Employees in France are typically divided into three categories:
National collective bargaining agreements, which are negotiated at the industry level and are in principle applicable to all companies in that industry, typically provide for minimum wages for each employee category.
Provided that they perform their work with a certain degree of autonomy and/or responsibility, executives and, subject to specific conditions, technicians/supervisors, can be subject to a specific working time arrangement calculated in days worked per year (instead of hours worked per week) called forfait-jours. This enables the company to pay a lump-sum salary to the employee regardless of their actual working hours (see 1.3 Working Hours).
Senior executives, who are the employees with the highest level of responsibility and remuneration within a company, are not subject to working time regulations.
As a principle, an employment contract is deemed to exist, even in the absence of a written contract, when a person undertakes to work for and under the direction of another in return for remuneration. This definition is articulated around three principles:
Indefinite-Term Employment Contracts
Indefinite-term employment contracts are the standard form of employment. Even though they do not have to be written from a strict legal point of view, the majority of companies in France execute written contracts.
Any unwritten employment contract is deemed to be an indefinite-term, full-time contract.
Definite-Term Employment Contracts
Definite-term contracts can be also used. Unlike indefinite-term contracts, they must, in particular:
Definite-term contracts that do not follow these legal requirements can be requalified into indefinite-term contracts.
Part-Time Employment Contracts
Part-time employment contracts can also be concluded for employees working less than the standard working hours, ie, typically 35 hours a week or 218 days a year (see 1.3 Working Hours). Among other requirements, these part-time contracts should be written and specify the number of hours worked (or days worked per year).
Standard Working Time
The standard working time arrangement in France is 35 hours a week.
Any hour worked beyond this threshold is considered overtime, and is usually compensated with a salary increase of 25% (for the first eight overtime hours) or 50% (beyond the eighth hour), unless an applicable collective bargaining agreement provides for lower compensation, with a minimum of 10%.
Unless provided otherwise by applicable collective bargaining agreements, an employee cannot do more than 220 overtime hours within the same year. Beyond this limit, any overtime hours must be compensated (in addition to salary) by additional days of paid leave. Since January 2019, overtime is exempted from income tax up to EUR7,500 per year, and subject to a reduced rate of social contributions (ie, an exemption from pension contributions within the limit of 11.31% of salary).
Day-Year Scheme (Forfait-Jours)
Employees performing their work with a certain degree of autonomy and responsibilities can be subject to a day-year scheme called forfait-jours, under which they must work for a certain number of days per year (no more than 218 days). They receive lump-sum remuneration that covers all their hours of work, without any distinction between ordinary and overtime hours.
This particular scheme is very popular, especially for executives who are thus not subject to the 35-hour week. However, to be valid, this scheme must be provided for in a collective bargaining agreement (whether industry-level or company-level). This agreement should include guarantees ensuring that the employee’s working hours and workload remain reasonable, and provide safeguards in respect of the protection of employee health and safety.
In the absence of such provisions, or if the employer does not comply with them, the day-year scheme could be deemed invalid, and the rules related to overtime would then apply. This gives rise to significant litigation in France, with a three-year limitation period for claims related to compensation. As a consequence, employers are strongly advised to design their day-year schemes carefully.
For part-time employees, unless otherwise agreed, employees may not work less than 24 hours or more than 35 hours a week (or a prorated number of days for forfait-jours). A part-time employee may divide their working hours over a week, a month or even a year, as provided in their employment contract.
Employment contracts, as well as any amendments or schedules to the contracts, must be written in French to be enforceable against the employees. Bilingual contracts are also permissible, providing that the French version prevails.
In France, employees are usually remunerated in cash on a monthly basis, according to the number of hours or days worked.
A statutory minimum wage, called SMIC, and under which no employee working full-time can in principle be remunerated, is fixed every year by the state. For 2023, this minimum was set at EUR1,747.20 (gross) per month and EUR11.52 (gross) per hour. In addition, industry-wide national collective bargaining agreements can provide a minimum wage that depends on the employees’ status and classification, provided that it is higher than the SMIC.
Collective bargaining agreements also commonly provide for supplementary compensation (eg, an individual/company-based performance bonus, a 13th month, seniority or holiday bonus, pension plans, and health and welfare plans). This additional compensation, which is distinct from the minimum wage, may be payable to all employees or specifically reserved to certain employee categories (eg, executives or non-executives).
Some employees, usually managers, may receive additional compensation in the form of grants under long-term incentive plans (eg, bonus based on group’s performance, phantom shares, or restricted/free stocks), subject to their continued employment during the performance period.
In companies that have been employing more than 50 people over the past five years, the implementation of profit-sharing mechanisms to the benefit of employees is mandatory. The amount due to employees is calculated using a legal formula which takes into account the company’s net income, added value, wage bill and common equity. Profit-sharing bonuses benefit from favourable tax and social contribution regimes.
Profit-sharing schemes can also be set up voluntarily by the company. These voluntary schemes benefit from the same favourable tax and social contribution regimes as mandatory profit-sharing, and have been increasingly promoted by the government in the past few years.
A new bill, currently being discussed in the Parliament and Senate, aims at extending mandatory profit-sharing to companies with fewer than 50 employees and setting up new profit-sharing schemes and bonuses (see the Trends and Developments chapter in this guide).
