5 things to know about Employment Law in France

In this series, Barry Stanton, Managing Partner, is talking to his European colleagues with whom he has worked on numerous projects about five things we should know about employment law in their country.

In today's episode, Barry is speaking to Harold Berrier from Ydès. French employment law involves numerous layers of regulations. Key highlights include: 

1. Regulatory Hierarchy: From Labour Code to employment contracts, understand the rules shaping workplace compliance.
2. Working Time: Explore the 35-hour week, overtime obligations, and flexible time arrangements.
3. Termination Risks: Insights into resignations, dismissals, and complex termination scenarios.
4. Service Provider Reclassification: Manage risks of misclassifying contractors as employees.
5. Employer of Record (EOR): Navigate the rules and risks of EOR arrangements.

Stay ahead of legal risks and tune in to this episode for insights on French employment law. 

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Chapters

• 0:46 Hierarchy of rules and regulations
• 2:52 Working time organisation in France
• 8:06 Termination of contracts
• 19:29 Reclassification of service providers as employees
• 23:11 EOR : applicable rules and risks

Transcript

Barry Stanton: 0:01 

Hello, my name is Barry Stanton, I'm the managing partner of Boyes Turner and I've also practiced as an employment lawyer for the past 25 years. In that time, I have seen the growing importance of a knowledge of European and international employment law. In this series I'm talking to my European colleagues, with whom I have worked on numerous projects, about five things we should know about employment law in their country. 

Today I'm joined by Harold Berrier of IDES in Paris. 

Hello, Harold Berrier. So, Harold, French employment law is one of those conundrums that we all face, and I understand from our discussions in the past that there's a real hierarchy of rules and regulations that it's important for employers to know about. Could you give me a bit of information about that? 

Harold Berrier: 0:46 

Indeed, we have different sets of rules and regulations. In France, a foreign employer better know them to avoid making mistakes when they want to introduce whatever plans they want to introduce. So, first of all, we have the labour code, which is the basis of all our legal system. Then we have national collective bargaining agreements that are applicable to all companies on the French territory, even though some businesses may fall into loopholes, meaning that they will not be subject to any specific collective bargaining agreements. Then, at the level below, we have company-wide collective bargaining agreements that may be negotiated and executed between employers and union representatives. However, this happens mostly in mid-sized to big-sized firms above 50 employees. Then we have unilateral decisions of employers, or company rules and regulations, as the case may be. We have customary practices and, in the end, last but not least, we have employment contracts. 

Barry Stanton: 2:03 

So you'd start looking at the labour code first and then work your way down to get a better understanding. 

Harold Berrier: 2:09 

Exactly, and the deeper you go, the more favourable it must be, or at least it must be equivalent to what is provided in the labour code. 

Barry Stanton: 2:24 

That's really interesting. Thank you very much. And one of the things that we've struggled with in England is working time and the working time regulations, which we fought against quite strongly. I know the French have gone in a different direction. Perhaps you could tell me a little bit about working time organization in France, 

Harold Berrier: 2:52 

Sure I can, working time organization has been significantly amended in 2000. At the time, the famous or infamous 35-hour week was introduced. To make it simple, as of today, a foreign employer has to know that basically the legal weekly working time is 35 hours. The employer has a duty to monitor working time in any case, and that's something that most of them ignore or tend to forget, unfortunately. They also need to know that payment of overtime is due even if the employer did not ask the employee to work overtime. And, last but not least, we have specific working time organizations. Most of them are applicable to executives, but not only. We have the managing executive regime, which is applicable to top executives in a company. This regime is extremely favourable to the employer because basically, the employee will not be subject to any working time limit. So this is an exception basically to the rule, and that must be restricted to a very limited number of employees in a company. Sometimes in a company you will not find any employee who will be subject to this specific regime. 

Harold Berrier: 4:27 

More broadly used is the working time based on the number of days worked per year. This is the famous forfeiture. This one is a favourite of employers because on the paper it's easier to manage. You're not supposed to count hours in days or weeks, but you're supposed to count the number of days worked on a given year. Unfortunately, that's theory, and in practice the courts tend more and more to impose on the employer a duty to monitor working time more closely, even on a hourly basis, even though the employees are supposed to have their working time monitored according to a number of days. And then we have another option, which is less known, which is the working time based on the number of hours worked per week, per month or per year, which can be determined above the 35-hour threshold, and in that case compensation must be granted to the employee, either in the form of extra salary or in the form of compensation in view of time off. 

