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The validity of the multi-industry agreement on the modernization of the labor market concluded on January 11, 2008 (hereafter the "Agreement"), is conditioned upon the adoption of legal and statutory provisions, which are necessary to its application. A draft bill relating to the "modernisation du marché du travail" has already been voted by the Council of Ministers on March 26, 2008, and will be examined by both the French National Assembly from April 15 to 17, 2008 and by the "Sénat" from May 6 to 7, 2008. The draft bill notably focuses on the common-consent termination of the employment contract (2.1), the trial period (2.2), the severance pay (2.3), and the fixed-term employment contract entered into for a specific purpose (CDD à objet précis) (2.4).

A. Common-Consent Termination Of The Employment Contract

Following one or several meetings, the employer together with the employee will be able to decide to terminate the employee's employment contract by common-consent. An agreement entered into between the employer and the employee will set out the termination conditions, such as the indemnity amount, which cannot be inferior to the amount of severance pay provided for by the applicable collective bargaining agreement. Said agreement will also provide for the date of termination.

Each party will have fifteen days to withdraw, by letter, from said agreement, as from the date of signature thereof. Beyond this fifteen-day period, either the employer or the employee will send the agreement to the local labor authorities, which will certificate it within a maximum of 15 days. The Employment Tribunal will be competent for any claim relating to (i) this agreement, (ii) its certification or (iii) the certification's refusal. The certification procedure will not apply to agreements relating to the common-consent employment contract termination of protected employees. Indeed, such agreements relating to protected employees will require the labor inspectorate's authorization.

Furthermore, in the case of common-consent employment contract termination agreed upon with an employee who is not entitled to benefit from a retirement pension under a legally compulsory scheme (pension de retraite d'un régime légalement obligatoire), the draft bill provides for the same tax and social exemptions and the same ceilings as those that apply to severance pay. As regards the indemnity paid to the employee entitled to benefit from a retirement pension under a legally compulsory scheme, the draft bill sets forth the same tax and social regime as those that apply to the indemnity provided to the employee when he/she is pensioned off.

B. Trial period

Length

The draft bill slightly modifies what the Agreement provided for. Indeed, in this Agreement, the length of the trial period varied within a certain range. The draft bill provides for a maximum length of the indefinite-term employment contract's trial period depending on the employee's qualification:

  • two months for blue-collar workers and clerical employees;

  • three months for supervisors and technicians; and

  • four months for executives.

Renewal

Furthermore, the trial period can only be renewed once, provided this is set forth in an industry-wide agreement extended. In such a case, the maximum length of the trial period, including its potential renewal, will be (i) 4 months for blue-collar workers and clerical employees, (ii) 6 months for supervisors and technicians, and (iii) 8 months for executives. However, industry-wide agreements extended, which provide for longer trial periods and were concluded before the passing of said law, will still apply.

Termination

In the event where the employer intends to terminate the employee's employment contract during the trial period, this cannot be done with immediate effect; the employer must serve said employee notice that can go from 48 hours up to a month depending on the employee's length of presence within the company.

C. Severance pay

Concerning severance pay, the Agreement and the draft bill adopted by the Council of Ministers on March 26, 2008 provide for the following measures:

  • the length of service required for an employee to benefit from severance pay is reduced from 2 years to 1;

  • a single severance pay is provided for instead of two different amounts depending on whether said severance pay corresponds to a dismissal on economic or personal grounds. The Agreement sets forth that in the event of termination of his/her employment contract for dismissal, the employee is entitled to severance pay provided for by the applicable collective bargaining agreement, which must correspond to at least 1/5th of a month per year of service;

  • should the dismissal be based on a non-professional incapacity without any redeployment possibilities, the employee's compensation may be paid either by the employer or by a mutualization fund administered by the association for the management of the guaranteed salary insurance "Assurance des Créances des Salariés (AGS)".

D. Fixed-term employment contract entered into for a specific purpose ("CDD à objet précis")

Both the Agreement and the draft bill, provide for a new type of fixed-term employment contract called "CDD à objet précis" that can be entered into with engineers and executives for the realization of a pre-defined object. This contract can be entered into for a non-renewable period of 18 to 36 months.

Recourse to this new type of fixed-term employment contract is subject to the following conditions:

  • a collective bargaining agreement (i.e. an industry-wide agreement ("accord de branche") or, in the absence thereof, a company agreement ("accord d'entreprise")) must delimit (i) the economic reasons that justify the recourse to such contracts, (ii) the terms and conditions according to which the concerned employees would benefit from a preferential right to enter into an indefinite-term employment contract and (iii) the terms and conditions necessary to obtain guarantees for redeployment support, continuous professional training, etc.;

  • the "CDD à objet précis" must include mandatory provisions, notably concerning the reference to the collective bargaining agreement that established this contract, the description of the object pursued, the time expected to realize this object, the definition of the allotted missions, the event or the result that terminates the contract;

  • "CDD à objet précis" will be terminated with the realization of its pre-defined object, subject to a 2-month notice period. It can also be terminated on the anniversary of the contract's signature, by both parties, based on real and serious grounds. If it is not continued as an indefinite-term contract, the concerned employee will be granted an indemnity of 10% of his/her total gross compensation.

The draft bill, provides that this new fixed-term employment contract will be tested for an initial 5-year period, at the end of which the government will present Parliament with a report on whether or not this new contract should be permanently established.

This Agreement also focuses on the role of collective negotiation, notably by (i) setting out a schedule relating to multi-industry negotiations, and (ii) creating a commission in charge of its follow-up and evaluation. Moreover, it set forth provisions relating to professional orientation and training, employee mobility, unemployment mobility, unemployment assistance, clarifying specific employment contract clauses, access to rights, and better control of employment contract terminations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

AUTHOR(S)
Philippe Desprès
Gide Loyrette Nouel
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