Annual Negotiation on Compensation
In principle, companies with more than 50 employees and with a trade union delegate are required to negotiate every year with the trade union delegates on the employees’ remuneration and its potential increase. Whilst negotiating is mandatory, there is no obligation to reach an agreement.
In 2023, negotiations on salary increases have been focused on inflation. For 2023, salary increases amounted to approximately 4.4% on average, compared to 2.8% in 2022 and 1.4% in 2021.
Paid Holiday Leave
Under French law, employees have at least five weeks of paid holiday leave per year. They can also be entitled to additional days off (RTT), which are granted when employees work beyond the 35-hour working week or are subject to a specific arrangement called forfait-jours (day-year scheme) to work a certain number of days per year.
Public holidays are taken in addition to an employee’s annual leave entitlement.
Employees can also be entitled to special paid leave days for specific events, such as marriage, death of a relative, sickness of a child, etc. Collective bargaining agreements can provide for additional paid leave days.
Leave of Absence
In addition to holiday leave, employees may benefit from other kinds of paid leave such as leave for personal reasons, sick leave, family leave, pregnancy leave, and maternity or paternity leave.
In such cases, the employment contract is suspended and the payment of the employee’s compensation is covered, usually partly, by public social security funds. Collective bargaining agreements can also require companies, under certain circumstances, to supplement this social security indemnity so that the employees receive their full salary.
Obligation of Loyalty and Discretion
Employees are subject to a general obligation of loyalty and discretion towards their employer. As a consequence, they are prohibited from disclosing, whether within or outside the company, confidential information or knowledge obtained in the performance of their duties. They are also prohibited from disclosing manufacturing secrets.
In principle, employees cannot be held civilly liable for damage caused to their employer in the performance of their work. As a consequence, liability clauses in employment contracts cannot be enforced. By way of exception, an employee may be held civilly liable for gross negligence (faute lourde), where the employee commits serious misconduct with the intention to cause the company harm.
With respect to harm caused to third parties, employees can only be held personally liable for their actions if they acted outside the scope of their professional duties, without authorisation from their employer, and for purposes unrelated to their duties.
The general obligation of loyalty and discretion applicable to employees in the performance of their duties typically covers confidentiality, professional secrecy and non-disclosure of trade secrets, but also a non-compete undertaking during the execution of the employment contract.
To protect their interests after the termination of an employment contract, companies can provide a specific non-compete clause. These clauses, which are typically applied to the most senior managers or to employees with specific competitive skills, usually provide that the employee agrees not to carry out, on their own behalf or on behalf of another employer, an activity similar to that of their employer’s business during a certain period of time following the termination of the employment relationship.
To be valid, a non-compete covenant must follow four rules.
Any non-compete clause that does not comply with each of these requirements is null and void, and will not be binding on the employee.
The company can release the employee from their non-compete obligation upon termination of their employment contract (and in any case before the end of the applicable notice period), if it is expressly provided for in the employment contract or in an applicable collective bargaining agreement, or expressly agreed by the employee.
As per case law, an employee who violates their non-compete obligation, even on a temporary basis, may have to refund the non-compete compensation to their former employer and may be held liable for damages.
Non-solicit clauses that apply to employees after the termination of their contract (eg, to prohibit them from reaching out to company’s employees, clients or customers) are typically included within non-compete clauses, to which they are often assimilated. As such, they must follow the same rules to be valid, in particular as it relates to the financial compensation and the limitation in terms of time and space.
In addition, case law limits the scope of clauses prohibiting former employees from soliciting current employees of the company: these non-solicits may only cover “active solicitation” by the former employee. In other words, notwithstanding the non-solicit, employees of the company are still free to apply for a job with the former employee and be hired by them, providing that there was no prior “active solicitation” by the former employee. In addition, these non-solicits should in principle cover only the people employed by the company at the date of termination of the employment contract of the former employee, and be applicable for no more than 24 months.
In France, data privacy is notably regulated by the Data Protection Law of 1978 (loi informatique et libertés) amended in 2018, implementing the EU General Data Protection Regulation (GDPR) locally. In the context of employment relations, protection of employees’ personal data must be ensured by all the company stakeholders processing employees’ personal data (human resources, accounting department, etc).
The obligations to which the employers are subject include, notably, the following.
Citizens of European countries, the European Economic Area and Switzerland benefit from provisions relating to the free movement of workers in Europe.
Non-European citizens must have a valid permit authorising them to work in France. Valid permits include the following.
Before hiring a foreign worker who resides in France, and if the worker is not registered with the national unemployment agency (Pôle Emploi), a company must confirm with the local authorities that the worker’s permit is valid. This must be done no later than two days before the foreign employee’s first day of employment.
If the foreigner does not reside in France, the company must first file a job offer with the national unemployment agency (Pôle Emploi) and look for locally qualified candidates for at least three weeks (except if the job in question is part of the regional “list of short-staffed jobs” (liste des métiers en tension), in which case posting a job offer is not compulsory). If no unemployed person is qualified (or if there is no requirement to post a job offer), the company can file a request with the Labour Inspection (DREETS) to obtain a work permit for the foreign worker. After obtaining the authorisation, the company will have to pay a tax to the immigration authorities. The amount of tax to be paid will depend on the level of remuneration and the length and type of the employment contract executed with the foreign worker.
