Repeal of new employment contract for young people

In February 2006, the government introduced a new employment contract covering people aged under 26 years, who are hired by companies with more than 20 employees. The so-called ‘first job contract’ (Contrat première embauche, CPE) introduced a significant amount of flexibility into the redundancy procedure. In response, trade unions and student unions mobilised on a wide scale to demand the withdrawal of the CPE. By mid-April 2006, the CPE was withdrawn.

As part of the government’s fight against youth unemployment, the prime minister decided to create a ‘first job contract’ (Contrat première embauche, CPE) for workers aged under 26 years. This move was carried out as an emergency legislative procedure involving a vote by parliament without debate, under the authority vested in the government by Article 49.3 of the constitution. Furthermore, the proposal was drafted without any prior consultation with unions or employer organisations, contrary to the law stating that the social partners are to be systematically consulted on the regulation of social issues.

The law (in French) was passed by parliament in March 2006.

Main legislative aspects of CPE

The CPE was devised as a special type of permanent contract, consisting of the following characteristics:

  • The contract term started with a two-year consolidation period, during which the contract could be terminated without justification.
  • With regard to a notice period for dismissal, an employee who had been in his/her job for between one and six months required two weeks’ notice, and one month’s notice if more time had been served. The employee was to receive compensation worth 8% of the total gross wage paid since the beginning of the contract.
  • An extra 2% of this wage was payable to the state employment agencies to fund services provided to that employee.
  • If the young worker was ineligible for unemployment benefit (FR0601105F), and if they had been employed for at least four months, he/she would receive a flat-rate benefit of €16.40 per day for two months. The ‘individual right to training’ (droit individuel à la formation, DIF) (FR0311103F) accrued after one month instead of one year, as is the case with other types of contract.
  • If the employer terminated the contract during the first two years, the young worker could not be hired again under a new first job contract by the same employer for a period of three months from the day when the prior contract was terminated.

The CPE added to the large number of contracts that are exempt from standard labour law provisions, and which have been established as part of a youth job creation policy (FR0512101T). Apart from the age criterion, the CPE did not target any particular group. A young graduate might thus have been recruited under this type of contract, which was the main reason for the student mobilisation against the CPE.

As the CPE concerned companies with more than 20 employees, it represented an extension of the ‘new recruitment contract’ (Contrat nouvelles embauches, CNE), provided for in the June 2005 emergency employment plan and implemented by law in the summer of 2005 (FR0507103F) for companies with less than 20 employees. Thus, the CPE would have led to legal disputes in the same way as the CNE has. The increased use of CNEs (350,000 recruited since its creation) has also led to many contract terminations, of which several have been disputed in the labour tribunal (Conseil des prud’hommes). Such a termination of contracts prior to the 24-month consolidation period raises particular problems, since redundancy law does not have to be fully applied. There is no mandatory requirement for the employer to justify the redundancy with ‘genuine and serious cause’. However, if a case is disputed in the labour tribunal, the employer must justify to the employee, as well as to the judge, that the redundancy was not unfounded.

Reaction to CPE

The CPE law was widely criticised. All of the unions condemned what they called the ‘institutionalisation of a precarious employment status’. The French National Union of Students (Union nationale des étudiants de France, UNEF), the National Secondary School Students’ Union (Union nationale des lycéens, UNL) and the Student Confederation (Confédération étudiante) considered that the contract constituted serious discrimination towards young people, condemning them to a precarious economic position.

The Socialist Party (Parti Socialiste) accused the prime minister of having ‘killed off the permanent employment contract’, and parliamentary representatives of the party announced their intention to put the matter before the Constitutional Council (Conseil constitutionnel).

Even the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF), while arguing that ‘labour law should be liberalised to a much greater extent’, expressed reservations about this new type of contract. Most, if not all, of the court cases brought by dismissed workers in relation to the CNEs have been won by the plaintiffs. Many people within the employer organisation believe that there is a need to reintroduce justification for redundancy and reduce the consolidation period.

Protest action

All of the organisations opposed to the scheme called for an initial demonstration on 7 February to demand its withdrawal. With opinion polls reflecting the growing unpopularity of the CPE, and around 60 universities affected by strikes, a follow-up demonstration on 7 March brought a million people out onto the streets according to the unions (or 400,000 people according to the police). Following these demonstrations, the government announced that it was not planning to abandon the CPE, which would come into force before the end of April 2006.

On 28 March, a further day of demonstrations brought twice as many people onto the streets than the previous protest. The students continued to put pressure on the government in the form of strikes and sit-ins, affecting the vast majority of universities, while also consulting daily in general assemblies. In light of the scale of mobilisation, the government subsequently agreed to engage in dialogue, but only with regard to improving the scheme, without planning to alter the bill. The trade unions, as well as student and secondary school pupils’ unions, unanimously rejected this basis for negotiation, and made the withdrawal of the CPE a prerequisite for the resumption of dialogue.

Around the same time, on 30 March, the Constitutional Council delivered a ruling recognising the constitutionality of the CPE. The next day, in an unusual approach to the legislative process, President Chirac made a double announcement that he was to promulgate the bill and asked the government to prepare two essential amendments. The first was a reduction of the consolidation period to one year; the second provided for the right of a young worker to be given reasons for dismissal. The president also announced that he was taking all the necessary steps to ensure that, in practice, no contract without these amendments incorporated would be signed. The government was no longer to be responsible for redrafting the bill; instead, responsibility was to be assigned to deputies from the Union for a People’s Movement (Union pour un mouvement populaire, UMP), chaired by Nicolas Sarkozy.

The union mobilisation culminated in the demonstrations of 4 April, which were of a similar scale to the one held on 28 March.

Withdrawal of the CPE and implementation of previous plans

On 12 April, the National Assembly passed a bill revoking the CPE on its first reading. The CPE was instead replaced by three existing schemes (FR0512101T), through which the government plans to target young people in greatest need:

  • The ‘youth employment support’ (Soutien à l’emploi des jeunes en enterprise, SEJE) is to be boosted by further exemptions from employers’ social security contributions. This support is a state-subsidised contract in the public sector, aimed at young people without a secondary school diploma (baccalauréat).
  • The ‘integration into social life contract’ (Contrat d’insertion dans la vie sociale, CIVIS) – a contract assisting young people in poor circumstances – has been reorganised into three stages: a skills audit for the first three months; followed by employment contracts or training courses; and finally, ongoing mentoring schemes after the first year in employment.
  • The ‘vocational training contract’ (Contrat de professionnalisation) will also receive extra exemptions from employers’ social security contributions. This contract combines alternating periods of work and training derived from the cross-sector national agreement of 2003 on vocational training (FR0311103F).

In total, these schemes are worth €150 million of extra tax exemptions, out of some €15 billion worth of subsidies for companies, aimed at creating jobs for young people. They will be funded partly through an increase in taxation on tobacco.

Commentary

The trade unions, as well as student and secondary school pupils’ unions, which remained united throughout the campaign, warmly welcomed the victory regarding the withdrawal of the CPE. They have made few remarks about the schemes replacing the CPE, which they feel are hardly significant. The bill that repealed the CPE suggested opening ‘a wide-ranging consultation process with the social partners, student and youth organisations about the integration of young people into the workforce’. Whether this process will take place remains to be seen.

Florence Lefresne, Institute for Economic and Social Research (IRES)

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