The law n°2018-287 of April 20, 2018: another significant modification of French contract law?

The law of April 20, 2018 is the last stage regarding the reform of the French law of obligations: it ratifies the February 10, 2016 “ordonnance”. The “ordonnance” is already in effect since October 1, 2016. Consequently, modifications of the 2018 law are not quantitatively significant (6%) so as to preserve legal certainty and foreseeability.

The delayed adoption mechanism of the final project puts the issue of transitional law at the core of the issues that practitioners will encounter. There are three distinct applicable laws, and two principles. The first principle is the application to the contract of the law in force at the time of its conclusion. On this point the French Parliament has decided that contracts formed before October 1, 2016 will be governed by the ancient French Contract law, “including their legal effects and the public policy provisions “. The second principle is about the “interpretative” dispositions: their application is retroactive (from October 1, 2016).

So :

• Contracts formed before October 1, 2016 :
o Principle: Ancient law is applicable
o Exception : « les actions interrogatoires »

• Contracts formed from October 1, 2016 to October 1, 2018:
o Principle: the 2016 « ordonnance » is applicable
o Exception: interpretative provisions of the 2018 law

• Contracts formed after October 1, 2018 :
o Principle: the 2016 « ordonnance », as modified by the 2018 law is applicable

 

I. Modifications of the 2018 law on: contracts formation, defects of consent, “adhésion” contracts, price fixing 

First of all, the definition as well as the legal regime of the “adhésion” contract will be modified (articles 1110 and 1171 of the Civil Code). The definition is now “the contract that includes a set of non-negotiable clauses, determined in advance by one of the parties”. The “General Terms and Conditions” have been replaced by “a set of clauses” and a criterion of non-negotiability has been added. “Adhésion” contracts are therefore no longer limited to mass contracts.

Symmetrically, the legal regime of unfair terms in the “adhésion” contracts is modified: the new wording of article 1171 of the Civil Code provides that only the non-negotiable clauses determined in advance by one of the parties (and no longer “any clause”) creating “a significant imbalance between the rights and obligations of the parties” may be subject to review by the judicial judge. The control of unfair terms is thus restricted.

Then the new Article 1112 provides that, in the event of misconduct in the negotiations, compensation for the damage resulting therefrom will neither be the “loss of the expected benefits of the contract not concluded” nor the “loss of opportunity to get these benefits ” This addition certainly provides for greater predictability in the compensation for the harm suffered during negotiations. This provision is interpretative and therefore applies from October 1, 2016.

Article 1117 (2), which deals with the invalidity (obsolescence) of the offer in the event of its author’s incapacity or death, is completed by the words: “or the death of its addressee”

Article 1137 (on the fraud) is added a paragraph as follows: “Nevertheless, does not constitute a fraud by one party not to reveal to his co-contractor his estimate of the value of the service”. The 2018 law thus puts an end to a great incoherence with article 1112-1 (on the obligation of information) which disposes in its paragraph 2: “Nevertheless, this duty of information does not relate to the estimation the value of the service”. The obligation to inform oneself, at least on the value of the service, is thus established since the person who is not obliged to inform the other party about the estimate of the value of the service will not be found liable anymore on the basis of Article 1137 of the Civil Code.

Article 1143, which deals with economic violence, also has an addition: “There is also violence when a party, abusing the state of dependence in which his co-contractor finds himself in relation to him, obtains from him a commitment that he would not have subscribed in the absence of such a constraint and derives a manifestly excessive advantage from it”. Thus, only the dependent condition of the contractor towards his co-contractor will henceforth be taken into account. This provision is interpretative and therefore applies from October 1, 2016.

Article 1145 paragraph 2 will now provide that: “The capacity of legal persons is limited by the rules applicable to each of them”. Article 1161 is also amended and will provide that: “In matters of representation of natural persons, a representative cannot act on behalf of several parties to the contract in opposition to interests or contract on his own account with the represented. ”

On price fixing, the new wording of Article 1165, on service contracts, will be:

“In the service contracts, in the absence of agreement of the parties before their execution, the price may be fixed by the creditor, for him to justify the amount in case of dispute.
In the event of an abuse of the price, the judge may be seized of a claim for damages and, where appropriate, the termination of the contract. ”

This provision is interpretative and therefore applies from October 1, 2016.