In addition, the company must record the type and reference number of the permit authorising the foreigner to work in France in the employee register. Copies of the relevant documents must also be retained.
The above does not apply to citizens of European countries, the European Economic Area and Switzerland, who benefit from provisions relating to the free movement of workers in Europe and, as such, do not need a work permit.
Remote work is relatively flexible in France and has become increasingly popular since the COVID-19 pandemic. Remote work refers to any form of working arrangement whereby work that could have been performed on the employer’s premises is carried out by an employee away from these premises on a voluntary basis. In other words, provided that the parties agree to it, work does not have to be performed at the employee’s domicile. For example, it could also be performed at a shared co-working space.
Companies can implement remote work by way of:
Industry-wide collective bargaining agreements can provide for specific provisions and guidelines for companies the agreements apply to.
Regardless of the type of documentation implementing remote work, companies are strongly advised to conclude individual remote-work agreements with the relevant employees to set out each party’s rights and duties.
Remote work cannot, in principle, be imposed by the employer, except on a temporary basis in the context of exceptional circumstances, such as a pandemic. Conversely, an employee cannot impose their wish to work remotely on their employer. However, an employer’s refusal must be justified by objective grounds such as technical impossibility or organisational requirements.
The tools used by the employees for their work are typically provided by the company and must be used in compliance with the company IT policy. Rules relating to employee privacy must also apply to employees who work remotely.
The company has a duty of care with respect to the remote worker’s health and safety. It must notably ensure that the workspace and equipment are appropriate, prevent employee isolation, ensure a balance between private and professional life, and control workload.
There are no binding statutory rules governing the compensation of remote work. However, national collective bargaining agreements may provide for the reimbursement of expenses incurred by remote workers. This payment is exempt from social contributions, capped at an amount calculated by reference to the number of days worked remotely.
Sabbatical leave enables an employee to leave the company for a few months to pursue an activity of their choosing, to carry out a personal project, etc, without terminating their employment contract.
Sabbatical leave involves a suspension of the employment contract. However, the employee remains part of the company’s workforce, and remains subject to loyalty and non-compete obligations.
Conditions for Sabbatical Leave
Except as otherwise provided in applicable collective bargaining agreements, employees must fulfil certain conditions to be eligible for sabbatical leave. In particular:
Approval by the Company
Upon receiving a sabbatical request from an employee, the company must, within 30 days, notify to the employee whether it:
If the company does not respond within 30 days, it will be deemed to have approved the sabbatical.
Refusals can be justified if the employee does not fulfil the legal requirements, or if the absence of the employee would have a negative effect on the company’s activity. In companies of a significant size (ie, with at least 300 employees), refusals can only be justified if the employee does not fulfil the legal requirements.
Remuneration During Sabbatical Leave
For the duration of the sabbatical leave, the employee is not legally entitled to any remuneration (except as provided by collective bargaining agreement or as agreed between the parties).
Nevertheless, an employee on sabbatical leave may engage in gainful employment throughout the sabbatical period, in particular to compensate them for a reduction or loss of income.
Flex-Office and Desk Sharing
Following the COVID-19 pandemic, companies of all sizes have had to adapt to a global fall in the number of employees working every day in the office and a corresponding rise in remote work. The most popular of these new working arrangements are “flex office” and “desk sharing”, which allow employers to reduce the size of their offices and, most importantly, the related costs.
Flex office is the practice of not allocating a specific workstation to an employee, but allowing them to move from one space to another depending on their tasks and missions: a free desk in their own office, a meeting space, a co-working room, a café, etc. This concept should be distinguished from the other popular concept of desk sharing, which means that employees no longer have allocated desks, but can sit wherever they like on company premises.
The implementation of these working arrangements is normally subject to prior consultation of the company’s works council (if any), as these arrangements have an impact on employee working conditions.
The Status of “Platform Workers”
As of January 2022, approximately 320,000 people worked as independent contractors for digital platforms in France, especially in the ride-hailing and food delivery sectors. In France, as elsewhere, this new form of work has become increasingly popular, but has also raised a number of legal issues.
These workers are not hired under an employment contract, and as such are not entitled to the benefits usually associated with a salaried employee status, such as paid leave or unemployment insurance. This has led many platform workers to seek the reclassification of their relationship with a digital platform as an employment contract, sometimes successfully, including in front of the French Supreme Court.
In response to this ever-growing number of workers and related disputes, the government enacted several laws to try to regulate relationships between these “independent contractors” and companies using digital platforms and apps to connect with their customers. For instance, since 2019, digital platforms have had a “social responsibility” towards their contractors, and are required to contribute to their work insurance and training costs. Platform workers may also form and join trade unions through which they can represent their collective interests.
In May 2022, the government organised elections for representatives of platform workers working in food delivery, in order to encourage social dialogue between them and the digital platforms. Since then, several national collective bargaining agreements have been negotiated, in particular on matters relating to the negotiation of collective agreements in the sector, to the minimum revenue guaranteed to platform workers, and to the termination of commercial relations between platforms and workers.
