French Employment law reform: Our answers to your questions about the new mechanism enabling to terminate several employment contracts all at once
Created by the Ordinance n°2017-1387 of 22 September 2017 and entered into force on 23 December 2017, the Contractual Collective Termination (hereafter "CCT") is a new way to terminate employment contracts through a negotiated collective agreement.
Beyond traditional dismissals and resignations, the French Law of 25 June 2008 created the “contractual termination”.
Such a termination enables the employer and one employee to mutually agree about the termination of the employment contract, under the control of the Labor Administration.
This very flexible mechanism proved successful, but was solely applicable to individual termination until the French Employment Law reform.
Henceforth, the CTT enables the company to set up contractual terminations for several employment contracts, by negotiating a collective agreement with employee’s representatives.
Here are 10 points to better understand this new mechanism.
1. For which companies?
For all companies, regardless their size.
2. For what purpose? In what context?
The purpose of this negotiated mechanism is to collectively reduce the workforce without any economic reason.
Until now, economic reasons was mandatory for the company to set up terminations of several employment contracts.
It therefore implies, in our opinion, a peaceful social atmosphere at a moment where the company is in no trouble.
During negotiations, the Trade Unions or the Staff’s Representatives will remain demanding on the compensations offered to employees, especially for severance pay and accompanying measures for professional retraining.
3. For which employees?
The collective agreement may provide either that all employees are eligible, or that its application is restricted to only some of them.
The employer may negotiate that the company is granted the right to refuse the application of an employee if its retention in the workforce is essential to its proper functioning. In practice, the employer will be under the obligation to demonstrate objective and obvious reasons justifying the retention, for example the fact that an employee has a very rare expertise.
Subject to the authorization of the Work Inspection, the CCT may also concern an employee who holds a mandate as a Union Representative or as a Staff Representative.
4. How to set it up?
It can be set up exclusively by a collective agreement.
In accordance with the provisions of the new laws on collective bargaining, the CCT is established:
· By an agreement between the employer and the Trade Union Delegates;
· In the absence of Trade Union Delegates, by an agreement between the employer and the members of the Social and Economic Council, whether they are mandated or not by a Trade Union;
· In the absence of any representative body, by a draft agreement presented by the employer and ratified by the employees in a referendum.
5. What is the content of the CCT?
Article L. 1237-19-1 of the Employment Code provides that the CCT must determine:
· the conditions and procedures for implementing the termination of the employment contract;
· the information procedures of the Social and Economic Council;
· the conditions employees must fulfill to benefit from the CCT;
· the maximum number of departures considered;
· the criteria to resolve conflicting or competing application for departure;
· Accompanying professional mesures…
6. Is this collective agreement under regulatory control?
The employer must first inform the Labor Administration of the opening of negotiations.
Once the agreement is concluded, it is sent to the Labor Administration for validation.
This latter comprehensively reviews the CCT, based on:
· The reason of the CCT project - which cannot be to circumvent the mandatory rules of dismissal for economic reasons;
· The categories of employees benefiting from the CCT - which cannot have for effect to create discriminations;
· The accompanying measures - which must be precise and material.
The Labor Administration has 15 calendar days from the receipt of the CCT to notify its decision. Failure to reply within this time period is tantamount to acceptance.
The Social and Economic Council (i.e. Work Council) is entrusted with the task of controlling the implementation of the CCT.
7. What are the consequences for the employee leaving the company pursuant to a CCT?
The acceptance of the employee’s application by the employer entails the termination of the employment contract by mutual agreement.
The employee will benefit from:
· unemployment insurance ;
· accompanying professional measures ;
· the severance payments set in the agreement.
Important point: severance payments are exempt from income tax and social security contributions up to 79.464€ (this amount being slightly modified every year).
8. Is it a blank cheque granted to the employer to set up a predetermined number of individual contractual termination of employment contracts? No.
Although the flexibility of individual contractual termination inspired the creation of the CTT, its objectives and methods of implementation are distinct.
The CCT is implemented through a collective agreement framing the amicable and identical termination of several employment contracts. The individual agreement of each employee intervenes only in a second time and may be subject to the employer’s acceptance. Therefore, it does not allow a predefined number of employees to negotiate individually their departure conditions.
9. Is this a new "golden handshake”? Not really.
The CCT incorporates a logic of compensation, but seeks chiefly:
· To help employees find an equivalent job (training actions, accreditation for work experience);
· To support Professional retraining;
· To support the creation or recovery of a business.
10. Is it a new form of voluntary departure plan? Yes and no. .
When the company is under trouble, and seeks to reduce its workforce without excluding recourse to dismissal, it can set up a “voluntary departure plan” offering the choice for some employees to leave the company on preferential terms.
The CCT is very much inspired by such an instrument, but it remains distinct from it in that:
· The CCT cannot be motivated by any economic reason, which excludes recourse to such a mechanism in case a Job Saving Plan is ongoing;
· It results from a bargain between the employer and the representative of the employees: it cannot be implemented by a unilateral decision of the employer.
The CCT is an autonomous measure to terminate employment contracts by mutual agreement.
Its purpose is to avail employers of a new mechanism for the termination of employment contracts, complementary to those already existing under French law.
However, if the CCT is neither wisely used by the employers nor negotiated in mutual understanding, there is a high risk that the CCT projects will not succeed or that future agreements will not be validated.
One challenge still remains for employers: displaying to Trade Unions the reasons that lead them to propose such a mechanism in a context where the company is doing well.
French employment is definitely becoming more and more flexible.