Barry Stanton: 5:49 

That's, and so, just just to be clear, the 35 hours per week is a maximum per week, or is that, on an average um a number of hours per week? 

Harold Berrier: 5:59 

If, if you do not have any specific working time organization put in place, that's the maximum. It's in fact the minimum if it's a full time, but it's also the maximum. Above 35 hours comes overtime. However, if you decide to organize the working time on a longer period than the week, let's say on a month over a month, then you have the possibility to have working time vary across the period. 

Barry Stanton: 6:37 

Okay, and I'm conscious that some of my clients have granted employees more holidays, so presumably they're working on the latter examples that you talked about. And the other thing that in England and the United Kingdom we struggled with is the payment of holiday pay at the rate of a normal pay, so including overtime and shift allowance and bonus, and that applies in France as well, does it? 

Harold Berrier: 7:07 

It does. It can be sometimes a bit tricky because you have to consider the compensation paid to the employee during the so-called reference period and you need to make sure that, when the employee takes his holiday days, the right amount of money, the right compensation, is used to determine the amount to be paid. So, one of the usual difficulties that employers can be faced with is when salespeople, for instance, get paid on a quarterly basis, some commissions, and it's sometimes difficult to determine what the amount of the compensation during paid holiday should be, because you need to pay attention to the commissions paid the year before. 

Barry Stanton: 8:06 

Yes, it's challenging, isn't it? I'm glad to hear that we're not the only one struggling with that. Can we move on and look at termination of contracts? I understand again that there are some nuances there that those accustomed to a common law system might not appreciate. 

Harold Berrier: 8:21 

We have basically five ways to terminate a contract. Among those five ways, some are probably very similar to what your clients know. In the UK. We have resignation. We have amicable termination. The only thing that needs to be known is that it's easy to use. You need to agree on a certain amount of money to be paid to the employee, which can be no less than the equivalent of severance as provided by the labour code or the applicable collective bargaining agreement, and you need to agree on a date to end the contract with the employee. Then we have termination. 

Harold Berrier: 9:03 

Termination on the French law is not for predetermined causes, which means that whatever the reason put forward by the employer to dismiss an employee, the reason will always be subject to the court's review in the event that the employee challenges his or her dismissal before a court of law. We have basically two let's say families of grounds for dismissal. We have personal grounds and economic grounds. Personal grounds include whatever misconduct the employee could commit. The more serious the misconduct, the less money the employee will receive at the end of the contract. Basically, we also have termination for poor performance, which is also a personal ground for dismissal, and we have all other reasons for dismissal, such as unfitness for work, long leave of absence disturbing the company's operations and implying the recruitment of a successor. 

Barry Stanton: 10:12 

Is there a process that needs to be followed to make that dismissal appropriate and legitimate, or does the employer have an amount of free will and free reign to do as it pleases? 

Harold Berrier: 10:26 

Well, it is a very strict procedure that has to be complied with. 

Harold Berrier: 10:32 

The procedure will always imply inviting the employee to a pre-dismissal meeting, holding this pre-dismissal meeting. 

Harold Berrier: 10:44 

Employers sometimes face difficulties because, in theory, you're supposed to meet with the employee face to face and you're also supposed to hold the meeting in French. And this is even truer when the employee exercises his right to be assisted by someone else. Someone else could be either a colleague or an outside counsellor in the smallest companies. And then, after this meeting, you have to wait for two full days to lapse before sending out the dismissal letter at the earliest. And even though the whole procedure is important because if you do not comply with the procedure then the employee can claim damages the most important is the content of the dismissal letter, because the dismissal letter sets the frame of the future dispute. Meaning that an employee who will challenge his dismissal before the court will only have to fight against what is stated in the dismissal letter, and on the other side, the employer will only be able to argue on the basis of the content of the dismissal letter. He will not be allowed to use whatever other grounds that would be discovered afterwards. 