At the EU level, a draft Directive which introduces a legal presumption of salaried status for platform workers was approved by the European Parliament in February 2023. This draft is now under discussion between member states within the European Council.
Trade unions are involved on a daily basis in many areas of labour law in France: collective bargaining, health and safety, working hours, wages, etc. Within this general framework, a specific role is assigned to so-called “representative unions”.
To be considered as representative within a company, a trade union must have scored at least 10% at the last employee representative elections, as well as prove that it meets several criteria, including: respecting republican values, being independent vis-à-vis the employer, applying financial transparency, having sufficient influence through its activity and experience, and having a certain number of members.
Trade unions can be representative at the national industry level, where their main purpose is the negotiation of national collective bargaining agreements which are applicable to all companies belonging to the same industry.
Trade unions can also be representative at the company level, in which case they negotiate collective agreement applicable to company employees only. In practice, representative trade unions within a company must name union delegates, who have the power to negotiate the company collective bargaining agreements with the employer.
Trade unions and their delegates must not be confused with the works council (or comité économique et social, literally “social and economic committee”), which is a distinct employee representative body.
Two main types of employee representative bodies should be distinguished in France: the works council and the trade union delegates.
The works council (comité économique et social – literally “social and economic committee”) is a council composed of representatives elected by the employees during employee representative elections that occur in principle every four years. Members of the works council are not necessarily members of a trade union, although it is common in bigger companies.
The implementation of a works council is mandatory in companies with at least 11 employees. However, at this threshold, its role is limited. In companies with more than 50 employees, the works council must be informed or/and consulted on many economic, financial and employment matters. Its remit also includes the prevention of professional risks and the improvement of working conditions. An employer must seek and obtain the works council’s opinion before taking any binding decision affecting the general running of the company. The works council does not have a veto right.
In companies with several separate establishments, works councils can be set up for each establishment with one central works council covering the whole company. In addition, in large group companies, group works council can be set up to oversee projects at the group level.
Trade Union Delegates
The trade union delegates are employees chosen by trade unions that are representative within the company (ie, unions that scored at least 10% at the latest employee representative elections, among other requirements). Trade union delegates can negotiate and conclude collective bargaining agreements with the company. They are not members of the works council per se, although they may attend works council meetings, but without taking part in the votes.
Violation of Employee Representative Rights
Failure to respect provisions related to employee representatives and their protection may qualify as a criminal offence (délit d’entrave), which is punishable by a fine of up to EUR7,500 for legal representatives of the company (and EUR37,500 for the company itself) and/or one year of imprisonment, depending on the circumstances.
Collective bargaining agreements are the result of discussions and negotiations between employers’ representative organisations or the employers themselves on one hand, and employees’ trade unions on the other hand. They can cover a wide range of matters relating to the employment, professional training and working conditions of employees.
Collective bargaining agreements can be entered into at different levels: at the industry level, at the company or group level, at the level of each establishment or group of establishments, etc. Industry-wide national collective bargaining agreements are very common and their application is, in most cases, mandatory in all companies belonging to the same industry. Agreements negotiated at the company level are also common.
To terminate an employment contract, the employer must be able to justify its decision by reference to “real and serious” reasons. Such reasons should be documented and based on objective elements (eg, not getting along with a colleague would not be sufficient).
Personal or Economic Reasons
There are two types of reasons for dismissal.
Procedures to dismiss vary depending on the reason for the dismissal. In particular, a dismissal for economic reasons and a dismissal of employee representatives (who are protected) may require the involvement of the works council. Specific obligations also apply to the dismissal of employees who have been declared unfit for work.
If an employer wishes to dismiss more than one employee for economic reasons, specific collective redundancy provisions may be triggered. The procedures are complex and vary depending on whether the company employs more than 50 employees, and on the number of proposed redundancies.
In all procedures, the employer must inform and consult the works council, and send documentation related to the collective redundancy to the Labour Inspection. In addition, within companies employing at least 50 employees, if more than ten redundancies are planned over the same month, the employer will have to follow a specific consultation procedure and negotiate with the employee representatives a “social plan” (plan de sauvegarde de l’emploi) providing for social measures to the benefit of the redundant employees (relating to redeployment leave, training, the prevention of psychosocial risks, additional severance indemnities, etc). The Labour Inspection is also closely involved in these projects and has to approve the social plan before it can be implemented.
Notice periods are set by industry-level collective bargaining agreements and the Labour Code. They generally last between one and three months, depending on the employee’s status. Employees on notice period must receive their salary as usual, even if the company exempts them from working during the notice. The contract may be terminated without notice (or payment of notice) in the event of serious misconduct (faute grave) or gross negligence (faute lourde).
There is no at-will employment in France. If an employer intends to dismiss an employee, it must at least have cause (ie, a “real and serious reason”).
Process to Dismiss
To dismiss an employee, a specific process must be followed.
The final decision to dismiss must not be notified before the two working days have elapsed. Any dismissal decided in advance of this is deemed not to have a real and serious reason, which entitles the former employee to damages, usually calculated by reference to their salary and length of service.
Collective bargaining agreements can provide for a more favourable procedure.
