France's Employment Law Tries to Please Businesses, Workers

France's National Assembly approved a new law on employment on April 9, 2013 after months of negotiations that attempts to give businesses the flexibility to better weather the country's stagnant economy while at the same time preventing worker layoffs.

The National Interprofessional Agreement bill was adopted by a vote of 250-26 [fr]. The legislation is supposed to allow companies to negotiate a reduction of employee salaries but while having the same number of employees on the payroll. It would allow companies to reassign employees to a different location or department as long as they compensate with consolidated health benefits and other social welfare benefits.

The French economy is in a tough spot, with the unemployment rate at 10.6 percent, double the rate of its neighbor Germany. The country slipped into a recession in the spring 2013, the second in five years [fr]. On top of the alarming unemployment rate and recession, the stalling of its GDP over the long run is the main cause of concern for French economists [fr]. The government believes the eurozone crisis is one of the main factor for its reduced growth rate [fr].

The employment agreement was the product of months of negotiations between the three trade unions (CFDT, CFTC, and CFE-CGC) and employer associations (MEDEF, CGPME [fr], and UPA [fr]), under economic emergency conditions.

Meanwhile, the left of the left gathered throughout the country to denounce a text that they consider to be “criminal”. The blog France-Amérique explained the viewpoint of the unions [fr] opposing this bill:

Les modifications apportées au projet par l'Assemblée sont loin de satisfaire la CGT et FO. “Le fond demeure”, en particulier tout ce qui concerne la “flexibilité” du travail, a souligné auprès de l'AFP M. Mailly. [..] Le leader de la CGT a reproché au gouvernement d'avoir “une oreille droite bien ouverte” aux revendications du Medef et “une oreille gauche un peu bouchée”.

The amendments made to the bill by the Assembly are far from satisfying CGT and FO. “The basic principles are unchanged,” especially anything that concerns job “flexibility”, [Jean-Claude] Mailly stressed to AFP [Agence France-Presse]. . . . The CGT leader criticized the government for having “a right ear that is very open” to hearing MEDEF's demands and “a bit of a clogged left ear”.

code travail

French Labor Code via wikipedia – Public domain

Negotiations on this bill have been underway since July 2012 when the government held round table discussions with trade unions and employer federations. Five months later, the negotiating sides came to an agreement, which was drafted into legislation.

The agreement signed on January 11, 2013 is a first in French social history. Not only did the state refrain from intervening — it simply issued an ultimatum urging the negotiating parties to reach an agreement together — but these negotiations were successful, leading to this law with support of the workers organizations, with the exception of CGT and FO. Juriguide wrote [fr] about the agreement:

Jusqu'ici, le gouvernement français avait toujours été porteur des propositions de réformes, soumises en aval aux partenaires sociaux qui avaient le choix de les refuser ou non. Un triangle décisionnel inadapté à un pays où il n'y a pas de culture du compromis. Cette fois-ci, l’État [..] n'a pas été force de proposition. Résultat:  syndicats et patrons ont échangé sans intermédiaire et, à l'instar de l'Allemagne, se sont laissé la possibilité d'adapter l'accord aux réalités du terrain.

Up to this point, the French government had always made reform proposals, submitted downstream to the social partners who had the choice to refuse them or not. This decision-making triangle was unsuited to a country where there is no culture of compromise. This time, the state […] was not the source of proposals. The result: unions and employers exchanged unmediated views and, as in Germany, allowed themselves the option of adapting the agreement to the realities on the ground.

Small-scale protests were organized against the bill, but they did not disrupt day-to-day operations [fr] even though the agreement went back on significant social benefits. In this case, the demonstrations were not on the same scale as those that France experienced when it came to reopening discussions on social security funding (1995), retirement pensions (2003), wages and the 35-hour workweek (2005), or even the First Employment Contract (2006).

Unemployment is the issue that the crisis-weary French want to tackle first and foremost [fr], according to a recent poll by the Institut français d'opinion publique (French Institute of Public Opinion). Olonnescom, a community platform of the concerned citizens of the French southwest region of Olonnes, wrote a plea to parliamentarians [fr] following the Cahuzac tax fraud scandal, in which the former Socialist budget minister was revealed to have hidden money in a Swiss bank account, and the demonstrations against marriage equality that have overwhelmed parts of the country:

Messieurs, Mesdames nos parlementaires, Messieurs, Mesdames de la presse…STOP CAHUZAC, STOP AUX REFORMES dites SOCIETALES qui ne font que diviser les français ou amuser la galerie occupez-vous du CHOMAGE, le vrai problème !

Ladies and gentlemen of the parliament, ladies and gentlemen of the press… STOP WITH CAHUZAC, STOP WITH THE so-called SOCIAL REFORM that does nothing but divide the French and entertain onlookers. Deal with UNEMPLOYMENT, the real problem!

These provisions break away from the negotiating approach that has prevailed in France until now and engages a reform dynamic suitable to businesses lacking competitiveness. With more flexibility in the way they can manage their employment, they can also expect substantial improvements in terms of taxation and administrative procedures.

Indeed, April 9 saw the opening of the Interdepartmental Committee for the Modernization of Public Action [fr] (Comité interministériel pour la modernisation de l'action publique or CIMAP), which is led by Prime Minister Jean-Marc Ayrault and aims to send a “shock of simplification” through administrative standards and procedures.

Additionally, the fiscal reform already initiated by the government through the Tax Credit for Encouraging Competitiveness and Jobs (Crédit d'impôt pour la compétitivité et l'emploi or CICE) will most likely continue. An online calculator [fr] developed by the medium-sized business association ASMEP, allowing the user to compare the benefit of CICE to tax increases since 2010, will likely shed new light on businesses’ tax situations and lead to new developments.

The effects of this peaceful collective negotiation will likely go beyond the scope of employment. The hope is that they will spill over into the country's overall economic health–and the employees who will not have to regret the temporary adjustment of their social benefits.

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