 

II. The modifications of the 2018 law on contract performance and termination of the contract

Once the control of validity of the contract has been done, the creditor seems, under the new French contract law, to benefit from a protection that has no equivalent abroad.

Thus article 1217, which enumerates remedies for breach of contract available to the creditor, replaces the word “solicit” with the word “obtain”:

“The party to whom the undertaking has not been executed, or has been imperfectly executed, may:

…
– Obtain a price reduction
…”

While the verb “to solicit” suggested a compulsory recourse to the judge to obtain the reduction of the price in case of an improper performance by the debtor, the word “to obtain” clearly establishes a sanction which is exerted without intervention of the judge. This is a clear privatization of sanctions. This provision is interpretative and therefore applies from October 1, 2016.

The 2018 law then amended Article 1221, which relates to forced execution. If, in the event of non-performance of the debtor, forced execution in kind is now the principle, two exceptions are foreseen: the impossibility of enforcement and a manifest disproportion between the cost to the debtor and the interest in the creditor. However, the 2018 law now specifies that only the debtor in good faith can avail himself of this second exception. As a result, the debtor in bad faith may be exposed to irrational forced execution. In this way, the 2018 law increases, even more, the protection of the creditor. This provision is interpretative and therefore applies from October 1, 2016.

In addition, Article 1223 on the proportional reduction of the price has been entirely rewritten:

“In the event of imperfect performance of the service, the creditor may, after giving formal notice and if he has not yet paid all or part of the service, notify the debtor as soon as possible of his decision to proportionately reduce the price. The debtor’s acceptance of the creditor’s price reduction decision must be in writing.

If the creditor has already paid, in the absence of agreement between the parties, he can ask the judge to reduce the price. ”

The reason for this rewriting is that the version of the 2016 order raised two doubts: Could the creditor decide, alone, the reduction, or did he need the consent of the debtor or the support of the judge? And was there room for a judicial reduction of the price anyway? The law of ratification has more or less solved these uncertainties. First, paragraph 1 of new Article 1223 contains the words “his decision”, which would imply that the creditor alone decides on the reduction. However, the second sentence of the same paragraph provides: ” The debtor’s acceptance of the creditor’s price reduction decision must be in writing.” Doubt about the possibility of a conventional reduction then seems to reappear. However, the analysis of the “travaux préparatoires” shows that the legislator wished to put in place a right to unilateral reduction, the second sentence of the first paragraph meaning that if the debtor accepts the price reduction, he will no longer be able to dispute it in courts.

The second paragraph of new Article 1223 allows for judicial intervention if the creditor has already paid and the parties cannot agree.

The fight against “fake news” and the entry into force of the GDPR: the news on the challenges related to the digital area

The fight against fake news is not a recent phenomenon, rather it has worsened notably because of the digital revolution. Indeed, Article 27 of the law of July 1881 on freedom of the press already punishes the dissemination of “fake news, documents that are fabricated, falsified or deceptively attributed to third parties when, made in bad faith, (the news) will have disturbed the public peace”. Additionally, the Electoral Code indirectly forbids fake news. Nevertheless, the fast development of the digital era has called for a brand-new law.

President Macron also announced, early this year, the drafting of a bill that aimed at fighting the publication of false information. This bill was published on March 7, 2018 which purports to reinforce the control on the Internet and fight against “fake news” especially during election periods. This soon to be law, entitled “law of reliability and confidence of the information” aims at the digital in a broad sense, which includes social networks, video-sharing sites, and “media under the influence of a foreign State”.

According to the Ministry of Culture, it is not a question of defining what are “fake news”, but rather of countering “the universe, the tips, the channels for spreading fake news today”.

Yet, the absence of a definition of “fake news” leaves the possibility of defining them to the judiciary power and to the “CSA” (Audiovisual Council), such entities would then present themselves as the referees in the “fake news” matter. This lack of definition is already the subject of important criticism, which is fed by the fear of a mechanism of censorship. In addition, the concept of fake news was originally aiming at deliberately misleading information, but the concept has been expanded. Indeed, erroneous information can be described as fake news even if the author acted in good faith.