Dismissed employees are entitled to a severance indemnity which is determined by the law or the industry-wide collective bargaining agreement, on the basis of their average remuneration and seniority.
If the cause for dismissal is misconduct, the employer must in principle act within two months of learning of such misconduct, and the final decision to dismiss must be notified within one month after the pre-dismissal meeting. In the case of a dismissal for serious misconduct (faute grave) or gross negligence (faute lourde), the employee is dismissed without any notice or any severance indemnity.
Before initiating dismissal proceedings, or to mitigate operational risks between the employee’s invitation to the pre-dismissal meeting and the meeting being held, companies can temporarily suspend the employee by way of “preventative suspension” (mise à pied conservatoire). This measure allows companies to carry out investigations on alleged misconduct, while temporarily relieving the employee from their duties. Preventative suspension can lead to dismissal, if the company finds that the employee’s actions are sufficiently “real and serious”, or to the employee’s reintegration within the company, potentially including reclassification of all or part of the preventative suspension as a “punitive suspension” (mise à pied disciplinaire), if a minor misconduct was committed. In this case, remuneration during the punitive suspension period will not be due to the employee.
In respect of a dismissal for economic reasons (except for collective redundancies), additional steps must be observed, such as establishing the selection criteria that will be used to determine which employees will be made redundant and attempting to redeploy employees within the company or other group companies in France.
Mutual Termination Agreements
Indefinite-term employment contracts may be terminated by means of a “mutual termination agreement” (rupture conventionnelle) between the company and the employee. Under this agreement, both parties agree to terminate the employee’s contract on a date of their choice, with the employee being entitled to a severance payment at least equal to the severance indemnity provided by the law or the industry-wide collective bargaining agreement.
Several steps must be followed to conclude a valid mutual termination agreement, notably the organisation of one or several meetings to discuss the agreement, the execution of a legal form which can be supplemented by a written agreement, and a validation by the Labour Inspection. The whole process usually takes approximately 40 days.
An individual mutual termination agreement is not a settlement agreement, under which the employee waives their right to bring future claims. An employee who has only signed a termination agreement can still file claims in connection with the performance of their employment contract (such as requests for back pay).
When disputes arise in relation to the termination of an employment contract, the parties can settle the dispute by way of a so-called “transaction” or “settlement agreement”, whereby the employee waives their right to file an action in relation to their employment contract against payment by the employer of a settlement indemnity.
To be valid, a settlement agreement cannot be concluded before the actual termination of the employment contract. In other words, employers have to be very careful when opening discussions in view of a settlement when the contract has not been duly terminated yet (eg, when such termination is only contemplated or the process is in progress).
In France, some employees benefit from a specific protection against dismissal, amongst which are found employee representatives (eg, trade union delegates and works council members), as well as pregnant employees, employees on sick leave caused by a work accident or professional illness, employees declared unfit for work (inapte) by the occupational doctor, etc. If the provisions relating to the protection of such employees are not followed, then their dismissal will be deemed null and void.
Employee representatives benefit from a specific legal protection in connection with the performance and termination of their employment contract, including for six months (or 12 months for union delegates) after the end of their tenure. Such protection also applies to employees who were candidates in the last employee representative elections but were not elected, and to employees who requested the organisation of such elections.
Aside from dismissals, this protection prevents the company from imposing on these protected employees any substantial change to their employment contracts or any change in their working conditions. In addition, to dismiss a protected employee, regardless of the reason, the company must consult the works council and request authorisation from the Labour Inspection, failing which any dismissal will be deemed null and void.
A dismissal can be deemed wrongful for many reasons. Most reasons relate to:
These different grounds for wrongful dismissal have different consequences.
Unfair Dismissal Indemnity
In the event of a dismissal without “real and serious reason”, employees are entitled to an indemnity for unfair dismissal, which is fixed by the court within a minimum and maximum amount set by a scale (also called the Barème Macron) provided by the Labour Code, which depends on the employee’s average salary and their length of service within the company.
Indemnity for Null-and-Void Dismissal
If the court finds that a dismissal was null and void, then the employee is entitled to an indemnity of at least six months of salary, without any upper limit for the judge to consider.
Cases where a dismissal can be deemed null and void are notably the following:
In addition, the employee has the right to be reinstated within the company (without the employer being allowed to object), and the indemnity (of at least six months of salary) will be awarded in addition to the salary payable to the employee for the period between the dismissal and the ruling on its nullity.
The French Labour Code prohibits direct as well as indirect discrimination, ie, measures that are apparently neutral but result in a particular disadvantage for specific persons compared with others, due to discriminatory criteria. The definition of discrimination includes age, race, nationality, origins, gender, sexual orientation, marital status, handicap and disability, religion, pregnancy, home location, and trade union affiliation.
Duty of Care
Employers have a duty of care with respect to their employees’ health and safety and must provide a working environment that is free of discrimination. In particular, they may be held liable for the discriminatory actions of each of their employees, if those acts are carried out in the context of their employment, even if it was without the approval or knowledge of the employer.
Burden of Proof
An employee who alleges discrimination on the basis of one or several of the criteria mentioned above has a lighter burden of proof.
