France: When Forward-Looking Management Joins The Negotiations…

Large collective redundancies in France are subject to a complex procedure, which implies the information and consultation of the works council or, failing such, the employee representatives, prior to any definitive decision. The employer must also justify its decision with valid economic grounds. Moreover, an employer must establish a collective redundancy plan¹ (plan de sauvegarde de l'emploi) in the event of the contemplated redundancy of 10 or more employees in a company with 50 or more employees over a 30-day period.

With a view to reducing the number of economic redundancies and anticipating restructurings, the law of January 18, 2005 requires that companies with at least 300 employees set up every three years negotiations on forward-looking labor force and skills management² (gestion prévisionnelle des emplois et des compétences – hereinafter "GPEC").

Commentators and practitioners have been wondering what impact this new three-yearly obligation of negotiation on forward-looking labor force and skills management would have on restructuring plans and collective redundancies. Indeed, several district courts ruled that the obligation for employers to negotiate such an agreement is immediate, and therefore ordered employers to postpone works council information/consultation procedures with regard to restructuring projects until a GPEC agreement was negotiated with their social partners.

Would this mean that GPEC has become a prerequisite to any collective redundancy project in large-scale companies?

Pursuant to Article L.320-2, "in companies and groups of companies […] with at least 300 employees […], the employer is required to initiate every three years negotiations on the terms and conditions of information and consultation of the works council regarding company strategy and its foreseeable effects on employment and salaries. The negotiations must also cover the implementation of a forward-looking labor force and skills management system, of which the works council must be informed, as well as the relevant accompanying measures, particularly in terms of professional training, validation of acquired professional experience, in-depth assessment of the employee's skills, motivation and professional experience and professional and geographic mobility of employees […]".

In the absence of any specifications on the application of Article L.320-2, one may legitimately consider that the law imposes no obligation on the employer to initiate negotiations on GPEC before expiry of the first three-year term following the enactment of the law³ (that is, January 20, 2008). More importantly, the law does not subject the validity of a collective redundancy plan to the preliminary negotiation of a GPEC agreement.

Therefore, the sole fact that a company is undergoing a restructuring prior to January 20, 2008 does not trigger in itself a preliminary obligation for the employer to negotiate on GPEC, before implementing a collective redundancy plan.

However, several contradictory decisions have been delivered on this issue since the passing of the law of January 18, 2005.

Indeed, there is some uncertainty regarding the reasoning set forth above since certain district courts recently passed strict judgments with respect to the time at the employer's disposal⁴ to initiate GPEC negotiations, ruling that the employer was required to set up negotiations as soon as possible in order for said forward-looking management to have a real useful effect.

Other decisions of the District Courts of Créteil and Paris⁵ indicate that GPEC is a prerequisite to any collective redundancy since it aims to avoid a collective redundancy plan, which inevitably implies that enough time must elapse for it to produce results⁶. A decision of the Nanterre District Court went further and ruled that "the observed failure of GPEC […] must take place prior to" collective economic redundancies, and consequently suspended the procedure "until the social partners concretely implement a GPEC agreement".

Numerous jurisdictions expressed their opposition to this solution, as they considered that the purpose of GPEC is different than that of a collective redundancy plan and does not constitute a prerequisite thereto⁷. The decisions that upheld GPEC as a prerequisite to redundancies drew more attention however⁸, in part because they often issue from courts of the Paris region, under whose jurisdiction many companies with over 300 employees are located.

This is also the case with the latest decision to date (Paris Court of Appeal, March 7, 2007, Nextiraone, 14^th Ch. Section A, n°06/17500), although it did not clearly settle the question.

Without designating GPEC as an automatic prerequisite to a collective redundancy plan, the Court of Appeal indicates in its decision that "the negotiations procedure of Article L.320-2 of the Labor Code [is] all the more imperative when an employer contemplates a decision that is liable to impact employment and when the works council requests it for that very reason; […] in such a case, GPEC negotiations take on their full meaning when they occur before a decision is made on employment modification and potential redundancies".

Moreover, the Court of Appeal reminds that, since the passing of the law of August 2, 1989, the employer is also subject to an annual obligation of informing and consulting the works council on "job and qualification evolution in the company over the year that has just elapsed […], on the annual or multi-annual forecasts and the actions, notably preventive and training, that the employer contemplates implementing given these forecasts…" (Article L.432-1-1). It specifies that "compliance with this procedure is […] all the more necessary for the staff representatives' appraisal of a restructuring project such as the one in question; […] in such a case, this procedure takes on its full meaning when it occurs before the implementation of this project".

However, although the Court of Appeal does not explicitly subject every collective redundancy project to prior compliance with the provisions of Articles L.320-2 and L.432-1-1, it no less confirms the suspension of the collective redundancy procedure ruled by the first instance judge, considering that as the employer "was ordered to launch such negotiations owing to an economic transfer project, for which it was necessary to anticipate the announced consequences, it was its duty to satisfy this obligation".

Nevertheless, the Court of Appeal primarily indicates that the principle is that the negotiations must have been launched "for the first time before [January 20, 2008], which constitutes the deadline for a first three-year period since the enactment of this text".

When the Supreme Court's ruling on the subject will be known, it will already have lost much of its initial relevance since the three-year term will almost have expired (January 20, 2008). Still, the articulation between GPEC and collective redundancy remains a delicate question since the economic climate and restructurings cannot always be anticipated.

Footnotes

1. A collective redundancy plan is "aimed at avoiding or limiting redundancies and facilitating redeployment of staff whose redundancy could not be avoided, notably older employees or employees whose social characteristics or qualification make their professional rehabilitation particularly difficult" (Article L. 321-4-1 of the French Labor Code).

8. To that effect: See footnote n°4 and also District Court Nanterre, summary proceedings, Capgemini, September 5, 2006, n°06/01923; Court of Appeal Paris, 14^th ch., Nextiraone, March 7, 2007, n°06/17500.