The bill provides for 3 important proposals. Firstly, the obligation for digital platforms to publish by whom and for what amount the contents of the information have been sponsored. It needs to, “beforehand, impose on the platforms increased transparency obligations in order to allow, on the one hand, the public authorities to detect possible destabilization campaigns of the institutions by the dissemination of false information and, on the other hand, allow the Internet users to know in particular the advertiser of the sponsored contents”.

The second proposal results in the expansion of the “CSA”’s powers. Indeed, the law will allow the “CSA” to revoke or suspend the convention of a media under foreign influence if it considers that it propagates a false information.

Lastly, the bill provides for the jurisdiction of the “juge des référés” (judge for summary applications) to put an end to the dissemination of a news judged to be false, this action “allowing him, where appropriate, to delete the content in question, to dereference the site, to close the user account in question, or even to block access to the website”.

However, it should be noted that these measures will be limited to election periods. This raises the question of fake news outside the electoral context which would pose a considerable threat to democracy.

At the European level, on Thursday 26th of April 2018, just over a year before the next European elections in May 2019, the European Commission presented measures to combat online misinformation and new rules regarding the digital platforms. Firstly, it proposes a “code of good practices”, which must be developed and applied by digital platforms by July, in order to “guarantee the transparency of sponsored contents, especially political advertising, but also to limit the targeting options for this type of advertising and to reduce the revenues of the misinformation vectors”.

In addition, it proposes to create a European network of fact checkers, but also a secure European online platform on misinformation. Finally, the Commission’s proposal provides for the creation of an EU observatory to monitor the impact of the new rules. The Commission says that particular attention will be paid to the evolution of policy and regulatory approaches throughout Europe, placing the problem of misinformation as one of the main objectives of the EU.

• The protection of personal data

Finally, after four years of negotiations, the EU Member States have agreed on a new text, the General Data Protection Regulation (GDPR), which is the new European normative framework for the treatment and circulation of personal data. This text is crucial for the protection of the privacy of European citizens as it redistributes the cards within the digital economy. Indeed, it aims for a European harmonization, the reinforcement of people’s rights, as well as the development of the notion of accountability.

The GDPR will come into force on May 25, 2018 and will repeal the Directive on the protection of personal data of 1995. A bill will amend the Data Protection Act of 1978 to integrate the provisions of the GDPR.

The GDPR thus simplifies and harmonizes the laws of Member States, supervises new ways of using data (without hindering development), creates “digital” trust, unifies and improves the protection of citizens’ data, reduces administrative formalities and finally ensures the free movement of data within the EU.

In particular, the GDPR simplifies administrative formalities, introduces an impact assessment, provides for a right to be forgotten, as well as the principle of consent, and strengthens the possibilities of investigation and sanction by the national supervisory authorities.

The CNIL (French national supervisory authority) has also published 6 practical steps to prepare for the GDPR, namely: designation of a pilot, mapping the treatment of personal data, prioritizing actions, managing risks, organizing internal processes and finally documenting the conformity.

The sanctions for the failure to comply with the obligations are particularly high and can go up to 20 million euros or 4% of the total annual worldwide turnover of the previous financial year, whichever is the higher.

Loi Sapin II of December 9th 2016 provides for the protection of whistle-blowers and compels companies of more than 50 employees to implement a reporting procedure as of January 1st 2018.

Article 6 of Loi Sapin II defines a whistle-blower as a “natural person revealing or reporting, in a disinterested way and in good faith:
– A crime or an offence,
– A serious and manifest violation of an international commitment duly ratified or approved by France,
– A unilateral act of an international organization taken on the basis of such a commitment, the law or the regulation,
– A threat or serious harm to the public interest of which he/she has been personally aware.
The following are excluded: facts, information or documents covered by national security, medical secret or the confidential relations between a lawyer and his client “.

It has to be noted that legal entities cannot be qualified as whistle-blowers.

Article L. 1132-3-3 of the French Labour Code provides for the protection of whistle-blowers, who may not be discriminated against in the course of hiring, be excluded from a promotion or be dismissed because of the reporting effectuated:

“No person shall be excluded from a recruitment procedure or from access to an internship or a period of professional training, no employee shall be penalized, dismissed or discriminated against, directly or indirectly, notably as regards remuneration, measures of profit-sharing or share distribution, training, reclassification, assignment, qualification, classification, professional promotion, transfer or contractual renewal, for having reported an alert in accordance with Articles 6 to 8 of Law n° 2016-1691 of 9 December 2016 on transparency, the fight against corruption and the modernization of economic life “.

