France: The end of the risk of imprisonment for breaches of obligations towards the works council?

Current regime for breach of obligations towards the works council (and other employee representatives)

In France, failure to respect obligations in relation to employee representatives (the obligation to organise elections, prior consultation in relation to transactions and many other matters) is a criminal offence (délit d'entrave).

Currently, such offence is punishable by a maximum fine of € 3,750 (USD 4,703) for individuals (€ 18,750 or USD 23,515 for companies) and, more importantly, potentially also up to 1 year's imprisonment for the individuals held to have committed such breaches – this can include the management team based overseas. The risk of imprisonment, albeit rarely imposed, obviously is a significant risk factor for corporate officers and senior employees (including those based overseas).

Whilst sentences of imprisonment are extremely rare, they are a potential risk – for example in February 2013[1], the Managing Director of Molex Automotive SARL and a factory co-manager were given 6 months' suspended sentences and had to pay € 10.000 by way of damages, for failure to inform and consult with the works council in advance of a decision to close a site in France (the decision was found to have already been taken by the shareholders).

Proposed change: removal of the risk of imprisonment

The French President, François Hollande, has recently announced a proposal to remove the possibility of imprisonment and to limit the sanction to a fine.

The French government's declared intention is to try to dispel France's reputation of being a complex and risky jurisdiction for overseas investors, by eliminating the risk of potential prison sentences for officers and employees who do not comply with their obligations towards employee representatives.

Many questions are still open in relation to the proposal – what level of fine will be set? will the amount vary depending on the severity of the breach? will it be increased in case of repeat offences? will it be an automatic fine or will tribunals have a discretionary power?

What next?

These proposals are to be included in draft law to be presented to the French Council of Ministers in December and debated in the French Parliament during the first trimester of 2015.

Trade unions (in particular the CFE-CGC) are strongly opposed to such potential change in sanctions and have already criticised the proposal, arguing that this may result in the loss of a very important deterrent to breaching the obligations to employee representatives.

[1] Toulouse Court of Appeal, 7 February 2013, no. 13194.