France: Labour market modernisation agreement signed

Employment contracts

The labour market modernisation agreement states that the open-ended contract “is the normal and general form of the employment contract”. Fixed-term contracts and temporary agency work should allow employers to “deal with temporary labour needs”. They should be used “in a responsible manner, respecting their purpose”, which is to meet “objectively identifiable” temporary needs for “reinforcement, transitions and replacement”, as identified by the company’s works council (or employee delegates, where there is no works council).

The accord sets out the process through which employee representatives should be informed about the use of fixed-term contracts and temporary agency work. It also calls on the public authorities to simplify and rationalise current subsidised employment contract schemes.

The agreement aims to “facilitate the access of young people to working life”, notably through open-ended contracts, and promote their “durable integration” in employment. The main provisions on this point are as follows:

Probationary periods for new employees are currently set mainly by individual employment contracts and collective agreements. The accord introduces new national rules on the length of probationary periods that will apply to all employees, unless there was a sectoral collective agreement providing for longer periods in place on 11 January 2008. The maximum durations are:

• one to two months for blue- and white-collar workers;
• two to three months for technicians and supervisors; and
• three to four months for managerial and professional staff.

These probationary periods may be renewed once if this is permitted by a sectoral collective agreement, bringing the maximum lengths to four, six and eight months respectively.

The duration of the probationary period must be stated explicitly in the employee’s letter of engagement or employment contract, and shorter periods than the new upper limits are permitted.

During the probationary period, the contract may be terminated by the employer with: two days’ notice during the first month; two weeks’ notice during the second and third month; and one month’s notice during the fourth or subsequent months. Throughout the probationary period, the contract may be terminated by the employee with two days’ notice.

The intersectoral agreement aims to facilitate employees’ access to certain rights linked to length of service with an employer. Principally, it makes access to collectively agreed supplementary sick pay (which tops up statutory sickness benefit) easier. All periods of work carried out for the same employer under a contract of employment will now be included in calculating whether the employee has the required length of service for sick pay entitlement. Further, the length of service required will be cut from three years to one year, and sick pay will be payable from the seventh day of sickness absence, rather than the 11th day, as previously.

The agreement provides that negotiations at sector and company level will examine other ways of facilitating access to rights linked to length of service with an employer. For example, sector-level agreements could provide that all periods of employment in the sector concerned, and not just with the same employer, count towards length of service for entitlement to certain rights.

The agreement states that occupational and geographical mobility should offer employees possibilities of career development and advancement, and provide “protection against loss of employment”.

With regard to occupational mobility at the employee’s initiative, the agreement provides that employees should have access to public employment services while still in their current job. With regard to occupational mobility at the employer’s initiative, and to geographical mobility generally, employers will provide assistance, such as arranging visits to potential new workplaces, or providing relocation assistance, help in finding accommodation and assistance in finding jobs for partners.

Companies with more than 300 staff will examine the introduction of a “mobility experimentation period”, allowing employees to try out new jobs, and to return to their old position if a new one proves not to be suitable.

Where geographical mobility forms part of an employee’s normal career path, employers should ensure that this is organised in a way that is compatible with the employee’s family responsibilities.

Further, in co-operation with the public authorities, ways will be sought of making it easier to transfer from one “employment law status” to another – for example, moving from being a public sector employee to a private sector employee, or from employment to self-employment – so that the person concerned enjoys continuity in terms of their employment rights.

The current procedures for terminating open-ended employment contracts are complex and often involve long delays and high costs, with contentious legal proceedings frequently ensuing. The agreement therefore – “without calling into question the existing ways of terminating open-ended contracts, or affecting the procedures for collective redundancies on economic grounds” - introduces a new way of terminating contracts by mutual agreement between employee and employer, separate from resignation or dismissal.

Under the new arrangements, the employer and employee can simply agree to terminate the contract. However, there are certain guarantees for the employees concerned:

• they are entitled to be accompanied in talks prior to the decision on termination by a person of their choice, who may be an employee representative or other employee, or an external “employee adviser” in companies with no employee representatives;
• they must be informed of their right to contact the public employment services in order to be able to assess their future employment prospects before agreeing to a mutual termination of the contract;
• they have a 15-day “cooling-off” period after agreeing to the mutual termination, during which they may retract their agreement; and
• after the 15-day period, the local labour authorities must confirm the termination of the contract. If they do not object within a further 15 days, the termination stands.

A standard form will be used to document the procedure, with copies for the employee, employer and local labour authorities.

To allow the employment of senior technical employees and managerial and professional staff to work on projects of uncertain duration, the agreement introduces, on an experimental basis, a new form of fixed-term employment contract for the “realisation of a defined objective”, lasting between 18 and 36 months. The contract may not be renewed and may not be used to deal with temporary increases in the employer’s activity.

The contract may only be used if a sectoral collective agreement (or, in its absence, a company agreement) is in place, defining the “economic necessities” that can justify its use. The collective agreements in question should also deal more generally with the conditions under which fixed-term contracts may be used, “in order to rationalise their use and reduce precariousness”, and with matters such as training to improve the employability of the workers concerned. Further, the agreements should define ways of giving employees on the new form of contract priority in access to open-ended jobs in the company when the project ends, and ways of helping these employees’ subsequent career development.

The fixed-term employment contract for the “realisation of a defined objective” must state expressly the project for which it has been signed and whose completion means the expiry of the contract. It may be terminated by either party, for a “real and serious” reason, after one year. Termination entitles the employee to a payment worth 10% of total gross pay due for the entire contract period, free of tax and social security contributions. The contract should specify the notice – which must be of at least two months - that must be given to the employee that the completion of the project, and thus the end of the contract, is approaching. If the employer plans to offer the employee an open-ended contract, the same notice must be given.