Hence, whistle-blowers profit from the strictly confidential nature of the procedure, and the prohibition of professional retaliation measures as well as criminal immunity. However, if the whistle-blower’s statements are defamatory, the natural person will not be protected since he/she will not be considered as a whistle-blower in the legal sense and will be subject to the sanctions provided by the French Criminal code for slander as well as disciplinary proceedings.

This protection of whistle-blowers invites companies to adopt virtuous behaviour.

Loi Sapin II also provides the implementation of the appropriate proceedings for the collection of reporting emitted by the whistle-blowers in the companies of more than 50 employees. The outline of the proceedings were specified by a Decree n° 2017-564 of 19th April 2017, which entered into force on the 1st of January 2018.

The Decree compels the company to appoint an adviser likely to receive the reports and which disposes, by its positioning, of the competence, the authority and the means sufficient for the exercise of its mission. This adviser can be a natural or legal person and not be a stakeholder of the company.

It is also the responsibility of the company to set up a procedure for the collection of reports which must be brought to the attention of all the members of its staff or its agents, as well as its external and occasional collaborators.

This procedure must specify the manner in which the whistleblower addresses his report, provides the supporting elements and communicates with the recipient.

In addition, this procedure must indicate the steps taken by the company to inform the author of the receipt of his report and the reasonable and foreseeable time necessary for its review, the measures taken to ensure the strict confidentiality of the author, the facts and persons concerned, as well as the provisions to allow the destruction of elements which could enable the identification of the author.

Finally, in terms of sanctions, Loi Sapin II provides that any person who obstructs, in any way whatsoever, the transmission of an alert is punishable by one year’s imprisonment and a fine of 15,000€.

The MEDEF (leading network of entrepreneurs in France) published a handbook in 2017 concerning the declaration of extra-financial performance and the new legal and regulatory provisions.

With regard to CSR, France has transposed European Directive 2014/95/EU of 22 October 2014 on the publication of non-financial information. The MEDEF specifies that this new legislative and regulatory system profoundly modifies the field of companies concerned by extra-financial reporting and information to be communicated.

The MEDEF also indicates that companies must understand and integrate these developments. These constitute the entities concerned, the nature and scope of the information to be produced, the planned verification work, the links between the declaration of extra-financial performance and the other applicable reporting texts.

This new system clearly affirms the search for more relevance and utility for companies and their stakeholders. It is now a question of informing a proactive and tailor-made declaration of non-financial performance, presenting: the business model of the company, the main risks on major non-financial issues (social, environmental, human rights and the fight against corruption), the policies implemented to respond to them and the results of these policies.

Follow-up of our synopsis of the Macron ordinances reform in labour law, after the study, in January, of the aspects concerning the breach of employment contracts.

The Ordinance n°2017-1386 of September 22nd, 2017 concerning the new organisation of the social and economic dialogue in the company and promoting the exercise and value of the union duties, provides the establishment of a new staff representative body.

Indeed, the whole of the current representative bodies (the work Council, the staff delegates and the health, safety and working conditions Committee) will merge and give rise to the Social and Economic Committee (SEC).

The Union representatives are, of course, not concerned by this reform.

Social partners will henceforth be able to entrust to this new body, that will be then named ‘works Council’, the negotiating and decision-making powers.

Companies have until December 31st, 2019 to set up the SEC so that on January 1st, 2020, the whole of current representative bodies will have completely disappeared.

Please note here that most of the rules applicable to this new body are frequently identical to those regulating the previous representative bodies.

The setting up of the SEC concerns the companies that count at least 11 employees during 12 consecutive months (article L.2311-2 of the French labour Code), which consists of a, de facto, more challenging threshold to reach. Previously, the overrun of the threshold had to intervene for a total period of 12 months, irrespective of whether they were consecutive or not, throughout the three previous years.

