France: Law to secure employment

A major new law ('Loi sur la sécurisation de l'emploi') was passed in June, following an agreement in January between representatives of employer associations and trade unions.  The new law introduces a number of important measures for employers to be aware of. 

This article discusses new measures affecting the representation of employees at board level and increasing powers of works councils in management decisions and the operation of the company.

Representation of employees at board level

Larger companies (those meeting certain thresholds, will be required to nominate one or - on boards with 12 or more members (administrateurs) - two employee representatives to the board of directors. A large company is classed as:

• a company with a head office in France where the company and its direct and indirect subsidiaries employ at least 5,000 permanent employees on average (as at the end of the last two financial years); or
• a company and its direct and indirect subsidiaries together employ at least 10,000 employees (regardless of whether the registered office is in France or overseas), and is under an obligation to put in place a works council in France.

Where a parent company is under an obligation to have employee representatives to its board, its direct or indirect subsidiaries do not need to do so.

The election/nomination process for employee representatives should be set out in a company's Articles of Association (Statuts). Following an information and consultation process with the works council, the Statuts must be amended to accommodate the election/nomination process within 6 months of the end of the second financial year in which  the obligation is triggered (i.e. the requisite numbers of employees).

The election/nomination process then takes place 6 months after the Statuts are amended.  It should follow a procedure specified by the new law (such as election by French employees or designation by works councils or representative trade unions, etc.).

Where two employee representatives must be nominated in groups with a European Works Council (EWC) or in European Companies (EC), the EWC or EC nominates the second employee representative.  The new law also deals with the potential situation where the company's shareholders refuse to approve the appointment of any employee representatives.

Finally, employee representatives must be elected/appointed to the Board no later than 6 months after the shareholders' meeting amending the Statuts. This meeting must be must be held in 2014.

Maximum time limits for opinions from works councils during consultation

Employers and works councils may now agree - or in the absence of an agreement, a decree of the State Council (Conseil d'Etat) may order - maximum time limits for the works council to provide its opinion on matters subject to consultation (where consultation is required under articles L.2323-6 to L.2323-60 of the French Labour Code).  Matters for consultation include corporate transactions e.g.  a proposed sale or purchase of a company, the transfer of a business undertaking, changes to production methods and implementation of new technology etc.

The minimum period that can be agreed is 15 days and it must also be long enough to properly consult with the works council. The agreed period must therefore correspond to the importance and complexity of the subject matter of the consultation. It should also take account of any obligation to inform and consult with the health and safety committee (where applicable).

If the works council doesn’t give an opinion by the end of the agreed period, it is deemed to give a 'negative opinion'.  This is a significant change for employers, which (once a maximum period has been agreed with the works council) may help to reduce uncertainty and delay. However, to take advantage of the change, employers must first agree the maximum period with the works council.

Consultation with works councils on the strategic direction of the business

Works councils must now be consulted annually on the strategic direction of the business and its impact on certain matters, including employment, the evolution of jobs and any hiring of contractors or temporary workers.

The works council may propose alternative approaches to companies and may appoint an expert to assist it. The works council pays a maximum of 20% towards the costs of the expert and the company is responsible for the balance.

Provision of additional information to works councils

With effect from 17 June 2014 (companies with 300 or more employees) or 17 June 2015 (companies with fewer than 300 employees) works councils must be provided with additional economic and social information. This information must be updated on a regular basis and included in a permanently accessible information database.

The information must cover the current year, the two previous years and provide forecasts for the next three years.  A decree will be issued to specify precise requirements – potentially with stricter requirements for companies with 300 or more employees – and information will likely be required in relation to:

• employee costs, particularly with regards to temporary and part-time workers, training and working conditions;
• capital and debt;
• employee remuneration;
• social and cultural activities;
• fees to financial bodies;
• external payments made to the company e.g. from public aid and tax credits;
• sub-contracting; and
• intra-group financing.

From a date fixed by decree, or latest from 31 December 2016, the database must also include other information which employers regularly provide to works councils under current law. Importantly, works councils are under a general confidentiality obligation regarding all information received under these provisions.

Employers are already under an obligation to supply information to works councils on a regular basis and they may already provide some of the information included under the new statutory regime. However, the new law extends the scope of information which must be provided; particularly in relation to a company's finances.