New scale for payouts by arbitration regarding unfair dismissals, increase in legal redundancy pay, changes to procedure for challenging termination of contract, etc. President Macron’s orders crystallise debate between businesses and workers. They are likely to make significant changes to the practices of business owners, managers and the regulated professions responsible for implementing these procedures.
President Macron’s orders concerning changes to the French labour code came into force on September 23, 2017. The five decrees organise a general overhaul of labour law, the watchwords being simplification and flexibility. Here we review the measures presented in this reform’s key text, Order no. 3 relative to the foreseeability and security of the employment relationship.
Compensation settlements by arbitration in cases of unfair dismissal to be regulated
In cases of wrongful or unfair dismissal, a compensation scale with both a minimum and a maximum has been determined for settlements arrived at by arbitration. The scale is based on how long the employee has worked for the company and, for employees with up to 10 years’ service, the size of the company. The minimum amount to be awarded is between 15 days’ and 3 months’ gross salary and the maximum amount is between 1 and 20 months.
The amount of redundancy pay has been revised
The decree reduces the minimum length of service that an employee on a permanent contract must have spent at the company to 8 months (as against 12 months previously), in order for the employee to receive a redundancy payment.
Relaxation of regulations concerning reasons for dismissal
Employees can be informed of their dismissal via a standard letter and the reasons given can be specified at a later date by the employer or the employee. The dispute will therefore be clarified in this second letter. Lastly, should the procedure not be carried out in due form, the judge may grant the employee compensation (maximum 1 month’s gross salary), but such cases shall no longer result in annulment of the procedure.
Procedure for challenging termination of contract changed
Employees wishing to dispute the termination of their contract will now only have 12 months to do so, compared with the 24 months allowed previously.
How does this affect the regulated professions concerned?
These measures, which change how employers must proceed with regard to terminating an employment contract, also concern the regulated professions responsible for implementing the procedures (accountants, lawyers, legal administrators, etc.). The introduction of these measures may reduce the number of claims filed and therefore the number of appeal procedures:
- The legal time limit for challenging a termination of contract has fallen from 24 months to 12;
- Employers now have the option of specifying the reasons for the dismissal in a second letter, following a meeting with the employee concerned.
Moreover, the introduction of a ceiling for payouts in cases of unfair dismissal means that it will now be possible to calculate the amount of the maximum risk, which has been set at between 1 and 20 months’ gross salary, instead of a sum that could previously have been anything up to €310,000.
President Macron’s orders have started a broad reworking of the Labour Code, with changes likely to mean a reduced risk and fewer claims for the regulated professions concerned.
Marie LEYENDECKER, Finance Loss Adjuster