Nonetheless, and despite this unification, the SEC does not have the same functions according to whether the company has more or less than 50 employees. Schematically, if the company counts less than 50 employees, the SEC has similar powers to those of the staff representatives (here we are talking of reduced attribution). When the headcount exceeds 50 employees, the SEC has broadly the same prerogatives attached to the work Council (we are talking here of extended attribution).

Once the threshold has been exceeded, the company has 12 months to set up the SEC, during which the representative bodies in place practice the extended punctual attributions, unless there is only one year of mandate left until the expiration of this period of time.

It is the employer who takes the initiative to organise the elections and, if he has omitted to do so, he can be invited by an employee or a union to organise them. He then has to proceed to the elections, in the month following the request, which can only intervene following a 6-month period after the setting up of a report of deficiency (article L.2314-8 of the French labour Code).

The elections have to take place in a maximum period of 90 days following the publication of the document informing of the organisation of the elections (article L. 2314-4 of the French labour Code) and, where appropriate, within 15 days preceding the completion of the previous mandate (article L. 2314-5 of the French labour Code).

The SEC comprises of the employer, who presides it, and a staff delegation that includes an equal number of permanent and alternate members.

The number of staff delegation members is set in article R. 2314-1 of the French labour Code. The employer and the trade unions interested can increase this number by agreement.

It also seems that, even though the legal minimum of members constituting the SEC decreases, they have, individually, more delegation hours.

In companies with less than 300 employees (and in the establishment belonging to these companies), the union delegate is a union representative of the SEC provided that he is not a representative of a union section. For the companies of more than 300 employees, each representative trade union of the company or its establishment can designate a union representative to the SEC, following a notification to the employer.

The Ordinance also came to limit the renewal of the mandates of the whole of SEC members. They therefore will not be able to perform more than 3 successive mandates, unless provided otherwise in a provision of the pre-election agreement or if the companies count less than 50 employees (article L. 2314-33 of the French labour Code).

Moreover, it is henceforth permitted to resort to the deferral and the pooling of delegation hours. It is therefore possible to use the credit of hours cumulatively in the limit of 12 months. The representative is required to inform the employer at least 8 days before the date provided for its use, without being able to exceed one and a half times the monthly credit of hours (article R. 2315-5 of the French labour Code). The same conditions apply to the distribution of hours between SEC members (article R. 2315-6 of the French labour Code).

The SEC can be put in place on different levels: company, establishment, economic and social unit or inter-company.

The Ordinance provided 4 types of transitory measures offered to the company’s discretion for the implementation of SEC at the latest on January 1st, 2020.

1. Once a pre-election agreement has been reached before September 23rd, 2017 for the previous staff representative bodies, the elections had to take place in accordance with the provisions in effect to this date. The SEC will then have to be set up at the latest on January 1st, 2020.

2. Once the mandates of the representative bodies came to an end between September 23rd and December 31st 2017 – and that the pre-election agreement had not been reached by September 23rd 2017 – the mandates were automatically extended to December 31st, 2017, with the possibility of a new extension of a maximum of one year, by collective agreement or decision of the employer following consultation of the bodies, for the setting up of the SEC at the latest on January 1st 2019.

3. Once the expiry of the mandates is expected between January 1st and December 31st, 2018, and that a pre-election agreement had not been reached by September 23rd, 2017, their duration can be reduced or extended to a maximum of a year, in the same conditions provided previously, in order to set up the SEC at the latest on January 1st, 2020.

4. Finally, for the expiries expected throughout 2019, the SEC will have to be set up at their expiry date.

In the case where the end of the mandates of the different representative bodies subject to the previous regime, does not coincide, it is possible to extend or reduce their duration, by collective agreement or by decision of the employer following consultation of the bodies, so that the expiry of all mandates be adjusted to the date of the SEC setting up.

Once the SEC is set up, its running differs to the extent that the company counts more or less than 50 employees. However, some common provisions are also provided.

On January 30th and February 2nd, our firm held two workshops – in French and Spanish – on the recent French labor reform, with a special focus on the termination of employment contracts.

We would like to thank all the participants for coming and for the very productive talks we had.

Our slides in French and Spanish are available below.

At a time when media resonate the initiatives on the Collective Agreement Termination (CAT) envisioned by certain groups in France, a short update seems necessary to remind that no, the mechanism implemented by the Macron Ordinance of September 22, 2017 is not a miracle solution, denounced by some people, that would allow companies to notify economic redundancies without any control whatsoever.

