Courts play an increasing role in supervising mass redundancies

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After a legal battle lasting more than three years between the management of La Samaritaine (one of the five large Paris department stores), and its works council and CGT union branch, two rulings by the highest court in the French legal system on 13 February 1997, imposed the reinstatement of staff made redundant, as part of the cancellation of a corporate "downsizing" procedure (plan social). These rulings reveal the growing role of judges in the supervision of redundancies.

The Samaritaine case

In September 1993, the department store's management laid off 110 workers as part of a corporate redundancy programme (plan social) This was contested twice in the courts by the works council. Both at the first hearing and at appeal, the management saw its collective redundancy procedure cancelled due to the plan's inadequacy. Judges criticised the vagueness of the information provided to the works council, as well as the inadequacy of employment opportunities offered to redundant employees. At the same time, two former members of staff, with the support of the CGT (Confédération Générale du Travail), were claiming their reinstatement. The Cour de cassation- France's highest court - has now ruled in their favour by cancelling their redundancies. This decision also enabled the other laid-off employees individually to demand their reinstatement, along with the payment of salary owing to them since their dismissal, before the Conseil de prud'hommes (an elected industrial tribunal).

The management of Samaritaine made the first move by sending a letter to the staff in question, offering to take them back. Most of these employees, in their forties, had been with the company for 20 years and had not found work elsewhere. Unions involved at La Samaritaine asked for negotiations with management to prevent pay-off settlements being arrived at on an individual basis. The management's intentions are not yet known and several questions (regarding redundancy payments and unemployment benefits etc) remain obscure.

Changing regulations

For the first time, the Cour de cassation has scrupulously interpreted the text of existing legislation on corporate workforce-reduction procedures. These decisions have resolved a crucial point in redundancy law : the significance for laid-off workers of rejection by a court of a corporate plan social. The plan socialis a document that management presents to the works council when it envisages laying off more than 10 staff out of a total of 50. It must contain details of a precise procedure for offering the staff in question other positions, so as to avoid or reduce the number of dismissals.

Defined in 1974 by employers' organisations and unions in a nationwide intersectoral agreement on job security, the concept of the plan socialwas reworked in the law of 3 July 1975, which also imposed the requirement for authorisation by the Ministry of Labour before any redundancy could go ahead. Although this had scarcely reduced the rise in unemployment, the law was repealed by the political Right when it returned to power in 1986.

Since then, new legislation on redundancies has been established. The contents of a plan socialhave been codified, as have the procedures for consultation of staff representatives.

Faced with the rapid increase in the number of redundancies during the period 1990-3, Parliament brought in a law on workforce reductions and related plans sociaux. This law, (called the Aubry law after the then Minister for Employment, Martine Aubry) was passed on 27 January 1993. It has many features :

  • it imposes minimum requirements on employers, aiming to keep staff in employment. If these measures are not contained in the plan, mass redundancies can be annulled by the courts;
  • it gives the Ministry the chance to formulate a "deficiency statement" if the plan is deemed inadequate. This statement is not legally binding, but delays the procedure, as the employer has to modify the plan. Courts are not obliged to follow the Ministry's decisions, but staff representatives may use them in the event of a court case; and
  • its objective was to fill the obvious gaps existing in redundancy procedures, especially by obliging the employer to look for ways of offering staff other work within the company, but it left unanswered the question of the effects on individual cases of redundancy of court decisions to cancel the plan social.

Through a variety of judgments, the courts' supervision of plans sociauxsteadily widened and strengthened.

Judges first asked the employers to introduce measures to help employees adjust their skills to changes in their job requirements. Then they ordered the employers to look for ways of offering laid-off employees other jobs within the company. From 1995 onwards, the courts have become more demanding, and challenged management's intentions and the practical aspects of the measures included in the plan social. More recently, the courts have demanded the prioritisation of the company's efforts to find other positions for their staff (new jobs within the company or group, reduction in hours, etc) rather than the usual tools of external reshuffling (like outplacement, financial assistance in setting up companies, geographical mobility, or early retirement) Finally, the recent Cour de cassation rulings in the Samaritaine case have proclaimed the cancellation of individual redundancies in the event of the inadequacy of a plan social.

The reopening of the debate on the supervision of redundancies

On hearing the news of the Samaritaine ruling, the Minister for Employment invited employers' organisations and unions to open a "dialogue to finalise initiatives on cross-sector agreements or even legislation, to end legal uncertainties." He made it clear that there was no question of retracting the whole of the 1993 legislation, or judicial supervision of corporate restructuring plans.

This, however, is exactly what employers are demanding. A month ago, Jean Gandois, the president of the CNPF (Conseil National du Patronat Français), employers' confederation was already calling for the repeal of the Aubry law, "which had been used as a basis for an alarming increase in judicial supervision of plans sociaux, leading to a situation harmful to work and job creation", and he added that "workforce reduction was being prevented by over-lengthy, over-complicated and uncertain procedures." In fact, according to the employers' line of argument, as expressed by the metalworking employers' federation: "the more difficult it becomes to make mass redundancies, the harder it is to create new jobs". Indeed, in 1986, employers based their argument for eliminating Ministerial authorisation for lay-offs on this idea. It is easy for Nicole Notat, general secretary of the CFDT (Confédération française démocratique du travail) union confederation to recall that according to employers, the elimination of this procedure "was to create thousands of jobs, but we all know what the result has been".

All unions have hailed the Cour de cassation's decision. In response to the offer of opening a dialogue, they declared that they preferred waiting for the conclusions of a committee set up by the Ministry of Employment to analyse "obstacles to job creation", whose report will be out at the end of July.

Comment

The impact on job creation of supervision of redundancies should be put into perspective: in 1996, only 14% of those registering as unemployed were victims of lay-offs. According to the Ministry of Employment, two-thirds of mass redundancies are carried out independently of any plan social. As several studies have shown, most of these plansare not acted upon.

The legal system does not work on the same timescale as the economy or the job market. It is not out of the question that in future the judges' requirements will lead management to seek a consensus with staff representatives, to accomplish successful restructuring. (Catherine Vincent, IRES)

Reference

"La cause de l'emploi. Les usages du droit dans la contestation des plans sociaux" C Didry and L Tessier, Travail et Emploi, n° 69-4/96, Paris (1996) .

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