Social partners sign agreement on labour market reform

After four months of collective bargaining, on 11 January 2008, employer organisations and four trade union confederations reached an agreement on ‘modernising the labour market’. The agreement lays the basis for a French version of ‘flexicurity’; it establishes more flexible conditions regarding recruitment of workers and termination of employment, on the one hand, while maintaining some employee rights if the employment contract is terminated, on the other.

A new multi-sectoral agreement, concluded between the employer organisations and trade union confederations after four months of collective bargaining, aims to modernise the French labour market. The agreement was reached on 11 January 2008 and underpins the notion of ‘flexicurity’, combining greater flexibility and employment security.

Rendering employment contracts flexible

The agreement, which is composed of 19 articles, includes three main new measures regarding employment contracts.

First, alongside resignation and dismissal, a new way of terminating employment contracts has been introduced, namely termination by a negotiated agreement or by mutual agreement between an employer and an employee, while at the same time giving employees the right to change their mind up to two weeks after signing the agreement. This procedure must be validated by the public employment service of the Offices at département level of the Ministry of Labour, Employment and Vocational Training (Direction Départementale du travail, de l’emploi et de la formation professionnelle, DDTEFP). The public employment service has a deadline of 15 calendar days; if it makes no interjection within that period, its silence means validation. The employee is then entitled to a lump sum on contract termination, equivalent to a fifth of a month’s pay for each year of service, as well as unemployment benefit.

Second, probation periods of permanent employment contracts have been lengthened, although to a lesser extent than employer organisations originally wanted. The new probation periods are as follows:

• between one and two months maximum for manual and clerical workers;

• between two and three months for supervisory staff and technicians;

• between three and four months for professional and managerial staff.

This period can be renewed once by sectoral agreements. A shorter period can be fixed in the recruitment letter or employment contract; young people’s placements count towards the probationary period.

Third, a new employment contract has been created on an experimental basis for professional and managerial staff, ‘for carrying out a defined assignment’. The length of the contract is limited, but not specifically defined at the time of signing it, as it depends on when the assignment comes to an end. It must last between 18 and 36 months. The use of such a contract is subject to a sectoral or company-level agreement and ‘cannot be used in order to deal with a temporary increase in the workload’. This employment contract can be terminated after a year if there is a real and serious reason. In such an event, the employees concerned receive a lump sum that is equivalent to 10% of their total gross pay and is exempt from social security contributions and tax. They are also entitled to unemployment benefit and support services to find a new job.

Portability and improvement of some employee rights

Employees are guaranteed certain rights including during periods of unemployment. They thus keep 100% of what is left of their right to training time that has accumulated in the framework of the individual right to training (Droit individuel de formation, DIF) (FR0311103F, FR0711019I). The number of hours concerned can be converted into training, skills assessment, validating work experience (validation des acquis de l’expérience, VAE) (FR0404NU04) or other support services to reintegrate into the labour market as soon as possible.

Employees also continue to be covered by their top-up health insurance scheme during a third of the period in which they receive unemployment benefit, with a minimum of three months. This measure is financed jointly by the former employer and employee in the same proportions as previously or by a pooling system that is defined by collective agreement.

The new agreement standardises the calculation for an intersectoral lump sum relating to termination of employment, which cannot be less than a fifth of monthly pay per year of employment; up to now, this proportion has stood at a tenth of monthly pay. A lower and upper limit will be fixed by legislation for court cases regarding termination of employment contracts with no real or serious reason. It will be possible to receive this payment after one year in the job, compared with two years currently. Finally, those aged under 25 years who are involuntarily jobless – and do not fulfil conditions regarding previous employment that give the right to unemployment benefit – will be awarded a flat-rate bonus; the amount of this bonus will be fixed at the end of future multi-sectoral bargaining on unemployment insurance.

Positions of social partners

Trade unions

A total of four out of five trade union confederations signed the agreement, which means that it is validated; for this to be the case, the law requires a majority of the recognised representative union confederations to sign. Overall, two types of considerations guided the trade unions’ position:

• the content of the agreement itself, notably the balance between flexibility and security;

• the wish to avoid political and legislative intervention. Prime Minister François Fillon had warned that, if an agreement was not reached, the government would impose its own rules for reforming the labour market.

The General Confederation of Labour (Confédération générale du travail, CGT) emphasised that ‘the employers’ side has moved its position somewhat because the trade unions had put joint pressure on them right until the end’. However, CGT was the only trade union confederation which refused to sign ‘an unbalanced agreement that, in spite of a few positive measures, increased job insecurity for employees’. In CGT’s view, the introduction of ‘termination by negotiated agreement’ of employment contracts represents a significant attack on French labour law, thus making it possible to avoid the fundamental rule of there being a real and serious cause for termination, which so far protects employees.

The other four representative trade union confederations considered that, although the agreement is modest, it undeniably included positive aspects for employees. These four union groups included the General Confederation of Labour – Force ouvrière (Confédération générale du travail – Force ouvrière, CGT-FO), the French Christian Workers’ Confederation (Confédération française des travailleurs chrétiens, CFTC), the French Confederation of Professional and Managerial Staff – General Confederation of Professional and Managerial Staff (Confédération française de l’encadrement – Confédération générale des cadres, CFE-CGC) and the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT). CFTC President, Jacques Voisin, spoke of an ‘initial step towards making career paths more secure’ (FR0710029I). The General Secretary of CGT-FO, Jean-Claude Mailly, referred to an agreement that was ‘balanced and gives employees additional rights’. Meanwhile, the head of the CFDT negotiating team, Marcel Grignard, welcomed progress for employees, while at the same time expressing ‘deep regret that a considerable number of the proposals made to make employees’ career paths more secure have not been retained’.

Through their ratification of the agreement, the trade union confederations showed, above all, their desire not to yield an inch to the government on the eve of three important multi-employer bargaining sessions in 2008 – the first on trade union representativeness, the second on unemployment insurance, and the third on vocational training of jobseekers and those less skilled. The undertaking in the agreement to create a working group on the transferability of employees’ rights is seen as ensuring that more progress will be made towards making career paths secure and, at the same time, as admitting that the agreement is limited in this respect.

Employers

The main employer organisation, the Movement of French Enterprises (Mouvement des entreprises de France, MEDEF), which was involved at the start of the bargaining, greatly welcomed the ratification of the agreement. The accord was also signed by the Craftwork Employers’ Association (Union professionnelle artisanale, UPA) (FR0712039I) and the General Confederation of Small and Medium-sized Enterprises (Confédération générale des petites et moyennes entreprises, CGPME). CGPME conceded the abolition of the ‘new recruitment contract’ (Contrat nouvelles embauches, CNE), which had been created by the previous government – a contract that was available for companies with fewer than 20 employees and introduced a two-year probationary period (FR0801029I, FR0705029I).

Within the new agreement, the new employment contract ‘with a defined assignment’ has been a demand of MEDEF for several years, as was terminating employment contracts ‘by mutual agreement’. The President of MEDEF, Laurence Parisot, presented the latter as a factor for ‘pacifying industrial relations’ and ‘making job creation more dynamic’.

Next steps

Now that the agreement has been signed, it will serve as the basis for a law which is due to be presented to parliament by June 2008.

Florence Lefresne, Institute for Economic and Social Research (IRES)