limited to the costs of the actual salaries, social security contributions and professional expenses.

• Illegal trading of workers (“marchandage”)

Illegal trading of workers is the loan of workers for profit which negatively affects the interests of the employee concerned or which distorts the application of legal rules, a labor convention or collective agreement.

This offence is constituted when the employees loaned do not enjoy the same benefits as the employees of the company to which they are seconded.

• Subcontracting

Companies often employ subcontractors to execute part of the works entrusted to them by their clients. Those operations are legal, but particular attention is needed on two particular points:

• All contracts corresponding to an operation amounting to at least 5,000 Euros (excluded VAT and for the global amount of the services provided), the contractor must ensure, during the conclusion of the subcontracting agreement and every 6 months afterwards, that his subcontractor reports all his workers (see above), and specifically, that he is up to date with the mandatory declarations to the social security organisms and fiscal obligations. Failing to do so may result in the contractor being held jointly and severally liable for the social obligations and contributions of the subcontractor. If the subcontractor employs foreign employees, the contractor must moreover ask and be provided with declaration upon which the foreign employees are entitled to work in France.

• Moreover, subcontracting may amount to a temporary loan of an employee of the subcontractor to the contractor’s company. In this instance, the contractor should ensure that the loan of this employee is only an accessory to the services provided by the subcontractor and not the main goal (or benefit) of the subcontract. Otherwise, there is a risk that the services supplied by the subcontractor may be qualified as “illegal trading of workers” or “marchandage”, a criminal offence.

A company located in France using foreign labor must exert a control over its subcontractors pursuant to a July 11, 2014 Statute aimed at preventing “social dumping” and its implementing Decree dated March 30, 2015.

Compensation

Minimum wage

In France, employers are free to determine the compensation to be paid to its employee, provided it is above the “salaire minimum de croissance” (acronym “SMIC”), which is a minimum wage, increased by the French Government on the basis of the national cost of living index. The current rate for 2017 of the SMIC is 9.76 € / per hour, or a gross monthly salary of 1,480.27 €.

Each employee’s compensation must also meet the minimum requirements of the collective bargaining agreement applicable to the company’s industry, if applicable (which cannot fall below the SMIC).

The “equal work, equal pay” principle

A consistent line of case law has determined that the employer must ensure the equality of compensation between all employees placed in identical situations. In a nutshell, the employer may only use his managing power (“pouvoir de direction”) to treat employees differently provided he/she can justify such differences by criteria that are “unbiased, relevant, physically verifiable and not linked with any discriminatory motive”.

Subject to certain conditions and context, the employer is entitled to justify differences of compensation based on the experience and seniority, professional skills or education.

Social security contributions / Payroll taxes

They amount to 60-70 % of the employee’s gross salary (40 to 50% paid by the employer, and 20 to 25% by the employee), depending on the industry and applicable collective bargaining agreements.

Working time duration

General rules

In France, the working time duration is by default set at 35 hours per week (i.e. 151,67 hours per month). Time worked above that limit constitutes overtime and is subject to an additional payment, and, in some cases, to rest days.

The law also provides for the following absolute working time duration limits:

• a maximum of 10 hours a day;
• an average of 44 hours in a 12 consecutive weeks period;
• no more than 48 hours in a single work week.

Each employee must in any case benefit from a daily 11-hour rest.

Any employee, even classified as an executive (“cadre”), is submitted to these rules.

Specific regimes for executives

Nevertheless, the law provides specific rules for executives only which allow more flexibility. These regimes vary according to the executive’s category and upon the applicable collective bargaining agreement provisions, if any.

Three categories may be distinguished:

• “Integrated executives”: (“cadres intégrés”): those are subject to the company’s collective working time and who are integrated in a working team.

They are subject to the mandatory provisions on working time.

• Senior executives (“cadres dirigeants”): executives who have significant responsibilities and are the decision-makers in the company; their work hours cannot be quantified due to a high degree of independence in the organization of their work; they are granted the highest compensations of the company.