If a company is found to have discriminated unlawfully against an employee, the Labour Court can:
In addition, an employee who is repeatedly discriminated against by their employer is entitled to claim that they have been constructively dismissed, provided that they can prove that the facts are serious enough, and to claim related compensation on the grounds of unfair dismissal (ie, severance indemnity, indemnity in lieu of notice period, unfair dismissal indemnity of at least six months of salary, etc).
As per the French Criminal Code, refusing to hire an employee, or disciplining or dismissing an employee on discriminatory grounds, are also criminal offences punishable by up to three years of imprisonment and a fine of up to EUR45,000 (for the company legal representative) or EUR225,000 (for the company itself).
While procedures and discussions with the administration have become increasingly dematerialised, such as the submission of collective bargaining agreements, collective redundancy documentation or mutual termination agreements through online governmental platforms, dispute resolution in France is still a “physical” matter. Conducting court proceedings via video remains very rare and circumstantial (such as during the COVID-19 pandemic).
Individual employment disputes between employers and employees are referred to the relevant Labour Court (conseil de prud’hommes), which is a tribunal composed of judges selected by the employee trade unions and the representative employers’ organisations at a national level. A judgment panel includes an equal number of employee and employer representatives.
In addition, the Civil Court (tribunal judiciaire) has jurisdiction to hear all collective employment disputes, in particular in respect of collective negotiations and strikes, and matters concerning electoral law and elections in the workplace.
Since 2016, certain associations have been allowed to launch class action claims before the Civil Court in a limited number of cases, namely for the breach of provisions relating to:
Such class action may seek to obtain compliance with the law and, if appropriate, the award of damages.
Representation in front of the Labour Court is not mandatory, and employees sometimes represent themselves or are represented by certified trade union representatives instead of attorneys. However, attorney representation is mandatory in front of the Court of Appeal and the Civil Court.
Alternative dispute resolution is not common practice in France. In the event of a dispute, the matter is usually referred to the courts. That being said, in practice, collective labour disputes such as strikes may be resolved by various means other than judicial proceedings, such as arbitration, mediation and conciliation, which constitute alternative dispute resolution.
With respect to costs, courts in France typically order the losing party to pay for the costs of proceedings (entiers dépens).
In addition, parties usually make a specific claim for the payment of a lump-sum indemnity pursuant to Article 700 of the Civil Procedure Code, which covers their attorney’s fees and other legal fees in whole or part. In most cases, the losing party is sentenced to pay this indemnity, although its amount may be lowered if the court deems it to be too high, which it is more likely to do when the losing party is the employee.
The following is an overview of two major trends in French employment law which have been observed in the past few years: the first being the increasing interest shown by the French government in promoting profit-sharing mechanisms, and the second being the recent increase in the number of large and/or listed companies in France undergoing pre-insolvency proceedings, which naturally affects employment.
The Government’s Promotion of Employee Profit-Sharing
The government, under Emmanuel Macron’s presidency, has been promoting profit-sharing mechanisms for several years. The creation of an “employee dividend” was also one of the promises made by Emmanuel Macron during the presidential campaign of 2022. It therefore came as no surprise that, after the government had implemented its pension reform, another campaign promise, the French President and his government announced new initiatives in respect of employee profit-sharing.
The main existing profit-sharing schemes, mandatory only for companies of 50 or more employees
French law already provides for several profit-sharing mechanisms, and in particular the following.
All these mechanisms are subject to favourable social security and tax treatments (especially deductibility from company income tax, an exemption from social security contributions and specific contributions called “CSG-CRDS”, and an exemption from employee income tax), to encourage companies to implement them, including on a voluntary basis.
The government’s failed “employee dividend” proposal
The creation of an “employee dividend” (dividende du travail or dividende salarié) was one of Emmanuel Macron’s key promises during the 2022 presidential elections, at the end of which he was re-elected as Head of State for a new five-year term. The principle of an “employee dividend” is to align the interests of both the shareholders and employees, by providing for a special mandatory payment from companies to their employees if their profits suddenly increase.
On 26 October 2022, President Emmanuel Macron explained: “When you have a sudden increase in dividends for your shareholders, then the company must have a mechanism that is identical for employees.” In other words, the idea was that, when a company makes profits and can pay dividends to its shareholders, it must also guarantee better remuneration for its employees. The government considered that the existing profit-sharing schemes, which are mandatory only for bigger companies, were not sufficient.
In this context, the French government convened the national representatives of employee trade unions (CFDT, CGT, FO, CFE-CGC, CFTC) and the national representatives of unions representing employers (Medef, CPME, U2P) to discuss new mechanisms that could be created to implement such an employee dividend and, more generally, the future of employee profit-sharing in France.
However, both the employee and employer unions rejected the idea of an “employee dividend”. For unions representing employers, dividends are a reward for taking risks, and the concept of an employee dividend ignores the reality of small and medium companies. Employers were also wary of blurring the lines between share ownership and labour. On their side, employee trade unions were opposed to replacing wages with bonuses and called instead for higher base remuneration. As a consequence, the idea for an employee dividend was dropped.
The employee and employer unions’ national interprofessional agreement
Although the idea of an employee dividend was rejected by the unions, the government encouraged the unions to discuss potential reforms to profit-sharing in the context of strong inflation and growing demands for salary increases.
