Layoffs in France Can Be Complex

By Dinah Wisenberg Brin September 19, 2023

​Employers operating in France need to take care before embarking on a significant restructuring, given the country's laws designed to involve and protect workers in the process.

Requirements to consult with labor groups can make reorganizations lengthy and complex endeavors in France.

"The essential rule under French law is that of prior consultation with employee representatives," according to the Comité économique et social, or CSE, which applies only to companies employing at least 50 people, said Alexandra Stocki, an attorney in Proskauer Rose's Paris office.

The operations covered by this prior consultation obligation are diverse and do not concern only plans to reduce the workforce. Under the terms of the French Labor Code, consultation is required on all matters concerning the organization, management and general running of the company, she said.

The obligation to consult is subject to special rules for proposed redundancies involving 10 or more employees for economic reasons and in the event of a takeover bid, but the guiding principles of consultation are the same in all cases, according to Stocki.

Job Protection Plan

A key component of this consultation involves a job protection plan, or PSE, for Plans de Sauvegarde de L'emploi, labor lawyers noted.

The 2013 Employment Security Act "radically reformed the law on economic redundancies and major layoffs" involving at least 10 people in companies with more than 50 employees, noted Jean-Marc Albiol, an attorney in Ogletree Deakins' Paris office.

Economic dismissals, including those within a PSE framework, must be based on an economic rationale consisting of both an economic cause—financial difficulties, technological changes, safeguarding competitiveness or cessation of activity—and a material cause, such as reduction in workforce size, employment transformation or employment contract modification, he said.

"A PSE needs literally months of preparation. The documentation is huge—economic rationale, social measures, appreciation of psychological risks—and the relation with the administration and the political authorities is key if the company wants to achieve its redundancy," he said.

It is also expensive, plus there is the subsequent judicial risk of paying damages for unfair dismissal, he added.

Stocki noted the key role played by labor authorities. "Without their green light, the redundancy project cannot be implemented," she said.

Employers developing a PSE for carrying out layoffs can choose between two methods, Albiol noted:

1. Negotiations with trade unions. While the procedure is complex with respect to both the trade unions and consulting with the CSE, these agreements tend to benefit from lighter control by the administration and a very high validation rate—90 percent of negotiations resulted in a validated agreement in 2022, he said. "These advantages clearly demonstrate the legislator's desire to give priority to collective bargaining," he added.

2. Unilateral action by the employer. Because negotiation is not compulsory, the employer can define the terms and conditions of the plan on his own. In this case, the CSE must be consulted on the elements and measures included in the unilateral document, Albiol said.

Albiol noted several challenges and potential pitfalls in the process, including: the need to show a valid economic rationale; long negotiations with unions and works councils; selection of employees to be made redundant; inclusion of social measures, such as employee training or reassignment, to smooth out layoff impacts; and possible employee lawsuits, even against employers that have paid millions for severance and social measures.

Guiding Principles for Consultation

Prior consultation with the CSE involves several guiding principles, according to Stocki.

The consultation must precede not only implementation but also decision-making on a project, with a consultation deadline required before a final decision. The consultation must be completed before the deadline on pain of prosecution for obstruction, a criminal offense punishable by fine for the company and for the manager and/or HR director, Stocki said.

In a merger, for example, case law holds that a consultation must be completed before the board of directors approves the deal.

The consultation is a written procedure that can be validly initiated only once the employer has submitted a memorandum containing the information needed for the CSE to understand the project's why, how and consequences, Stocki noted. Unless the project is simple, she recommended companies allow at least three months to prepare the documentation for the CSE.

The memorandum must cover the economic, business and organizational reasons and impacts for the company and the environmental effects of the project, although there is some debate on this point in the case of redundancies, she said. The memo also must address the project's impact on health and safety risks, including psychosocial, and on employees' working conditions, along with the preventive measures contemplated to limit the risks.

The CSE can make alternative proposals, and management must respond in writing.

Consultation deadlines vary and sometimes can be negotiated with trade unions or the CSE, but the project can be implemented only after the consultation process has been completed, Stocki said.

Dinah Wisenberg Brin is a reporter and writer in Philadelphia.



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