Landmark agreement paves the way for labour market reform

On 11 January 2013, the social partners in France reached a landmark agreement on labour market reform. It will be signed by all employer organisations and by three unions – two unions refused to sign the pact. The government is to adopt a Bill enacting the agreement in March 2013, and it will come into force in May. It is the second significant step towards labour market modernisation in France since 2008, and it is seen as a first step towards the concept of professional career security.

Background

Four months after the French Government asked the social partners to begin negotiations over labour market reform, a national interprofessional agreement (in French, 317Kb PDF) was signed on 11 January 2013. The social partners had been asked to conclude an agreement ‘to the fullest extent possible’ before the end of 2012 (FR1209051I).

Three employer organisations signed the agreement: the Movement of the Enterprises of France (Medef), the General Confederation of Small and Medium-sized Enterprises (CGPME), and the federation representing self-employed craft workers, the Craftwork Employers’ Association (UPA).

It was also signed by three trade unions: the French Democratic Federation of Labour (CFDT), the French Christian Workers’ Confederation (CFTC), and the French Confederation of Professional and Managerial Staff – General Confederation of Professional and Managerial Staff (CFE-CGC).

Two unions – the General Confederation of Labour (CGT), and the General Confederation of Labour-Force Ouvrière (CGT-FO) – refused to sign the document, saying the agreement created too much flexibility for employers and fewer rights for workers.

The new agreement has now to be incorporated into the Labour Code through legislation. A Bill is to be presented to the Council of Ministers on 6 or 13 March 2013 and reviewed through an expedited procedure by Parliament with a view to its enactment in late May. Social partners will outline a number of measures with a view to beginning new negotiations, for example on matters such as changes to the unemployment insurance system which is managed by the social partners.

Extension of complementary health insurance

All employees are covered by the French social security system (Sécurité sociale) but they are not reimbursed fully for all medical treatment. For this reason, employees are often covered by a ‘complementary insurance’, financed by employers and employees. This additional insurance partially, or entirely, takes care of the difference between the cost of their treatment and the amount they receive through the social security system. But companies are not obliged to offer this additional insurance. Employees without employers’ complementary insurance benefit should pay for this themselves, although only three quarters of all workers actually do.

The new agreement stipulates that the sector level social partners will need to start negotiations by April 2013 if complementary health insurance is to be made compulsory by 1 January 2016. If these negotiations do not produce an agreement before 1 July 2014, negotiations will have to take place at company level. The new agreement also increases the period in which workers who are made unemployed remain covered by their former employer’s complementary health insurance.

More flexibility and more protection in a crisis

Under the new agreement social partners will be permitted to negotiate and conclude a company level agreement to preserve jobs in the event of unforeseen severe economic difficulties. The agreement will also allow for the temporary adjustment of wages and working time for no longer than two years, in return for a commitment from the employer to make no redundancies. Under such an agreement, companies will be allowed to make dismissals through the current rules governing ‘individual economic dismissals’, regardless of the number of employees who refuse the new conditions in the agreement.

Greater predictability and legal certainty for employers

As a result of the labour reform, the social partners will be given the right to reach agreements over the procedure for collective redundancies. In the absence of such an agreement, companies will be required to send their proposed procedure to the labour administration, and their proposal will be considered valid if there are no comments from the administration within two weeks. The statutory period for individual redundancies will be shortened and an automatic scale for compensation will be introduced for those companies which engage in conciliation.

Unemployment insurance based on job history

Unemployed people will now have a right to receive welfare benefits based on their previous employment, immediately prior to being unemployed. If they find work again, their right to benefits ceases. The benefits received during subsequent periods of unemployment will then be based upon their last employment.

Unemployed workers will therefore be less likely to accept inferior employment, conferring lower levels of benefit, should they become unemployed once more.

In this way, the new agreement seeks to encourage unemployed people to accept part-time or lesser-paid employment without reducing their right to unemployment benefits. In this case, the job seeker will benefit from the rights based upon their immediately previous work but also on their employment before that. This measure will be detailed in a further negotiation of the next Convention on unemployment insurance, at the end of 2013.

Reduction of labour market segmentation

To encourage the recruitment of workers on permanent employment contracts, the social partners agreed to bring in rules to discourage the overuse of short-term contracts.