These discussions led, after almost a dozen negotiation sessions, to the signature on 10 February 2023 of a national interprofessional bargaining agreement on the sharing of profit within companies. The aim of this agreement is to involve employees more closely in the performance of companies, and particularly small businesses. Shortly after the execution of this agreement, the government announced its intention to transpose its provisions into law.
The transposition of the unions’ agreement into law
As announced by the government, a new bill aiming at transposing the national bargaining agreement of 10 February 2023 into law was presented on 24 May 2023 to the Council of Ministers. Its purpose is to encourage the sharing of profit within companies, while reiterating the principle of non-substitution, as per which amounts paid to employees as part of profit-sharing mechanisms must not replace salaries.
The bill is articulated around three main ideas: spreading the use of profit-sharing schemes; simplifying their implementation; and developing employee share ownership.
Developing profit-sharing within small companies
The measures included in the interprofessional bargaining agreement and the new bill are designed to further encourage the use of profit-sharing schemes in small companies.
These provisions would be introduced on an experimental basis for five years. The government will carry out an annual review and monitor the implementation of these new measures.
Introducing new measures triggered by an increase in company value or exceptional profits
The new bill also includes the following.
In March 2023, the President also mentioned sharing schemes for “super-profits” that are made when certain large companies buy back their own shares. The bill does not include any provisions dealing with this point at this stage. The Parliament could, however, introduce amendments in this respect.
Facilitating the grant of profit-sharing bonuses and free shares
Specific provisions are also included with respect to existing mechanisms, to introduce more flexibility and simplify their implementation.
Offering ISR funds in company savings and retirement plans
The bill also includes provisions to promote green and socially responsible savings. In particular, the companies will have to include in their company savings plans and retirement savings plans a fund that meets the criteria for financing the energy and ecological transition or socially responsible investment (eg, ISR, Greenfin or CIES funds), in addition to the “solidarity fund” that must already be offered in these plans.
The ongoing review of the bill by the Parliament and Senate
The bill has already been reviewed and amended by the Representatives of the French Parliament (Assemblée Nationale) in a first round of discussions that occurred in May–June 2023. In particular, the Representatives amended the bill to bring forward to 1 January 2024, ie, by one year, the experimental implementation of profit-sharing schemes in companies with 11 to 49 employees that are not subject to mandatory “participation”.
In addition, the obligation for small businesses to implement profit-sharing arrangements has been extended to companies of the “social economy” (ie, associations, co-operatives, etc), provided that their economic situation allows it. An extended industry-level bargaining agreement will be required.
With respect to the new obligation to negotiate in respect of exceptional profits, the Representatives have provided a framework for the definition of an exceptional increase in profits that the trade unions and unions representing employers will be able to adopt in the context of collective bargaining. This definition follows the recommendation set forth by the Administrative Supreme Court, and provides that an exceptional increase in profits will have to take into account “criteria such as the size of the company, the sector of activity, profits made in previous years or exceptional events external to the company that occurred before the profit was made”.
Other amendments, among others, would:
The Senate is now due to examine the bill. Several amendments may still pass before the bill is definitively adopted by both Parliament and Senate, likely before autumn 2023.
The Surge in Insolvency Proceedings and the Challenges They Pose for Job Preservation
During the COVID-19 pandemic, due to massive state support, in particular the postponing of tax and social contribution payments as well as the creation of specific state guaranteed loans (PGE), the number of insolvency proceedings in France significantly dropped. This trend started to reverse in 2022, where the number of insolvencies increased by 50%, even if it did not reach pre-COVID levels.
As of 2023, the number of insolvency proceedings, which was approximately 15,000 between January and March, ie a jump of 43.6% compared with the first quarter of 2022, appears to be back to pre-COVID levels. According to the latest official analysis supported by the French National Bank, companies are being weakened by the economic slowdown, inflation, reduced cash-flow and reduced access to financing. While the deadlines for debt-waiver plans and the reimbursement of state-guaranteed loans (PGE) appear to be respected overall, the burden of COVID debt is becoming increasingly heavy. These difficulties are likely to have serious repercussions on employment.
Already, these difficulties have led to the sale or liquidation of many historic and popular brands in France, in particular in the retail (Camaïeu, San Marina, Go Sport…) and food industries (Place du Marché, Courtepaille, Gorillas/Getir…).
Pre-insolvency proceedings (mandat ad hoc or conciliation), which are entered into at the request of the company to provide a framework for discussing with its creditors, have also increased in number, including for large and/or listed companies or groups.
Recent difficulties encountered by insolvent companies in recovering employee payments insured by the Wage-Guarantee Insurance (Assurance pour la Garantie des Salaires or AGS) have also led to an increasing number of disputes.
Maintaining jobs as one of the key elements considered in insolvency proceedings
In France, when a company is unable to meet its debts and liabilities that have fallen due with its available assets, it is deemed to be in a “suspension of payments situation” (état de cessation des paiements). In this case, the company must file a declaration of suspension of payments with the Commercial Court within 45 days.
