France: Reform of the 35-hour week

During December 2004, the prime minister of France announced the government's programme for 2005. It includes a number of changes to the operation of the 35-hour week, essentially providing more flexibility for people to work longer if they wish. We examine the main changes below.

Introduction

On 9 December 2004, the prime minister of France, Jean-Pierre Raffarin, presented the government's programme for the forthcoming year: Contrat France 2005. He announced 28 measures, structured around three major themes: employment, daily life and purchasing power, and schools. Employment-related measures account for half the proposals; a key place was accorded a range of measures designed to allow more flexibility in the operation of the 35-hour week. The reform, which will be the object of a "parliamentary initiative" during January 2005, encourages businesses and their employees to increase the number of hours worked, without revoking the statutory length of the working week, which remains 35 hours.

The 35-hour week was introduced in France under Lionel Jospin's socialist government in 1998 (see box ) through the first loi Aubry (EIRR 294 p.19). More recently, the rigid regulations that initially operated have been relaxed. In January 2003, the then social affairs minister, François Fillon, introduced legislation named after him. This legislation made it easier for companies to implement the 35-hour week by introducing more flexibility, raised the statutory overtime ceiling, allowed smaller companies to pay lower overtime premia and gave the social partners greater flexibility to negotiate on the organisation of working time. It also introduced changes to so-called "time-saving" schemes, which allow employees to "save" additional hours worked in a special time-saving account (compte épargne-temps) and exchange them for cash or use them against time off at a future date (see France: New 35-hour-week law approved).

During the second half of 2004, the country was caught up in a lively debate about the future of 35-hour working, which was initiated, among other things, by an accord between unions and management at a factory outside Lyon belonging to the German-owned automotive company, Bosch (see France: New 35-hour-week under pressure). This accord provides for employees to work one hour a week longer without receiving any additional pay. Since then, other companies have concluded agreements introducing changes to working time arrangements.

While the unions consistently voice their fears that such changes are the first steps towards dismantling the groundbreaking 35-hour week legislation, employers' organisations welcome the introduction of measures that allow employees to choose whether they wish to work longer hours. They also view the ensuing flexibility as a positive step towards making French companies more competitive internationally.

The proposed reforms

According to the government, the proposed reforms underpin three broad goals: to uphold the statutory working week of 35 hours; to preserve the competitiveness of business - in particular, small companies; and to allow those employees who so wish to work longer hours and earn more money. This latter point applies especially to management employees. Mr Raffarin and the president, Jacques Chirac, have stressed on several occasions that the government is not "calling into question" the statutory duration of the working week, which will remain 35 hours. However, at his traditional New Year's speech, which he gave on 3 January 2005, Mr Chirac acknowledged that he did not wish the 35-hour working week to be "a constraint on business development or the aspirations of employees".

"Bypassing" the 35-hour week

Some commentators describe the government's manoeuvres in this area as "bypassing" the 35-hour week. Although it upholds the statutory 35-hour weekly working time limit, it provides the opportunity for workers to choose whether they wish to work longer hours. It raises the legal limit for overtime hours, from 180 hours a year to 220, and introduces a new type of collective agreement (accord du temps choisi) that will cover hours worked over and above the agreed quota for the enterprise or sector. It also amends the conditions applying to time-saving accounts.

Overtime quota
On 22 December 2004, Decree No. 2004-1381 on raising overtime quotas appeared in the French official journal, raising the legal quota of overtime hours from 180 to 220 a year. This move forms the second part of a reform of overtime that was initiated by François Fillon in 2003, which:

The new limits will apply to those companies that do not already have an agreed quota of overtime hours set out in a company or sectoral collective agreement.

Choice in working time

A new type of collective agreement providing for employees to choose the extent of overtime hours they wish to work will be introduced. Such agreements will apply to hours worked above the legal quota or the agreed quota of overtime for the company. However, it takes the form of a "double" agreement, which means that a company or sectoral agreement providing for this measure must be in place and the agreement of the employees concerned must be obtained. Thus, it will be the manager's responsibility to ascertain whether employees wish to work additional hours. Any hours that exceed the company's normal quota must be worked on a strictly voluntary basis. Employers may suggest that the employees might wish to work longer but they cannot force them.

A company collective agreement will set out the conditions governing the system and how the additional hours will be remunerated, which may not be at a rate that is lower than the overtime rate already being paid at the company.

Help for small companies
Small companies of 20 employees or fewer currently benefit from a derogation from the 35-hour week legislation that allows them to pay a premium of 10% for overtime worked (from the 36th to the 39th hours) instead of the normal 25%. This derogation, which runs until 31 December 2005, is to be extended for another three years, to 31 December 2008.

Time-saving schemes
There are many workers who wish to exchange part of their leave allocation or the time off they are entitled to under the reduction in working time legislation for a cash payment or for paid time off in the future. These employees will benefit from the proposed reforms to time-saving accounts.

Here, Mr Raffarin's proposals will extend the options available for "paying in" to time-saving accounts. The annual ceiling of 22 days will be removed, meaning that there is no limit to the amount of time that may be saved into these accounts. The five-year limit on using hours saved in these accounts is also abolished. At the end of every year, employees will be able to transform their credit into cash, transfer it to a company savings plan or retirement savings plan, or to put the hours and days saved towards time off in the future (see box for details).

Under certain conditions and on a voluntary basis, these options may also be made available to employees in small companies of 20 and fewer employees, where there is no collective agreement in place relating to time-saving accounts. In addition, some national assembly members from the government parties are calling for management staff at companies which have not agreed time-saving accounts to be able to participate in such a scheme.

This legislation will be presented to parliament during January 2005, and a draft Bill will be brought before the National Assembly in the first two weeks of February.

