MEDEF proposes new social constitution

In late October 1999, France's Minister for Employment decided to abandon the idea of funding the cuts in employers' social security contributions linked to the implementation of the 35-hour week by siphoning cash away from the budget of UNEDIC, the jointly-managed organisation responsible for the payment of unemployment benefits. Consequently, the MEDEF employers' confederation temporarily withdrew its threat to pull out of the management of social protection agencies, and at the same time approached the trade unions with a proposal to work together to develop a new "social constitution".

When the second law on the 35-hour working week was submitted to the National Assembly in early October 1999 (FR9910197N), Martine Aubry, the Minister for Employment and Solidarity, had proposed that part of the funding of financial assistance to companies signing agreements on working time reduction - in the form of cuts in employers' social security contributions - be borne by the UNEDIC unemployment insurance fund and the social security budget (FR9910112F). The Minister justified this funding formula on the grounds that it would offset the financial gains for the unemployment insurance and social security system linked to the new jobs to be created by the 35-hour week.

This proposal gave rise to an outcry from trade unions and employers' organisations, which for once were in agreement. Ernest-Antoine Seillière, the president of the main employers' organisation, the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF), issued an ultimatum, saying that "the first franc or centime siphoned by the government from any jointly-managed agency would lead MEDEF to withdraw its participation from that agency for good." The unions and employers' organisations considered that the Minister's proposal challenged their independence in running jointly-managed bodies like UNEDIC and the various social security funds. Moreover, they stated that the budgets managed by these agencies were designed for specific purposes such as health insurance and unemployment benefits and should not be diverted to other uses. French social protection institutions, such as social security funds (health, pensions and family allowances), supplementary pension funds and unemployment insurance, are in effect managed jointly by the social partners. These institutions are funded through contributions and run by the social partners. However, in the past, in an attempt to address financial imbalances affecting social protection, the government has often encroached on the decisions of these organisations. The most recent example of government interference was the Juppé government's 1995 social security reforms, which gave parliament the authority to approve the social security budget and major areas of the health agenda. This reform also buttressed government participation in the management of social security funds.

In the light of the social partners' opposition, and more specifically of the employers' associations' threat to pull out of the running of jointly-managed organisations, the government decided to reconsider its proposal and to come up with alternative funding formulae. Therefore, on 28 October 1999, the Minister for Employment and Solidarity explained that the government "would not be drawing on employers' and workers' social security contributions through jointly-managed agencies". These agencies were initially scheduled to provide around FRF 15 billion in funding for the 35-hour week. The government has set out the following alternative provisions:

  • UNEDIC's contribution to funding the 35-hour week will be replaced by a new transitional 10% tax on overtime work to be levied on companies that have not reduced working time; and
  • the FRF 5.6 billion that was to come from social security funds will now be taken from the surplus in the Old Age Solidarity Fund (Fonds de Solidarité Vieillesse). This fund meets the cost of pensions where no retirement contributions have been made. Part of the alcohol duties which support this fund will finance cuts in employers' social security contributions scheduled in the period of transition to the 35-hour working week.

The trade unions were pleased at "the victory of the joint parity principle". However, for its part, MEDEF has maintained its opposition. Its president, Mr Seillière, stated that "despite appearances, the government will to all intents and purposes draw indirectly on the social security general fund in 2000 [...]" Indeed, it is the social security system's pension contingency fund that maintains the Old Age Solidarity Fund.

Conditional continued MEDEF participation in jointly-managed bodies

MEDEF's announcement of its stance regarding its continued participation in jointly-managed organisations has been long-awaited. As early as just after the major tripartite conference on employment and working time conference held on 10 October 1997 (FR9710169F), MEDEF was threatening to withdraw from the jointly-managed organisations if the first 35-hour law was passed (FR9806113F). This possibility was raised several times in employers' circles.

Following the government climbdown on the funding formula for the 35-hour week, MEDEF's executive council published a solemn declaration on 2 November 1999, tying its continued participation in jointly-managed organisations to new government concessions and a redefinition of the entire system of social relations with the trade unions. MEDEF has asked the government to promise formally that it will not finance the reduction in working time by tapping, even indirectly, the budget of any social protection agency over the next five years. The organisation is also opposed to any new levy on companies, which are already bearing both the direct cost of the implementation of the 35-hour week and the burden of new taxes provided for by the social security finance law.

