Viviane Stulz, senior counsel, Clifford Chance, Paris
11 February 2002
For those human resource professionals whose re-mit spans several European countries, France is notorious for being the country where laws are perhaps the most paternalistic towards employees.
Reorganisations, restructuring and redundancy exercises in France have always been tricky from a personnel relations' perspective, in particular for companies employing more than 50 people which propose to implement more than 10 redundancies - for these, negotiations with the works council and the implementation of a 'social plan' are mandatory.
In the past, although a redundancy exercise might take a few months and incur high costs, shareholders usually have the satisfaction of achieving their ultimate aim - as with Marks & Spencer and Renault. Unfortunately, it is likely that this will not be the case in the near future. A new law governing redundancy has come into force in France that is likely to render company restructuring and closures even more difficult, and perhaps in some instances impossible.
It should be borne in mind that the new redundancy procedures will apply not only when redundancies are proposed, but also when the employer proposes amendments to key provisions of the workforce's contracts of employment. If either of these proposals involve more than one employee, the collective redundancy procedure applies. When they involve more than nine employees in a company or establishment employing at least 50, the employer is required to implement a 'plan for saving employment'. The name says it all - the aim is to avoid terminations altogether.
An employer may only make staff redundant if it can justify it with an economic cause and this cause has to be looked at, not only at the level of the French company, but also within the worldwide group. Redundancies are allowed only if the company can show that it has serious economic difficulties, that it has to reorganise to protect its competitiveness, or that the redundancies are necessary because of new technology.
The social plan may be put forward to the Company's Works Council only once the company has at least commenced negotiations with the trade unions in order to implement the 35-hour week. The social plan must include suggested measures aimed at avoiding the redundancies altogether, assisting the employees whose contract will be terminated, or finding alternative employment.
For redundancy exercises involving 100 employees or more, the legislation will impose obligations that are likely to prove costly. The social plan must include proposals aimed at developing local employment. This might, for example, impose an active obligation on the employer to seek a 'white knight' or to sell the premises to a purchaser that will engage some of the employees.
The employer must consult the works council in two separate phases. First, it must be consulted on the proposed restructuring. For this purpose, at least two meetings with the works council are required and it is entitled to appoint an auditor to assist. It is also entitled to veto the employer's proposals when they involve a total or partial cessation of activity of an establishment or an economic entity, and 100 or more redundancies are envisaged. Only when this first consultation phase is completed can the process commence to the social plan. This also requires at least two meetings of the works council, plus another if it decides to appoint an auditor to assess the validity and content of the social plan.
The legislation grants labour authorities greater powers. They will be able to review the plan and propose amendments at any stage, even after its approval.
The effect of the new requirements will inevitably delay the redundancy process. The law currently provides for a minimum of five meetings of the works council, and this can take six months or more. Under the new regime, some redundancy procedures might require ten or more meetings of the works council and could extend to a year.
To a UK employer, this might seem a bleak picture, but experience proves that employee communications is a key factor. Companies that involve staff representatives in their decision-making will reach their goals much more rapidly.
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