Barry Stanton: 12:14 

Is it normal practice then for employers, if they're dismissing someone for personal grounds, to seek legal advice in relation to the terms of the dismissal letter? 

Harold Berrier: 12:24 

Well, to be honest with you and your clients, I would say, unfortunately not all of them seek legal advice, but they should unless they have legal expertise in-house. I have an example recently in my mind of a Spanish company who thought that, you know, just cutting off all the internet accesses and saying goodbye to the employee was enough to terminate the contract, and that was a big mistake. And now they are facing a claim for wrongful dismissal and the costs and the risks associated with the dispute are extremely high. 

Barry Stanton: 13:04 

And I understand also that there are economic grounds for reasons for dismissal. 

Harold Berrier: 13:08 

I always tend to use this concept of dismissal for economic grounds as opposed to the concept of redundancy, because it's not the same thing. So once again sometimes translation can lead to misunderstanding. To dismiss one or more employees, and especially if you want to dismiss several employees, you have to follow the route of economic grounds. Economic grounds, basically, are assessed at the time of dismissal. So we call economic difficulties the situation where the employer reading the books can say okay, I have a lack of cash, but you also have the possibility to argue that you are facing a threat on the so-called company's competitiveness. So this time you're looking ahead, you're looking in front of you and you will have to say, as the case may be, to evidence that maybe some new regulations, competitions, whatever event that is likely to occur in the near future, will negatively impact your business. You have the right to combine economic difficulties and the need to safeguard the company's competitiveness. 

Barry Stanton: 14:38 

Okay, that's a very different concept from the one that exists in the United Kingdom, but it's an interesting thing. Interesting concept because it requires there to be some consideration of the economic environment in which the company is operating, which in many ways is actually probably quite fair. I understand also that, moving on from there, that there's been some developments around constructive dismissals, where the employee is saying the employer has treated them so badly that they've got to leave. 

Harold Berrier: 15:03 

There's been renewed interest for this, and the example that I mentioned before is the perfect one. So constructive dismissal is the situation where the employee argues that the employer committed a misconduct, a wrongdoing, failed to comply with his duties towards the employee, resulting in the impossibility for the employee to continue carrying out his work and performing the contract. In that situation, the employee has an option, which is either to consider that the contract is terminated immediately. He just walks out of the company and says look, because you did this and that, or because you failed to do this and that, I consider that I can no longer perform the contract and work for you, and this means that the contract is terminated as of today. 

Harold Berrier: 16:06 

In such a case, up front this kind of constructive dismissal is deemed a resignation by the employer, which implies afterwards that the employee, who is willing to get compensation for this situation, goes to court to claim that the constructive dismissal should be deemed a dismissal lacking real and genuine ground. So that's the first option. The second option is basically the same, i.e. the employee will argue that the employer committed misconduct or whatever wrongdoing preventing him to carry out his duties, but this time the employee will not say that the contract is over yet the employee will say I will file a claim before the labour court and the labour court will tell who's right and who's wrong. So in this situation the contract goes on until the court rules and tries the case. If the court rules in the employee's favour, the court will terminate the contract and award the employee damages. Or if the court rules in favour of the employer, then the employee will receive nothing, and the contract will go on. 

Barry Stanton: 17:38 

That's very interesting and probably very difficult if the employee has been employed for some. You know how long does it take to get to a hearing in those circumstances. 

Harold Berrier: 17:49 

Well, nowadays it takes quite some time. I would say that, especially in Paris and in the surroundings, it will be no less than 12 months. 

Barry Stanton: 18:00 

Wow, that's a long time to have somebody employed that perhaps doesn't want to be there, and you don't want there. 

Harold Berrier: 18:07 

Exactly and precisely because of that, what happens most of the time is that. At some point in time, the employer will dismiss the employee because it's just not possible to maintain the relationship in such a climate, and that would then be an amicable termination, presumably where you'd agree something. 

Harold Berrier: 18:30 

It could be amicable, but then there will be an amicable termination and probably also a compromise agreement entered into to settle the claim and the dispute. But sometimes it's not amicable at all, and so if the employee who has already filed a claim is dismissed, afterwards he will be able to add another claim, an ancillary claim for dismissal lacking real and genuine ground. So it's like a two-shot shotgun. First you ask the court to tell whether or not you were right to claim constructive dismissal. If you win, it's over. But if you lose, if the court rejects this claim, then you have the second claim, which is the claim for dismissal lacking real and genuine grounds, and you will have to fight against the grounds put forward in the dismissal letter. 

