Thematic feature - redundancies and redundancy costs

Download article in original language : FR0311110TFR.DOC

This article examines the procedures and costs involved in collective redundancies in France, as well as current trends and debate in this area, as at November 2003.

In November 2003, the EIRO national centres in each EU Member State (plus Norway), were asked, in response to a questionnaire, to give a brief overview of: the procedures and costs involved in collective redundancies - ie the dismissal of a number of employees for economic/organisational reasons (rather than reasons related to the individuals concerned); the levels of, and reasons for, redundancies over recent years; and current debate on the issue. The French responses are set out below (along with the questions asked).

Redundancy procedures

Please outline briefly the statutory procedures involved in making 'collective redundancies' (please indicate how these are defined) in your country, in terms of: information and consultation of employee representatives/trade unions; notification of (or obtaining permission from) public authorities; notice periods to be given to the redundant employees; rules on the order of priority for redundancy or giving special protection to particular groups of employees; and obligations to mitigate the planned redundancies or provide assistance in the form of redeployment, training, outplacement etc (including provisions on 'social plans'). Where collective agreements add to or improve on these statutory provisions, please provide a brief overview of such additional procedures (with examples).

In France, the regulations on redundancies (licenciements économiques) have changed a great deal over the last few years. Notably, the 'social modernisation' law passed in 2002 (FR0201102F) contained, among other measures, provisions specifying the precise procedures to be followed in the event of collective redundancies (FR0101121F and FR0107172F). After the presidential and parliamentary elections in spring 2002, the new conservative government adopted Law 2003-6 of 3 January 2003. This legislation sought to give renewed impetus to collective bargaining on the issue of redundancies, and suspended nine redundancy-related articles of the social modernisation law, returning to the provisions set out in previous legislation for an 18-month period until 3 July 2004 (FR0211103N).

Article L 321-1 of the Labour Code provides that in order for economically-justified redundancy to be allowable, the elimination or transformation of a job, or a substantial amendment to the employment contract must stem directly from economic problems or technological changes in particular.

Pending new regulations that may emerge from current collective bargaining or from new legislation, the current procedures for collective redundancies involve employee representatives. If two to nine employees are made redundant 'for economic reasons' over a 30-day period, in a company with 11-49 staff and workforce delegates (délégués du personnel) (FR0309102T), the employer must summon the workforce delegates to a meeting, and convey any useful information on the redundancy plan, especially the economic, financial and technical justifications for it, the number of workers affected, their occupational category, the criteria for the order in which redundancies will take place, and a timetable for them.

The goal of this meeting is to present and explain the redundancy plan, answer the questions and observations of workforce delegates, get their opinion on the plan and , if there is one, on any planned agreement to be signed with the National Employment Fund (Fonds national de l'emploi, FNE). The minutes of this meeting must be sent to the appropriate départemental office of the Ministry of Labour, Employment and Vocational Training (DDTEFP).

In companies with at least 50 employees that are planning to make redundant two to nine employees, the procedures for informing and consulting the works council (comité d'entreprise) (or if there is none the workforce delegates) are similar to those outlined above for a company with fewer than 50 workers, ie invitation to a meeting whose minutes are sent to the DDTEFP.

In the case of redundancies of at least 10 employees over a 30-day period, the transmission of information to, and consultation of, employee representatives and the monitoring function exercised by the local DDTEFP office must occur at particular moments in the process. The adoption and then the suspension of the 2002 social modernisation law (see above) have altered the areas of authority and responsibility attributed to works councils. The social modernisation law made a clear distinction between the phases of consultation over potential 'social plans' to accompany/mitigate the redundancies and those relating to the redundancy procedure proper. Due to the temporary suspension of this law, the phases of the two types of consultation have again been merged.

Apart from information consultation, prior to the social modernisation law, works councils had the right to examine restructuring plans and their impact on staffing levels. They had to be consulted, 'with reasonable notice given', and could issue 'a recommendation on the planned measures and the way they were to be implemented'. The social modernisation law gave further powers to works councils in respect of restructuring plans and workforce cuts (especially where achieved through redundancies).