The Commercial Court’s “opening” judgment will result in the company being placed under recovery proceedings (redressement judiciaire) or liquidation proceedings (liquidation judiciaire). The Court will also appoint agents (administrateurs judiciaires and mandataires judiciaires) to work with the company’s management. From the opening judgment, an observation period of up to six months begins, which may be renewed for up to 18 months.
In conjunction with the company’s management, the court-appointed agents will then look for solutions to maintain as many jobs as possible, while also allowing the continuation of the company’s business and the payment of creditors, either via a recovery plan or a sale plan.
Amongst the creditors with whom discussions are engaged, the French State is represented by the Inter-ministerial Committee for Industrial Restructuring (CIRI), whose role is to help companies in financial difficulty to devise and implement solutions to ensure their survival and development, and which can negotiate debt-waiving plans and/or defer the payment of taxes and social security charges. In return, the company must make a number of commitments, some of which include employment guarantees.
The issue of maintaining employment is one of the key issues taken into account by the Court before ordering a recovery plan or a sale plan, alongside the continuation of the company’s business and the paying-off of creditors. When in a competitive bidding process for the sale of a branch of the company’s business, the Court will pay very close attention to the employment aspects of the bids received before taking their decision, and may even encourage bidders to increase the number of employees they consider taking over. To make a difference in the bidding process, potential purchasers may even offer, or be asked, to contribute to the social plan implemented for employees who will not be taken over (and who will therefore be made redundant).
In a context of surge in insolvency proceedings, the scope and terms of job cuts and business transfers must therefore be closely monitored when these proceedings are initiated.
Balancing confidentiality, emergency and the information-consultation prerogatives of employee representatives
Employee representatives are closely involved in both pre-insolvency and insolvency proceedings. However, the commercial sensitivity and fast-paced nature of such situations calls for a very practical approach to dialogue with employee representatives.
Namely, in pre-insolvency proceedings such as conciliation, which are covered by strict confidentiality, the information (and, as the case may be, consultation) of the works council is in principle only required at the end of the process, shortly before the Commercial Court certifies the agreement reached with creditors. Works councils may therefore have very little time to assess the information they will receive. To mitigate the risk of disrupting dialogue with the employee representatives, companies may choose to disclose the fact that they are under pre-insolvency proceedings earlier in the process.
The works council is also involved in insolvency proceedings. Even before the filing of the declaration of suspension of payment, the works council must be informed and consulted on the draft filing to initiate recovery/liquidation proceedings. However, since these situations are often urgent, works councils are sometimes asked to give their opinion at the end of their first information meeting, which is unusual as the law theoretically gives them at least one month to do so. In such tight schedules and circumstances, communication with employee representatives is key.
In addition, the works council must also be consulted during the insolvency proceedings, mainly on the proposed recovery plan or sale plan and their consequences for the employees.
An increased risk of litigation fuelled by struggles to finance generous collective redundancy plans
Insolvency proceedings often involve a reduction in the workforce, provided for in the company’s recovery plan or sale plan. This downsizing is facilitated by an accelerated and streamlined procedure for consulting the works council in the event of a social plan (ie, if more than ten employees will be made redundant).
In practice, and especially in big companies where the number of contemplated redundancies is significant, informal works council meetings are regularly organised to keep the employee representatives informed of the process and mitigate risks of business and/or employee disruption (eg, strikes).
Less favourable social plans
Social plans implemented in the context of an insolvency are usually much less favourable than social plans implemented by viable companies and provide for a very limited number of employee measures due to the financial resources of the company being, by definition, also very limited.
In addition, the company may have trouble in funding the measures of the social plan, as well as the wages and statutory severance indemnities due to the employees who are made redundant.
Coverage by the Wage-Guarantee Insurance
To mitigate these risks, a Wage-Guarantee Insurance (Assurance pour la Garantie des Salaires or AGS), funded at the national level through social security contributions on wages, can cover wages and severance indemnities due by companies under insolvency proceedings.
However, the conditions to benefit from the Wage-Guarantee Insurance are very restrictive and sometimes subject to interpretation. In addition, over the past two years, due to internal organisational issues within the Wage-Guarantee Insurance body, the recovery of sums from Wage-Guarantee Insurance has been the source of an increasing number of disputes brought by insolvent companies and/or employees.
Due to these difficulties, employees are even more incentivised to seek other sources of funding in the context of their redundancies.
Seeking the responsibility of the shareholders
As their employer is facing economic difficulties, and the intervention of the Wage-Guarantee Insurance is not always straightforward and in any case is limited to certain types of employee liabilities, employees have historically tried (sometimes successfully) to establish the ultimate shareholders’ responsibility for the financial struggles of the company and to claim damages in reparation of the harm suffered due to the termination of their employment.
In the past, employees often sought to have a shareholder/parent company recognised as their “co-employer”, in particular if facts pointed towards a subordinated relationship of the employees with the shareholder/parent company, or an interference of the latter in the management of the employing company. However, as qualifying a “co-employer” relationship has become increasingly difficult due to stricter case law, employees have recently refocused their strategy on the liability in tort of the parent company/shareholder, accusing them of having mismanaged their subsidiary and ultimately caused its insolvency and, as a consequence, the related job losses.
In this context, specific precautions in terms of legal and business organisation should be taken to limit the shareholders’ exposure in respect of their French subsidiaries.