The ‘new recruitment contract’ (contrat nouvelles embauches, CNE) was introduced in August 2005 by the Villepin government. However, significant legal uncertainties still arise concerning the future of the CNE. Furthermore, the government’s figures regarding its impact on employment have been contested in a context of controversy over the method of calculating the unemployment rate and thus establishing current employment levels.
Legal issues
The ‘new recruitment contract’ (Contrat nouvelles embauches, CNE) concerns small and medium-sized enterprises (SMEs) with 20 or fewer employees (FR0507103F). It was established by executive order on 2 August 2005 with the aim of boosting employment, and since then has been strongly criticised as potentially leading to the development of insecure employment.
Theoretically, during a consolidation period of two years, employers can break the employment contract without any justification (FR0511102F). Nevertheless, much uncertainty still exists about the implementation of this aspect which was considered the main feature of the contract. In particular, it may be contrary to the International Labour Organization (ILO) Convention No. 158 on the termination of employment, which was ratified by France. This convention stipulates that an employee cannot be dismissed ‘unless there is a valid reason’ and ‘before he is provided an opportunity to defend himself’, except during a trial period of ‘reasonable’ length.
The legal saga – which started with the first cases taken by employees to industrial tribunals (Conseils de Prud’hommes) – is ongoing. The latest episode concerned a decision of the disputes’ tribunal (Tribunal des conflits), which is asked to arbitrate on the allocation of cases between the administrative and the judicial courts. The disputes’ tribunal ruled that it was within the judicial courts’ competence to assess whether the CNE is in line with international law.
Although this decision seems to be of a purely technical nature, it has significant and sensitive implications. In October 2005, the CNE legislation had been validated by the Supreme Administrative Court (Conseil d’État); therefore, it was in the government’s interest that the legislation be entrusted to an administrative judge for considering the CNE’s compatibility with international law.
The ILO’s opinion was initially expected in November 2006, but has not yet been announced.
Debate on impact assessment
Further controversy has erupted over the impact of the CNE on employment. As it was established with the aim of boosting employment creation, the CNE figures have been regularly presented by the government as achieving this objective. However, these data have been frequently contested as being unreliable.
The government has often made announcements about employers’ intentions to recruit people using the CNE, based on ‘single notifications of recruitment’ (Déclarations uniques d’embauches, DUE). Such notifications are an administrative obligation in France, but so far these have never been used for statistical purposes. Using these data as a basis creates three kinds of problems.
- Firstly, such notifications are a statement of intention to recruit but do not necessarily lead to actual recruitment.
- Secondly, the notifications of recruitment can be made by completing a form by hand or over the internet. However, the available forms that are filled in by hand still do not mention the CNE. New recruitment is therefore estimated only on the basis of uncorrected extrapolation from notifications over the internet. Nonetheless, it is probable that companies which use this modern method of notification are also those which know most about new employment contracts and thus use them more.
- Thirdly, DUE only measure a flow, so rates of breaks in the flow should also be applied.
The initial net impact on employment, which was announced by the government at the beginning of 2006, was calculated by applying a coefficient to the accumulated flow of intentions to recruit; this coefficient was taken from a survey carried out by Fiducial – a company that services small companies – among its own clients. According to this survey, about a third of companies which had recruited an employee using the CNE would not have done so without the new contract. However, this figure has been fiercely contested and has since been shown to be inconsistent with later surveys carried out on the initiative of the Ministry of Labour, Social Relations and Solidarity (Ministère du Travail, des Relations Sociales et de la Solidarité).
Survey on use of CNE
The latest survey by the Ministry of Labour’s Directorate for Research, Analysis and Statistics (Direction de l’Animation de la Recherche, des Études et des Statistiques, DARES) on the use of the CNE was published in March 2007. The results indicate that only 8% of heads of companies who had recruited using the CNE in May 2006 would not have done so if the new contract had not existed and that, for 19% of them, the CNE made it possible to anticipate recruitment.
It is also possible to compare initial intentions to recruit using the CNE – calculated on the basis of the DUE – with the rate of intentions that are actually transformed into recruitment and the rate of breaks in the flow, provided by the DARES surveys. This calculation reveals that the number of people hired under a CNE contract was, at the end of 2006, half of the accumulated flow of intentions to recruit calculated on the basis of the DUE – that is, around 400,000 contracts compared with 800,000.
Overall, at the end of 2006, the CNE’s impact might thus have been the creation of about 35,000 net jobs, representing 8% of 400,000 posts. Nevertheless, the authors of the DARES study were careful to indicate that the coefficients based on assertions made by company managers should be interpreted with caution. Previous experience has shown that heads of companies tend to overestimate the number of jobs that would not have been created if a particular measure had not been adopted.
Applying such coefficients to the numbers of people hired, according to indirect calculations on the basis of the DUE and DARES surveys, makes the estimation even more tentative. The only way of accurately assessing the number of people hired as a result of the CNE would be to analyse the data from the Labour Force Survey carried out by the National Institute of Statistics and Economic Studies (Institut national de la statistique et des études économiques, INSEE) and data from the unemployment insurance scheme, the National Union for Employment in Industry and Commerce (Union nationale interprofessionnelle pour l’emploi dans l’industrie et le commerce, UNEDIC). However, the publication of results using these sources has been postponed until November 2007 – well after the presidential and parliamentary elections, which took place in April, May and June; the scientifically justified nature of this decision has been questioned.
Reactions of social partners
Trade unions have reacted more in relation to the legal aspects than to the impact assessment of the CNE. As early as August 2005, the General Confederation of Labour (Confédération générale du travail, CGT) referred the matter to the ILO, and they were followed by the General Confederation of Labour – Force ouvrière (Confédération générale du travail – Force ouvrière, CGT-FO). The trade unions also lodged the appeal which led to the Supreme Administrative Court giving its opinion.
Meanwhile, employer organisations, especially the General Confederation of Small and Medium-sized Enterprises (Confédération générale des petites et moyennes entreprises, CGPME), have defended the measure. They describe the legal problems as being of secondary importance and continue to state that the measure created many jobs in spite of assessments to the contrary.
Yannick Fondeur, Institute for Economic and Social Research (IRES)