The Ministry of Labour, through its local labour inspectorate was, prior to the social modernisation act, able to present a proposal to complement or amend the social plan in a way that took the company’s economic situation into consideration, but this had to be done before the final works council meeting. These proposals in return had to be answered officially by the employer. The social modernisation law had broadened the possibility for action on the part of the labour inspectorate and the Ministry.

With the law of 3 January 2003 partially suspending the previous legislation deriving from the social modernisation law, the government is currently s attempting to give fresh impetus to collective bargaining on collective redundancies by creating the option, on an experimental basis, to reach company-level 'method agreements' setting out the ways in which works councils are to be consulted when 10 or more employees are being made redundant. These agreements can be concluded only in companies with more than 50 workers and a formally established works council, and where more than 10 redundancies are made within a 30-day period. These agreements can, in some cases, be given exemption from particular provisions of the Labour Code. However they must be signed by 3 July 2004 (the social modernisation Act was suspended for 18 months from 3 January 2003) with one or more trade unions with representative status that received a combined majority of the votes in the first round of the most recent works council elections, and may last a maximum of two years. However, such agreements cannot be exempted from certain provisions of the Labour Code. These include:

• the type of information to be given to works councils - ie a justification for the redundancies and their number, the occupational categories affected, criteria for the order in which redundancies are to occur, a timetable for redundancies etc;

• the option for employee representatives to put forward suggestions relating to the proposed measures for compensating and assisting those made redundant, the obligation for the employer to give an official response, the opportunity for the employee representatives to bring in expert opinion etc; and

• the powers of the Ministry of Labour and its officials in terms of monitoring the social plan.

The field of application of these 'method agreements' however is a broad one. It covers procedural deadlines and the number of meetings with employees representatives over and above the minimum set out in legislation, the conditions for bringing in the advice of an accountant and, in general, the quality of information and consultation on the restructuring plan.

Many businesses in both the public sector - such as GIAT ( FR0307101N) and private sector - such as DHL and Alcatel- have entered into this type of agreement over recent months.

Redundancy payments

Please outline the statutory rules on compensation for employees affected by collective redundancies, in the form of minimum notice periods, redundancy pay, severance pay etc - ie what is the level of payment, how does it vary with age, service etc. Where collective agreements add to or improve on these statutory provisions, please provide a brief overview of such additional payments (with examples). Overall, please provide any figures or estimates which may be available on the 'average' or 'typical' level of redundancy pay per employee. Where company practice and/or collective agreements provide for accompanying measures (ie set up an recruitment agency, retraining schemes with employer’s contribution, etc) please give an overview of such schemes.

Three main types of compensatory package can be identified -'notice packages', 'paid-holiday packages' and 'redundancy packages' proper. The latter is payable to all employees bound by an open-ended employment contract who are made redundant after more than two years’ unbroken service with the same employer. This compensatory package is based on the gross wage received prior to the contract being terminated.

Article 113 of the 2002 social modernisation law altered the amount of compensation specified in Article L 122-9 of the Labour Code. The amount of compensation now varies according to whether the redundancy is due to personal or economic reasons. In the latter case, the rate applicable is twice as high as the statutory minimum, ie 20% of a month’s pay per year of service up to a 10-year maximum, and 20% of a month’s pay plus 13.33% per year of service in excess of 10 years with the same company.

Considerable top-ups to this statutory minimum may be added by company or sector-level collective bargaining or individual negotiations.

According to the relevant statistical units at the Ministry of Labour, the data gathered does not allow for calculation of the amount of compensation actually received or the benefits actually provided for.

Redundancy levels

Where this is possible, please give statistics on the number of collective redundancies effected in your country each year from 1990 to 2003 (or the latest year for which data are available). If available, please break down by sector, and the jobs, age and gender of the workers affected. Also, please provide any information on the grounds for collective redundancies - eg company restructuring, closure or transfer/relocation. In response to this question, please give an assessment of trends and developments, even where full statistical information is not available.