Barry Stanton: 19:29 

Moving on then and looking at another area, because I'm conscious that in the gig economy if that still exists, we've seen across Europe claims by those who are classified as being a service provider or to be an employee. How's that operation in France? I know in England and the UK we have the triple classification of independent contractor and employee, but by and large in France is that you just have the two so contractor and employee, but therefore the definition of employees is wider. 

Harold Berrier: 20:04 

Yeah, it's correct. We have only two categories in the French law and the difficulty and we can see it especially in the gig economy, as you mentioned, the difficulty is that some employers, because of remote work, because of, especially in the service industry, the people, tend to lose touch with what their subordinates or what the people who are working for them are doing on a daily basis. They sometimes have difficulties understanding that you're not supposed to use an employee instead of a contractor and vice versa. You're supposed to know precisely why you will enter into a contract for the provision of services and not into a contract of employment. An employee under French law is someone who makes available to an employer his capacities, strength and time to work, and this person will await instructions from the employer, as opposed to a contractor who will be assigned a specific target product or service to be manufactured or delivered and to be delivered at a certain point in time. So you need to make sure, whenever you you choose one contract or the other, that you're choosing carefully and appropriately. 

Barry Stanton: 21:35 

And if the courts are asked to determine, do they look at the substance of what's going on or do they look at the, the form of the, the written document. 

Harold Berrier: 21:57 

Well, basically, as always, under French law, what is on the paper has little influence on the outcome. It's good I mean it's always good to have a good contract, a well-drafted contract. It can do no harm certainly not, and facially it will help you. But what the court will do is always look into the reality of the relationship and when it comes to reclassifying a contractor into an employment contract, the court will determine whether or not there is a so-called link of subordination. And the link of subordination is made of instructions, monitoring of the employee's work and, as the case may be, sanctions imposed on the employee. 

Barry Stanton: 22:52 

And then our final topic we were going to talk about was employers of record and I know you and I have talked about those on a number of occasions and they're much loved of international clients moving into a new jurisdiction where they want to test out the waters. But I understand there are issues in France and in other countries around this. Can you tell me what the issues are in France? 

Harold Berrier: 23:11 

Yes, basically, the issues are that the activity of an EOR is not precisely regulated. It's not regulated as such French law. In fact, it is regulated in the frame of what we call portage salarial. So if you want to operate as an EOR in France, you have to register as a company operating as a portage company and basically, to cut a long story short, this is more or less the same regulation as you have applicable to temp agencies. So it means that you have to be lawfully registered, you need to operate only as a portage company. You're not allowed to do anything else. You need to provide a bank guarantee, and so on and so forth. 

Harold Berrier: 24:18 

So some EORs operate lawfully in France, but some do not. So the first piece of advice I would give any employer willing to operate through an EOR or to hire employees through an EOR in France would be to check, or to have someone check, that the EOR is operating lawfully, because here the sanctions that we are talking about are not only financial sanctions, we are talking about criminal sanctions. So it's a key point Check that the EOR is lawfully registered to operate in France. And the second thing, which is even less known than the first one, because most EORs will not tell you about it is that you're not supposed to hire people through an EOR for more than 36 months, so it should not be for an indefinite period of time. 

Barry Stanton: 25:21 

And if you hire them for more than 36 months, what's the consequence? 

Harold Berrier: 25:25 

Well then, the whole relationship could be deemed to be existing directly between the employee and the client, who would become the employer. 

Barry Stanton: 25:38 

Okay, that's quite significant at that point. 

All right, Harold, thank you very much for your time today and for explaining so clearly some of the nuances surrounding French employment law. 

Harold Berrier: 25:48 

It was a pleasure, Barry. 

Barry Stanton: 25:50 

I hope you've enjoyed our conversation today. Coming up in our series, we'll be talking to colleagues from the Netherlands, Spain and Italy. If you want to listen to them as soon as they become available, you can follow or subscribe to our podcast. Goodbye, Thank you.