Pending formal assurances from the government, MEDEF postponed pulling out of jointly-managed organisations, while at the same time identifying various potential scenarios. MEDEF would continue to participate in the management of social security funds until 1 January 2000, but after that date would pull out at both national and local level if "any direct or indirect levy" were introduced or if the disputed section of the new law were not withdrawn. MEDEF is willing to extend until 1 April 2000 the agreement on which UNEDIC is based and which is due to expire on 31 December 1999. Such an extension requires agreement from the unions. Finally, with regard to the joint management of the supplementary retirement pension funds, MEDEF proposed that the negotiations on the agreements on the funds for managers (AGIRC) and for other employees (ARRCO), slated for late 1999, be postponed until the first quarter of 2000.

Employers propose new social constitution

In the second part of its declaration of 2 November, MEDEF calls on the trade unions to work with it to redefine a new "social constitution" (constitution sociale). This proposal is based on the belief that there "presently exists confusion as to the respective jurisdictions of the social partners and the government, in terms of both social protection and labour relations". The proposal decries "statism" and the "the constant attempts by the law and the government to dominate the social partners". The new "French social constitution" should accommodate both the "needs and aspirations of employees" and "the opportunities and restrictions faced by companies". The philosophy underlying this proposal is one of "autonomous, decentralised dialogue between the social partners". It includes "re-engineering the protection of French workers against the dangers they face."

On 15 November 1999, MEDEF published the letter sent by its president to the five main union confederations inviting them to participate in bilateral discussions on MEDEF's "new social constitution" proposal. Even if the letter does not spell out MEDEF's proposals precisely, it is clear on the challenges faced by collective bargaining policy and the parity principle. MEDEF's president reiterated his organisation's demand for an amendment to the 35-hour week legislation giving individual companies a five-year window in which to opt to implement either the provisions of the law or the provisions of a sector-level agreement - "if there is no provision of this type, collective bargaining policy at both sectoral and intersectoral levels would be seriously compromised in France. "In the same way as for collective bargaining policy, certain joint-management practices are clearly conditional on a commitment from the government to "impose no future levies whatsoever on the unemployment insurance system".

Trade union reaction

Despite uncertainty over MEDEF's intentions, all the trade unions accepted the organisation's invitation to hold bilateral talks. These talks were to take place from 1 to 22 December. At the same time, the unions made initial contacts with one another with a view to coordinating their position.

The unions are seriously questioning MEDEF's real intentions with regard to maintaining jointly-managed organisations, and several theories have been raised. The unions hope that the bilateral talks will clarify the employers' organisation's intentions.

The CFDT union confederation reacted favourably to MEDEF's announcement that it would continue to participate in the jointly-managed organisations until 1 January 2000. However, the confederation found it unacceptable that MEDEF had set out conditions for its continued participation after this date. It also decried the perceived contradiction between the employers' proposal for a social partner-led re-engineering of the social system and the proposal to postpone negotiations on unemployment insurance and supplementary pension schemes. In an interview with the Le Monde newspaper (on 1 December 1999), CFDT general secretary, Nicole Notat, clearly stated that if it became evident that MEDEF had "already decided to withdraw [...] CFDT would not see the point in discussing the future of social security with the employers' confederation." Ms Notat regretted that relations between the government and MEDEF had become so aggressive and feared that this situation would make negotiations between the social partners difficult. If MEDEF did withdraw from the running of the unemployment insurance scheme, CFDT would continue to participate in administering the fund and would be willing to study a potential new organisational system for the fund with the government. The real area of concern for CFDT is the collective bargaining issue. It rejects out-of-hand any "anglo-saxon style system" based solely on company-level negotiations, that would result from MEDEF pulling out of sectoral and intersectoral negotiations. However, CFDT is open to discussion on redefining the respective jurisdictions of the government and social partner. It even suggests that the European Union system, based on the original Maastricht Treaty European social policy Protocol and Agreement, could be drawn on.

While CGT defends the independence of social security in relation to government attempts to tap its resources, it also severely criticises MEDEF's "pressure and blackmail" tactics. CGT believes that the aim of MEDEF's proposed social partner-led re-engineering of the social system is to "make sure the employers' approach is adopted by seeking the consensus of the unions", even though, for the past two years, MEDEF has "rejected any intersectoral negotiation that all the unions have been calling for". In an interview with the Libération newspaper (on 26 November), CGT general secretary Bernard Thibault stated that MEDEF is attempting "to abandon collective guarantees agreed at intersectoral level in favour of individually negotiated employment contracts between employer and employee". Mr Thibault was convinced that MEDEF's decision to pull out of the joint management of social security had been made some weeks previously and that MEDEF was merely waiting for the right opportunity from a political point of view. CGT believes that "the alternative is not between the independence of social partners jealous of their territory and complete government control of management." Mr Thibault pointed out the uniqueness of the French social system with its three partners - government, unions and employers' organisations - each with a different jurisdiction: "It is appropriate that the lawmakers, when faced with certain choices of importance to society as a whole, make a decision and dictate the form that the discussions between the social partners should take."