The senior executives are excluded from the working hours legislative framework.

• “Autonomous” executives (“cadres autonomes”): they are leading executives with significant freedom to organize their own work time.

Their working time may be defined by an amount of hours or a number of days per year if the collective bargaining agreement or a company bargaining agreement (negotiated at the level of the company with the unions, if any) provides for this option. To define the working time by a number of days also requires the express consent of the employee. To that purpose, an agreement must be signed with the employee (either in the employment contract itself or in a rider).

• Part-time contract

A part-time work contract providing for fewer than 35 hours a week can be concluded with the employee. It must contain mandatory provisions to be valid. Since 1st of July 2014, the weekly working time cannot be fewer than 24 hours (limited exceptions apply. French part-time contracts have to comply with the legal provisions (mandatory mentions, priority of reemployment, equality of treatment…).

• Paid vacation

Employees are entitled to five weeks of paid vacation per year. The collective bargaining agreement applicable to the company may provide for additional paid vacations.

• Specific rules

French law provides specific provisions concerning night work, bank holidays, and Sunday work.

Termination of employment

Grounds of dismissal

The employer may only terminate an employment contract and dismiss an employee if he/she justifies:

–      an “actual” cause: termination must be based on objective facts which can be substantiated, constituting the real cause of the dismissal, i.e. an accurate and exact cause;

–      a “serious” cause: the grounds for termination must be of significance, making it impossible for the employer to continue the employment relationship.

The grounds for dismissal must be fully and exhaustively detailed in the letter notifying the dismissal to the employee. Nevertheless, according to the new Ordinance of September 22, 2017, regarding the securing of the work relations, starting from January 1, 2018 at the latest, the employer will have the possibility to complete the grounds for dismissal, either on its own initiative or at the request of the employee, after the notification has been given. If the employee does not ask for the grounds of his dismissal to be specified, insufficient justification of his dismissal letter will therefore only constitute an error which no longer systematically deprives the dismissal of its just cause, but gives rise to compensation of no more than one month’s salary. On this regard, standard form letters (Cerfa) for dismissal mentioning the rights and obligations of employers and employees will be also implemented by decree.

There are three basic types of actual and serious reasons for dismissal:

• Dismissal for personal reasons

The reason for dismissal is directly related to the employee, for instance in case of lack of performance, or if the employee has had an accident or is ill and therefore unfit for work.

In such circumstances, the employee must be convened to a preliminary meeting during which the reasons for his potential dismissal are explained to him by the employer. After this meeting, the employer may decide to dismiss the employee and notify him the dismissal by a registered letter with return receipt requested.

This procedure is quite formal and the employer must comply with specific delays. In case of non-compliance with of those delays, the employer may be ordered to pay compensatory damages to the employee for breach of the dismissal procedure (no more than one-month salary).

The physical inaptitude of the employee may constitute an actual and serious cause of dismissal, but only if such inaptitude has been noted by the occupational health doctor after a medical examination held in conformity with the new modalities of recognition of the physical inaptitude implemented by the statute of August 8, 2016 (“Loi Travail”), in force since January 1, 2017, after having consulted the staff representatives and if there are no possibilities redeploying of the employee within the company or the group of the employer, unless the occupational health doctor provided for the impossibility of redeploying the employee.

On January 1, 2018, a Decree will provide for the geographical scope of the redeployment to be retrained, which will correspond to the Group companies located in France only.

• Disciplinary dismissal

The employee may be dismissed for negligence with respect to his/her contractual obligations (breach of internal procedures, unjustified absences…), for breach of her duty of loyalty towards the employer (unfair competition, denigration…), or when the employee’s behavior towards his colleagues is inappropriate (insults, assault, workplace or moral or sexual harassment…).

However, a disciplinary procedure may solely be engaged within a period of two months starting from the day the underlying facts became known to the employer. Any previous wrongdoings are time-barred.

Finally, the dismissal letter has to be sent within a one month from the day the preliminary meeting took place. Failing this, the dismissal is deemed unjustified.