The mechanism implemented by Article 10 of the Ordinance of September 22, 2017 aims to allow volunteer-based job cuts, outside the framework of economic redundancies, which are necessarily based on an economic cause.

1. The CAT requires a collective agreement, whose negotiation is mandatory. This agreement will have to be approved by the administration.

In other words, no agreement, no CAT.

The content of the collective agreement, negotiated according to the conditions established in Article L. 2232-12 of the French Labour Code, is fixed by Article L. 1237-19-1 of the same code, and provides a certain amount of measures that the parties to the negotiation have to conform to.

The measures are the following:

Article L. 1237-19-1
Amended by Ordinance n°2017-1718 of 20 December 2017 – art. 1

The agreement on CAT ascertains:
1° The terms and conditions concerning the information of the Social and Economic Committee;
2° The maximum number of departures envisaged, of associated job cuts, and the duration of the implementation of the CAT;
3° The conditions that the employee must satisfy in order to profit from the CAT;
4° The terms of presentation and of examination of the application of departure from the employees, including the conditions of transmission of the written agreement of the employee to the device provided by the collective agreement;
5° The criteria of selection between potential candidates to the departure;
6° The terms of calculation of the severance pay guaranteed to the employee, which cannot be inferior to the legal indemnities owed in case of a dismissal.
7° The measures meaning to facilitate the external reassigning of the employees on equivalent positions, such as training actions, validation of acquired experience or of reconversion or actions supporting the creation of new activities or resumption of existing activities by the employees;
8° The terms of monitoring the effective implementation of the agreement on the CAT.

We can already notice that the CAT requires an agreement negotiated within the company, which agreement provides the mandatory provisions aiming to protect the employees and is, of course, volunteer-based.

But that is not the end of it.

The agreement must be conveyed to the French Labour administration (DIRECCTE) to be approved.

The administration will therefore control whether the agreement conforms to the legal provisions, and, of course, that it is not reached in order to escape, for example, an economic redundancy plan.

The administration has 15 days, after the receipt of the agreement, to approve the agreement. It needs to be specified that the lack of response by the administration on the deadline, will amount to a tacit approval of the agreement.

2. The RCC is not a substitution to Economic Redundancy Plan

Contrary to what has been affirmed by some people, the mechanism implemented by the Macron Ordinances is not supposed to replace Economic Redundancy Plans, for one simple reason: the companies that will actually face economic difficulties, and that will have recourse to the CAT, in an abusive manner, or that will undertake an Economic Redundancy Plan, just after a CAT agreement, would take the risk to see their agreements challenged, or invalided by the administration.

The CAT is an autonomous type of dismissal. It must be entirely distinguished from Economic Redundancy Plans.

Henceforth, a company that faces economic difficulties justifying the recourse to dismissals, would have more chances to resort successfully to an Economic Redundancy Plan (or even implement a voluntary departure plan), rather than attempt a hazardous CAT, that would, at the end, not enable the company to achieve its goals.

So, when is the recourse to a CAT advised?

There are situations in which companies do not have the necessary visibility to decide the implementation of an Economic Redundancy Plan, which is usually costly, and badly reflected internally.

However, it is possible that some employees are candidates to a voluntary departure, and that the employer, on his side, also wishes to profit from this flexibility and this opportunity, without having to justify economic difficulties, legally speaking.

When the CAT enables two wishes to meet – that of several employees, voluntary candidates to departure, and that of the employer – and the contract is balanced following the negotiation of the collective agreement, why not allow this autonomous type of dismissal?

The contractualisation of labour law allows the flexibility which the companies – and the employees – require to adapt to the markets and to the constant and increasingly rapid developments of today’s economic context.

The last measures of the French labor law reform which were still to be implemented have entered into force on 1st January 2018, giving us a good opportunity to carry out a quick overview of the key aspects of the reform.

I. Redundancy

1. Grounds for redundancy

Decree No. 2017-1387 of 22 September 2017 on the predictability and securitization of the labor relations has mitigated the employer’s obligation to state the ground(s) for redundancy in the notification letter, putting an end to the systematic award of damages based on a breach of such obligation.