In terms of the number of mass redundancies, according to the Ministry of Labour’s statistical units the relevant data gathered for labour market statistics through the National Employment Agency (Agence nationale pour l'emploi, ANPE) are incomplete: although the reason for registering with the agency as a job-seeker should be recorded, it is not always given. As a consequence, cautious use must be made of these figures. They demonstrate trends rather than provide an accurate snapshot. The Ministry of Labour publishes monthly statistics with the ANPE in a 'labour market' series of the periodical, Premières informations Premières synthèses, which does enable mass redundancies to be monitored on a monthly basis. The list of indicators for employment policies enacted by the Ministry allows these monthly statistics to be monitored over a 12-month period.

Over the last few months, according to the statistics drawn from the sources above, and contrary to common perceptions, the number of collective redundancies has been falling: by 10.9% in gross figures between January 2003 and January 2004 (9.5% in seasonally-adjusted figures); and by 3.3% between December 2002 and December 2003 (5.6% in seasonally-adjusted figures).

Debate

Please summarise any current debate on the issue of collective redundancies in your country. For example, is this an important topic for trade unions and employers’ organisations and in collective bargaining? Has there been any recent new legislation or proposed legislation on the subject, or the prospect of new legislation - eg to implement EU legislation such as Directive 2002/14/EC on national information and consultation rules (EU0204207F), which requires 'information and consultation on the situation, structure and probable development of employment within the undertaking or establishment and on any anticipatory measures envisaged, in particular where there is a threat to employment'? Has there been any debate on the cost met by the government as a consequence of collective redundancies (ie what is the cost associated with unemployment benefits, training schemes funded by the government etc).

Law 2003-6 of 3 January 2003, which relaunched collective bargaining on collective redundancies (see above under 'Redundancy procedures'), was not solely aimed at suspending some of the provisions of the previous government’s social modernisation law for 18 months. It also sought, on a experimental basis: first to spur company-level collective bargaining to reach 'method agreements' setting out the ways in which employees are informed and consulted over collective redundancies; and, second, to encourage bargaining on restructuring at intersectoral level between trade union confederations and employers’ associations with representative status. This bargaining is going on (FR0311106F), but disagreements persist, judging by the leaks appearing regularly and apparently with strategic timing in the press. Among the bones of contention, the following should be highlighted:

• the size of companies covered by a possible intersectoral agreement on restructuring - firms with more than 50 staff only, or also those with fewer employees;

• whether and how to take into account the relationships between subcontractors and outsourcing companies; and

• the role and position of employee representative bodies, especially works councils, and what form their participation in corporate 'governance' should assume.

Debate on these issues is heated, both between the social partners and in academic circles. The 2002 social modernisation law sparked a similarly passionate debate among labour law jurists and industrial relations experts (illustrated by a special issue of the journal Droit social on the social modernisation legislation and labour law in March 2002). In the French context, the debate touches not only on the various schemes capable of either delaying, forecasting or pre-empting mass redundancies, but also on the relationship between the law, employment contracts and the hierarchy of norms derived from legislation and collective agreements at the various levels (company, sectoral and intersectoral).

Michel de Virville (a high-ranking executive in the Renault group), in a recent report to the Minister of Social Affairs, Labour and Solidarity, entitled 'For a more effective Labour Code' (Pour un Code du Travail plus efficace) (FR0402108F and FR0403104F), explicitly rejected making proposals in the area of redundancy law for the time being. He did, however, leave the door open for the possibility of later extending his work on this precise issue if bargaining proves fruitless.

Lastly, the debate over the methods for implementing collective redundancies regularly makes political waves. The provisions of the 2002 social modernisation law and the January 2003 law referred to above are each the expression of a willingness among a variety of political forces to respond to the anxiety and extreme sensitivity of public opinion and the electorate on this issue. It must be stressed that the terms of the debate in France rarely touch on the European economic or regulatory context. They remain national, or linked to domestic current affairs. (Maurice Braud, IRES)