The current employer’s contribution of 4% to unemployment insurance will be increased to 7% by 1 July 2013 for short-term contracts of less than one month’s duration. It will be 5.5% for contracts lasting between one and three months, and 4.5% for contracts of more than three month’s duration.

This type of contract is widely used in the hotel and restaurant sector, and in the entertainment business. Some short-term contracts will not be affected by this, such as those used for replacement jobs, seasonal jobs or when employees are hired on permanent contracts when their short-term contract expires.

The new rules encourage employers to hire younger and older workers on permanent contracts by lowering the employer’s social contribution to unemployment insurance to zero for three months, or for four months in companies with fewer than 50 employees.

Individual training accounts

One of the agreement’s aims is to enhance the employability of both employed and unemployed people through professional training. The key measure is the creation of an individual training account. This individual account will be introduced within six months of the implementation of the agreement but will be conditional on an agreement on funding between the social partners, regions and the government.

According to the agreement, this account is:

  • universal, giving every person the opportunity to have a personal training account from his or her entry into the labour market until retirement;
  • individual, as each person, whether employed or unemployed, may have an account;
  • continuous, as each person will keep an account throughout their professional life.

Each year, an employee has the right to 20 hours of professional training, which will appear on an individual training account. Rights which already exist under the framework of the Individual Right to Training will be transferred into the new individual account.

The account will be capped at 120 hours. This limit will work as an incentive to the employee to use the account at least once every six years.

Employees keep their account if they change employers, but cannot turn the right to training into a financial allowance. In addition, each individual who leaves the national education system without receiving any diploma or other qualification may acquire an individual training account financially supported by public authorities.

Period of secure voluntary mobility

In companies with 300 or more employees, an employee may be granted a ‘period of secure voluntary mobility’ to try out a job in another company. At the end of the agreed mobility period, the employee may return to their previous job, or a similar position, and keep the same pay package as was previously in place. If the employee does not go back, they will be deemed to have resigned (without notice) and the employer is exempt from all obligations arising from a redundancy.

Framework for part-time employment

As of 1 January 2014, the minimum duration of activity of part-time employees will be set at 24 hours per week. Exceptions are for employees of private home employers, employees under 26 years of age who are pursuing studies, and those making a written and reasoned request for a shorter duration.

Hours worked beyond the weekly or monthly working time stipulated in the employment contract must be paid at the agreed rate of remuneration plus ten per cent, until the amount of overtime reaches one tenth of the weekly or monthly working time. Beyond this, overtime hours are paid at the agreed rate of remuneration plus 25%.

Sectors which employ at least a third of their workforce under part-time employment contracts must open negotiations within three months after the implementation of the agreement to agree a framework for part-time employment. Negotiations will include topics such as exceptions to the weekly working time limit, the distribution of working time in a week, the number and length of rest periods per working day, the notice period necessary before a schedule change, and overtime pay beyond the 10% agreed increase.

Information and consultation

Social partners want to increase employees’ information on companies’ strategic choices and to reinforce the existing forward-looking employment and skills management provisions (GPEC). All companies will have to set up a separate database of social and economic information with a three-year forecast. The database will include such items as investments, capital stock and debt, remuneration of employees, and management or sub-contracting.

The database will also provide support for in-depth consultation on different strategy options and their impact on activities, employment, professions at risk, subcontracting, and temporary work. After discussion, employees’ representatives will submit suggestions on options and possible alternative proposals. The employer will be required to respond in writing.

Employees’ representatives within the board of directors

In order to ensure that employees’ views on company strategy are represented in decision-making, employees’ representatives will be entitled to attend meetings of the board of directors where strategy is decided. Companies with at least 10,000 employees worldwide or 5,000 in France have 26 months to guarantee two seats on the board to employees’ representatives (if the board has more than 12 members), or one seat (if the board has less than 13 members). Employees’ representatives will have the same rights as other board members and will be allowed to participate in any vote.

Commentary

The National inter-professional agreement on Labour market reform paves the way for future consensual and labour market structural reforms. It increases security for companies and employees while decreasing labour segmentation, and is a first step towards professional career security. It also increases the rights of employees’ representatives to information and consultation with a view to a better understanding of company strategy.

Gilbert CETTE, Université Aix-Mareille; Frédéric TURLAN, IR Share

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