To that end, 6 template letters adjusted to various cases of redundancy and stating the rights and obligations of each parties have been provided to the employers by Decree No. 2017-1820 of 29 December 2017. Although the use of such templates is not compulsory, it is however highly recommended. The template letters may be viewed by clicking on the following link.

http://urlz.fr/6lSq

Furthermore, the grounds for redundancy may now be specified after the performance of the notification, either on the employer’s own initiative or at the request of the employee.

2. Specific rules for redundancy based on economic grounds

The decree also aimed at reducing the application scope of the ‘economic criteria’ for redundancy as the assessment of the difficulties experienced by a company is now limited to the French territory for both single and group companies – in which later case the assessment is performed regarding the shared business segment.

Concurrently, the scope of the obligation to reassign an employee was also narrowed to the sole national territory, whether in the controlling company or one of its affiliates. It is also important to note that reassigning offers no longer need to be individualized.

The Decree also enabled to set by means of a collective agreement the application scope of the different criteria used to determine the order in which to proceed with the redundancies. In its absence, the employer may set the scope, being noted that it cannot be lower than the perimeter of the jobs area in which the different sites of the company are located.

It is worth noting that it is now possible for any company with more than 50 employees to proceed with redundancies on economic grounds before the transfer of at least one of its autonomous economic entities. Such measure, which was previously limited to companies or groups of companies with more than 1,000 employees, derogates from the principle of statutory retention of employment contracts for the buyer.

3. Economic and Social Committee

One of the main contributions of the reform is the merging of the various employees’ representative bodies to form the Economic and Social Committee (ESC) which, as a result, concentrates the former prerogatives of each regarding redundancy.

II. Compensation for redundancy

There is a clear distinction between the statutory compensation which constitutes the minimum amount implemented by law or a collective agreement to be received by the redundant employee, and the scale of compensation set by the Decree to determine the amount of damages due by the employer when the redundancy is sanctioned by the Court.

1. Statutory compensation for redundancy

The decree also initiated some changes regarding the redundancy compensation. Indeed, the legal indemnity is now open to all employees having at least 8 months of seniority within the company (to compare with the former 1-year period). Furthermore, the calculation rate to determine the compensation has been reviewed and is now set to one quarter of monthly salary per seniority year for the 10 first years (previously a fifth) and a third for the following years.

2. Scale of compensation binding on Courts

It is undoubtedly the most emblematic measure provided by the labor law reform. The damages which can be awarded by a Court for redundancies without real and serious cause are now capped according to the seniority of the employee. It should be noted though that the minimum amount for the 10 first years differs on whether the company has more or less than 11 employees. It can be accessed to the scale of compensation implemented by Article L1235-3 of the Labor Code by clicking on the following link.

http://urlz.fr/6mza

The compensation is determined on the basis of the gross monthly salary earned by the employee, but it is not specified which period of time should be considered to do so.

Regarding redundancies qualified as null and void (e.g.: discriminatory grounds), the employee may choose either to reintegrate the company or to obtain an indemnity in no case lesser than the salaries earned in the last 6 months.

As for procedural irregularities (e.g.: rules of convocation), the indemnity to be granted remains unchanged to a month salary.

III. Collective contractual termination

The Decree implemented a procedure of collective contractual termination (‘rupture conventionnelle collective’) for employment contracts through the establishment of a voluntary departure plan, which falls outside the legal framework set for redundancy and economic grounds. Such collective terminations are negotiated with the company’s representative unions and are subject to a prior authorization issued by the French administration after monitoring the compliance with some basic rules (minimum number of departures, requirements to benefit from the agreement, terms for the submission and review of the applications…). It should be noted that the compensation negotiated cannot be lower than the minimum amount legally provided.

IV. Statute of limitations

The Decree set a unified 12-month period to challenge the termination of the employment contract before the Labor Court (‘conseil de prud’hommes’), starting from the day of notification of the termination (as opposed to the usual 2-year period previously experienced). There are some legal exceptions though, particularly for claims related to salary (3 years), physical injury (10 years), discrimination (5 years) or moral or sexual harassment (2 to 5 years).

It should be noted that this new term directly applies to all cases which were not prescribed on 23 September 2017, without such term exceeding 2 years.