Reactions

Employers
According to many analysts, the government's announcement of the proposed changes to the 35-hour week appears to signal a reconciliation between the employers' association, Medef, and the government. In the past, the president of Medef, Ernest-Antoine Seillière, has often criticised the government for not supporting business interests. However, following Mr Raffarin's unveiling of the government's programme for 2005, Mr Seillière praised the prime minister for his efforts in addressing "France's exceptional position" with regard to the 35-hour week at such a crucial time "when Europe is entering a new phase."

Mr Seillière said: "Since May 2002, we have been waiting hopefully, impatiently and eventually in exasperation, for the government to address the central economic and social question of working time in French companies." He highlighted the positive aspects of allowing people to work longer hours, saying: "It will be possible for people to work more and earn more. This will be an advantage for employees and companies alike. It will increase people's purchasing power, will create more employment and will assist growth."

Above all, Mr Seillière welcomed the fact that changes to working time will be the subject of negotiations at company or sectoral level. This, he said, forms an integral part of the much-vaunted social reform (Refondation Sociale), which has been at the heart of Medef's policies. This favours dialogue at the "lowest" level and "the priority of company agreements" over laws "passed from on high" - an approach which, according to union organisations, renders employees more vulnerable; the unions prefer agreements to be concluded at sectoral level.

The 35-hour week has indeed been the main focus of combat for the employers' organisation since 1997, when Mr Seillière took over from his predecessor, Jean Gandois. Mr Gandois had been forced to step down over the issue, and when Mr Seillière took over, the name of the organisation was also changed, from CNPF to Medef. It had one major policy focus - the 35-hour week.

The unions
While employers' organisations have given a unanimously warm welcome to the government proposals, the unions' reaction is very different. Having been divided among themselves over the issues for several months, following Mr Raffarin's announcement they all vigorously spoke out against his proposals. These, they claim, are an attempt to abandon the 35-hour week and will endanger employment opportunities in the future. However, even though they tried to set up meetings and devise a joint strategy during December 2004, it seems that these meetings merely revealed the depth of the mutual mistrust that still remains, following previous disunity in the face of government reforms to pensions (EIRR 352 p.6) and the sickness insurance system.

The general secretary of the CGT union confederation, Bernard Thibault, called on his colleagues to start working together and said: "If this government has found itself able to satisfy the demands of Medef, it is because the unions are not presenting a united front, are disorganised, and basically inactive." He said that he regretted the "apathy" of the union movement and called for urgent concertation talks. The CGT and the FO confederations have nevertheless indicated their reluctance to take part in any decisions on joint action before the start of 2005, even though their positions are not as far apart as was previously the case. They both reacted with some caution to the proposal of the CFDT and the CFTC to present a joint union response, maintaining that it was necessary to await "concrete suggestions".

The FO noted that the joint declaration on pension reform that was issued by the unions in February 2003 (EIRR 349 p.5) contained several ambiguities and the text subsequently unravelled. The union said: "That is why we favour taking time to examine the situation," claiming that: "a public failure of unanimity would be extremely counterproductive." The general secretary of the FO, Jean-Claude Mailly, also stressed that "it is not just a question of defending the 35-hour week" but that it was also a problem of "purchasing power for blue-collar workers and employees". He noted that "individually, it is possible that some may be tempted by the government's proposals".

The CFE-CGC has also expressed its misgivings about the idea of a joint statement, with its president, Jen-Luc Cazettes, noting that he had not been approached by any of the other union leaders and that the CFE-CGC had been "informed through the media" that "one or other of the unions" were trying to organise a joint response.

It is true that agreeing on a joint initiative is a delicate matter for the unions, since the differences that emerged during the conflicts about pensions and sickness insurance have not been forgotten.

In particular, the CFDT and the CGC have always sought to lay the blame for the failure of previous campaigns on the other unions. All the confederations have been cautious about what form any joint action might take, with none of them wishing to call for industrial action or for demonstrations.

In these circumstances, the national office of the CFDT has decided to "adopt the principle" that there should be some union action in protest at the government plans for the 35-hour week, without specifying what form it should take. François Chérèque, the confederation's general secretary, said in an interview with Les Echos on 17 December 2004 that he hoped "to devise a joint strategy" with the other confederations to criticise the government for "challenging" the 35-hour week. "The government is lending its voice to a general attack against the 35-hour working week, in which it will certainly be supported by several members of parliament." Mr Chérèque stated that Mr Raffarin was further "calling into question the very social progress that had been threatened for years through employees having their pay frozen while working harder". He continued, expressing his opinion that "in reality, this reform will allow companies to bypass the unions and exert pressure on employees directly". However, he also commented that it would be hard to mobilise French workers against the reforms, saying: "The employees who will be most directly affected by the changes are those working in small and medium-sized enterprises, and these are the workers it is traditionally hard to reach. By comparison, those public sector workers and civil servants, who are generally more prepared to take action, are not affected by the reforms for the time being." In another interview with Les Echos, on 7 January 2005, Mr Chérèque noted that: "The vision offered by the government of working more and earning more may seduce many employees" and that this would "complicate the task of the unions."

The future

In the final analysis, it is a priority for the government to finalise the reform of the 35-hour week that it has been working on since 2002 and to bring to an end a debate that could otherwise have the potential to run indefinitely.

However, the question remains as to whether the new regulations will achieve what they set out to do: to allow companies and their employees to negotiate the creation of a flexible and fair system that eases the constraints of the 35-hour week. Furthermore, after a period of weak economic growth, it is apparent that many enterprises, especially the large ones, will be reluctant to reopen negotiations on such a tricky subject, having already achieved an agreement on working time reduction with their unions, which they have designed to provide a balance between flexibility and productivity.