• Dismissal for economic reasons

Such cause for dismissal is based on reasons unrelated to the employee and relating to the necessity of modifying or reducing the headcount in order to face economic difficulties (such as the economic difficulties listed by the French Labor Code) or to safeguard the competitiveness of the company.

Economic grounds for dismissal are no longer evaluated at a worldwide level for companies belonging to a group (except in the event of fraud) and financial difficulties are now evaluated by the courts at the level of group companies located in France having the same activity.

Specific rules govern such a dismissal and vary when the dismissal applies to i) a single employee (individual dismissal), ii) from two to nine employees (small collective economic dismissal), and iii) ten or more employees (large collective economic dismissal).

In any case, an economic dismissal may only be brought if there is no possibility to redeploy the employee or alternative job opportunity within both the company and the group. On this issue, the redeploying measures have been simplified by the President Macron’s reform of the French Labor Code: the employer will have the possibility to choose between individual and personalized offer of deployment, or a collective information of the jobs available on the intranet of the company, starting from the publication of its implementing Decree in January 1, 2018, at the latest. The employer will not have any more the obligation to propose available jobs abroad.

Moreover, in case of a small economic dismissal and a large economic dismissal, the Works Council (“comité d’entreprise”) has to be consulted before the dismissal letters are sent to the employees. Such consultation will necessarily change following the merging of employee representative bodies into a Social and Economic Council (see below) which shall have to be implemented within the companies on January 1, 2020 at the latest.

In case of a large economic dismissal in a company of 50 or more employees, the Works Council (for now) may be assisted by a certified accountant who is paid by the company. A June 2013 statute sets a time limit during under which the Works Council must render its opinion.

This statute also provided for a specific procedure that has to be followed in case of such large collective dismissals. Indeed, specific rules have to be complied with, such as, for instance, in these cases, the obligation for the company to put in place an employment safeguard plan providing for internal and external redeployment measures and the support of the dismissed employees (assistance for geographical mobility, increase of the severance payments…).

Such a plan has to provide for sufficient support measures considering the capacities of the company and the group to which it belongs. If such a plan is considered insufficient, the notified dismissals are deemed void and the employees may petition the courts to request their reinstatement with the company, with compensatory damages and back pay.

Since the June 2013 Statute, the labor administration must approve the economic dismissal plan before its implementation.

Severance payments

In most cases, a dismissed employee is entitled to:

• A notice period, in general 1 to 2 gross monthly salary for workers (“ouvriers”), 2 months for technicians and supervisors (“agents de maîtrise”), 3 months for the executives and engineers (“cadres et ingénieurs”), in conformity with the collective bargaining agreements, or, in case only law applies, a notice period depending on the employees ‘seniority within the company;

• A severance payment based on current compensation and seniority, provided by law or by the applicable collective bargaining agreement, whichever is more favorable to the employee.

The severance payment is paid to the employee who has at least 8 months of seniority. This payment amounts to 1/4 of a monthly gross salary per year of seniority up to 10 years of seniority, and then 1/3rd of a monthly gross salary from the 11th year of seniority.

If the dismissal is not justified, the employee may also obtain before the labor court additional damages, which amount depends on the damage actually incurred by the employee and according to a compensation scale with respect to unfair dismissals provided by the President Macron’s Ordinances of September 2017 (which does not apply in cases of discrimination, harassment or violations of constitutional rights). Such a scale provides for a minimum amount of damages and a maximum amount, depending on the seniority of the employee and the number of employees within the company.

Amicable termination agreements

The employer and the employee may reach an amicable settlement agreement which is not construed either as a dismissal or as a resignation, and may together decide to mutually terminate the employment contract. Such an amicable termination has to comply with a specific process and to be approved by the labour and employment departmental office (or the Labour Inspection in case it concerns a protected employee).

A “collective contractual termination” has also been created, consisting of a voluntary departure plan by collective agreement subject to approval by the administration. The modalities of application of this collective settlement agreement shall be fixed by Decree.