At the outset, CGT-FO supported the MEDEF proposal for social partner-led re-engineering of the social system. It stated that "MEDEF wished to put direct relations between the employers' associations and unions back at the centre of its agenda and make them a key feature of the French social system." However, the CGT-FO general secretary, Marc Blondel, expressed concern at MEDEF's proposals, which he believed were designed to create a "corporatist society", in which "so-called common interests" between the unions and employers' associations would dominate and the agreements reached between the two would "take precedence over legislation". Mr Blondel also denounced the potential shift towards "anglo saxon-style industrial relations, where everything is negotiated at company level". CGT-FO still champions sectoral and intersectoral collective bargaining as well as a particular form of the parity principle. The confederation likes to point out that it was a collective agreement that created the current jointly-managed unemployment insurance system in 1958. On the issue of social security, CGT-FO states that it has "always demanded transparency and a redefinition of the respective jurisdictions of the government and the social partners". Mr Blondel said that he had pointed out the increasing "statism" of social security, which is MEDEF's current criticism, in 1995 at the time of the Juppé reforms, but was not supported by employers. Yet, in the opinion of the CGT-FO general secretary, the joint parity principle is a specific alternative to management by the state, and it is for this reason that he criticises MEDEF for abandoning the principle: "you are weakening the parity principle at a time when it needs to be rebuilt" (quoted in Le Monde on 3 December).

CFTC has expressed "grave concerns as to MEDEF's state of mind". This union confederation emphasised that it "advocates meaningful revitalisation of the parity system", but believes that this is "difficult to achieve when one of the players is constantly threatening to pull out of jointly-managed organisations". CFTC does, however, note "two positive points: MEDEF's resolve on the non-participation of social protection organisations in the funding of the 35-hour week; [and] its response to the CFTC proposal for a meeting between social partners to clarify relations between the government and the social protection organisations and to discuss the future of the parity principle".

In the opinion of CFE-CGC, MEDEF's decision not to pull out of jointly-managed organisations immediately was "a victory for common sense". The union confederation stated that this crisis "must be the opportunity for redefining the place and responsibilities of all players". CFE-CGC also calls for "meaningful consultation between unions and employers' associations as well as between organised civil society and the government".


The French industrial relations system is characterised by the leading role played by the government in terms of driving forward collective bargaining or monitoring jointly-managed institutions. There are many example of "authoritarian" government intervention in relations between social partners. One of the most recent examples of this was the modification of the rules on the validity of company-level agreements brought about by the inclusion in the second 35-hour week law of a requirement that agreements signed by minority unions in a company be approved by workers (FR9909104F). This intervention is not in itself unwarranted. Indeed, the government can, in the name of the public interest and adherence to democratic principles, fix the ground rules for those representing employers' and employees' interests. In Germany, where the social protection system functions in a similar way to France, the broad guidelines for social security are set by the government and the management of funds is delegated to the social partners. However, the difference is that, in practice, in this area, as on all social issues, German employers and unions are generally able to reach consensus, thus allowing independent management. The continual involvement of the government in French social relations does not in itself explain the recurrent weakness of collective bargaining policy, which is also the result of the strategies of the other two actors - employers and unions.

Therefore MEDEF's proposal to rework the French "social constitution" can be viewed as the culmination of the project by the employers' confederation to limit government stewardship in the area of industrial relations in favour of a system based on the collective independence of the social partners. However, this interpretation has contradictions. Why seek to base the development of new relations on a threat to pull out of jointly-managed organisations, which are one of the rare fora where, despite the clashes and breakdowns that characterise other levels of French industrial relations, independent social dialogue takes place with relative continuity?

MEDEF seems to be contemplating restructuring industrial relations by giving priority to company-level bargaining. In the context of all-out conflict with the government, the chances of this project succeeding are slim, since it will inevitably meet opposition from two quarters: on the one hand from a government anxious to preserve legal regulation of industrial realtions matters and the articulation of regulation at various levels; and on the other from unions hostile to the predominance given to company-level bargaining, a level where they are traditionally weak. (Alexandre Bilous, Catherine Vincent and Udo Rehfeldt, IRES)

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