At the end of the contract, the employee is entitled to: a payment worth 10% of total gross pay due for the entire contract period, free of tax and social security contributions; unemployment benefits; and the assistance normally offered to unemployed people. This applies if the employer does not offer an open-ended contract, on terms at least equivalent to the initial contract, after the fixed-term contract expires, or if the employee refuses such an offer on the grounds that the terms are worse.

The signatories of the agreement will set up a “follow-up committee”, to examine the implementation of the new contract, which will meet every six months. On the basis of the committee’s findings, the social partners may amend the scheme if necessary.

The agreement states that certain clauses that appear in managerial and professional employees’ employment contracts need to be made more precise in their application. This applies particularly to non-competition clauses (eg preventing employees from working for competitors after leaving their current employer), where greater precision is sought on the duration of their effect, financial compensation for the employee and so on. The social partners will negotiate on detailed new rules in this area.

Employees who lose their jobs lose many employment-related rights until they find a new job. The labour market modernisation agreement introduces a “portability mechanism” to enable the maintenance of some rights during periods of unemployment. The scheme applies only to employees who have not been dismissed on grounds of gross misconduct and who are entitled to unemployment benefits.

Under the agreement, workers will retain their rights under employment-related supplementary health insurance and social welfare schemes applicable to their former employer if they become unemployed. This entitlement will last for at least one-third of the period during which they are entitled to unemployment benefits, with a minimum of three months. During this period, the health insurance and welfare contributions will be paid jointly by the worker and the former employer, or through a mutual system based on a collective agreement.

Under the current “individual training right” (droit individuel à la formation, DIF) scheme, employees are entitled to 20 hours’ paid time off for training per year (the entitlement may be saved up for up to six years). The new agreement enables workers who lose their job to retain their acquired DIF rights. If they decide to use these rights while unemployed, they will receive a sum calculated at a flat rate of €9.15 per hour of DIF entitlement. This should be spent, in agreement with the public employment services, on training, skills assessment or other accompanying measures. If workers do not use the DIF entitlement while unemployed, they may use it during the first two years in a new job.

In the year after the intersectoral agreement comes into force, unions and employers in all sectors should open industry-level negotiations on specific portability provisions and on the “possibilities of introducing portability or transferability for other rights”, such as those relating to employee savings schemes. The provisions of the intersectoral agreement are regarded only as a first step in this area, and the signatories have set up a working group to examine further measures to “encourage mobility and make transitions between jobs more secure”.

The social partners state that specific resources will be provided to help the skilling or reskilling of those workers and jobseekers whose “training deficit” makes it difficult for them to find or keep a job, or to progress in employment. These resources will be adapted to the needs of  the workers concerned and employers, and will focus on areas such as the acquisition of “basic knowledge” or “occupational competences and qualifications”. In forthcoming negotiations on vocational training, the central social partners will seek to ensure “durable” funding for measures to achieve these objectives, and discuss the details with the other bodies concerned.

Negotiations over a new national agreement on unemployment insurance will start during the first half of 2008. The talks will deal with creating a “replacement income” for more unemployed people than currently receive unemployment benefits.

At present, in order to receive unemployment benefit, workers: require a minimum contribution and employment history; must have lost their job involuntarily; and must be registered with the public employment services as a jobseeker. As a result, only a minority of unemployed people - 46.1% in July 2007 - receive unemployment benefits under the general insurance scheme (which is managed by the social partners and largely financed by employers’ and employees’ contributions). A further 12.3% receive benefits under a state “solidarity” scheme.

The forthcoming negotiations will seek to extend benefits to more unemployed people and to clarify the respective roles of the insurance scheme and the state welfare system. The social partners believe that the conditions for entitlement to benefit should be made simpler and clearer and adapted to “the new characteristics of the labour market”. Higher benefits should be paid, but for shorter periods, within the framework of a greater emphasis on personalised measures to help unemployed people find employment and on incentives to return to work. The new arrangements should also take into account a need to encourage older workers to stay in employment longer. Further, the negotiations will examine whether groups such as workers who have resigned should be entitled to benefits.

The accord underlines a need to improve accompanying measures for job-seekers with a view to  accelerating their return to a high-quality job and better meeting employers’ needs. Such measures should take account of individual needs and be accessible to all jobseekers. This, according to the social partners, requires more resources, “calling on the resources of different labour market agents”, including “private operators”, along with improved schemes based on a “personalised return-to-work assistance plan” for each jobseeker.

The agreement stresses the importance of job-seekers taking an active role in finding work, in order to ensure that measures to help them are effective. It calls for the “respect of reciprocal rights and duties” and states that this involves a clearer definition of: the ways of monitoring the effectiveness of unemployed people’s search for jobs; and of the concept of the “valid job offers” that they should accept.

A practice known as “portage salarial” has developed in France, whereby workers provide services to a company on a temporary basis, via a special “portage” firm (société de portage). Essentially they are freelance workers or consultants, but are not formally self-employed, instead receiving payment from the portage firm, which bills the user company for their services. Currently this practice, which differs from temporary agency work proper, is not specifically regulated by law. The accord provides that the triangular relationship between the worker, the portage firm and the user company should now be regulated by a sectoral agreement negotiated by the social partners in the temporary agency work industry. This should guarantee that the workers concerned are treated as employees and receive payment for the services provided to the user company. Further, a portage relationship should not last for more than three years.