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Decree n°2017-1387 dated September 22, 2017, on the predictability and security of labour relations, introduced a scale for compensations which allows employers and employees to have prior knowledge of the financial stakes for dismissals lacking any real and serious cause brought before the Labour Court (Conseil de Prud’hommes).
As such, if the employee or employer refuses reinstatement into the company, the judge grants the employee compensation whose minimum and maximum amounts are already determined by the scale, based on the employee’s seniority and the size of the company (Article L.1235-3 of the French Labour Law).
However, the scale is not applied in the event of dismissal deemed null and void due to the violation of a fundamental freedom, harassment or discrimination (Article L.1235-3-1 of the French Labour Law) .When the scale was set, it was the subject of much controversy and led to extensive press coverage.
In a decision dated December 7, 2017, the Council of State (Conseil d’Etat) rejected the appeal by the French trade union CGT (Confédération Générale du Travail) which raised objections to the conformity of the scale.
Likewise, in decision n°2018-761 DC dated March 21, 2018, the French Constitutional Council ruled the scale to be in compliance with the French Constitution.
The scale should therefore be binding on the judge.
Nevertheless, late 2018 and early 2019 were marked by several decisions by Labour Courts which refused to apply the scale. To our knowledge, five Labour Courts (1) nullified the compensation scale for dismissals lacking any real and serious cause.
On the contrary, the CAEN Labour Court, in a decision by its settlement (départage) division dated December 18, 2018 (n°17/00193), applied it.
The judicial battle is essentially about two legal points:
– The direct applicability of the provisions of the Convention n°158 of the ILO and the European Social Charter by French judges.
– The conformity of the scale with the principles of adequate compensation for the prejudice suffered within the context of the unfair breach of the work contract provided for in Article 10 of Convention n°158 of the ILO and Article 24 of the European Social Charter dated May 3, 1996.According to the Labour Court councillors who refused to apply the scale implemented by the September 22, 2017 decree, the scale is in violation of the European Social Charter and Convention n°158 of the ILO.
We will now have to wait several months to see how the Court of Appeals and the Court of Cassation rule on the matter.
Employers and employees are therefore once again in a state of uncertainty: the former can no longer precisely understand their judicial risk and the latter do not know the real financial stakes of legal proceedings they might initiate.
(1) TROYES Labour Court via a decision on December 13, 2018, “Miscellaneous activities” division
AMIENS Labour Court via a decision on December 18, 2018, “Trade” division
LYON Labour Court via a decision on December 21, 2018, “Miscellaneous activities” section
GRENOBLE Labour Court via a decision on January 18, 2019, “Manufacturing” division
AGEN Labour Court via a decision on February 5, 2019, “Manufacturing” division
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On October 9, 2018, the French National Assembly adopted at first reading, the draft PACTE law (Action Plan for Business Growth and Transformation).
Among the many measures in the draft law, some are aimed at reinforcing the development of a social and solidarity-based economy.
1- Simplifying conditions of access to “Social and Solidarity-based Enterprise” (ESUS) accreditation
Since July 1, 2015, companies can receive a “Social and Solidarity-based Enterprise” (ESUS) accreditation for a five-year period (or a two-year period for companies under 3 years old).
To be eligible for the ESUS accreditation, a company must meet the following criteria:
- – Pursue “social benefit” as its main objective (provide support to vulnerable people, contribute to combatting exclusion or inequality, take part in sustainable development, energy transition or international solidarity);
- – Prove that the burden generated by the company’s social benefit objective has a significant impact on its profit and loss account or its financial profitability;
- – Adhere to a compensation policy meeting two requirements: the average of the compensations paid, including bonuses, to the 5 highest-paid employees or managers must not exceed a yearly limit capped at 7 times the monthly minimum wage (SMIC) and the salary for the highest-paid employee must not exceed a yearly limit capped at 10 times the minimum wage (SMIC);
- – Equity securities issued by the company cannot be traded on financial markets.
For ESUS-eligible entities, the measure is aimed at facilitating access to equity capital funding, either through tax breaks (such as the IR-PME scheme), which individuals investing in such entities benefit from, or through the obligation made to funds fiscally encouraged to meet certain investment quotas in the entities concerned.
Article 29 of the draft PACTE law proposes to introduce the following improvements to the ESUS accreditation measure:
- – Facilitate access to accreditation, by clarifying the definition of “social benefit” in particular for activities related to ecological transition, cultural promotion and national solidarity;
- – Simplify the modalities for assessing the impact of social benefit activities on the business model of the companies applying for accreditation;
- – Eliminate the obligation to include the wage caps in the company statutes, and standardise the application of those caps to all eligible companies.
The possibility of setting up an online accreditation procedure is also being discussed.
2- Taking into account a company’s social and environmental aspects
Article 61 of the draft PACTE law proposes to modify Articles 1833 and 1835 of the Civil Code as follows:
- – Article 1833 with: “The company shall be managed in its social interest and taking the social and environmental aspects of its activity into consideration.”
- – Article 1835 with: “The articles of association may specify the purpose, consisting of the principles held by the company and in observance of which it intends to allocate resources for the conduct of its activity.”
The modifications are aimed at contributing to a much stronger integration of environmental law in the company governance, by highlighting the activity of companies with a genuine commitment to sustainable development.
Nevertheless, the question arises as to what extent a lack of knowledge of these obligations will create a risk of incurring liability for the company directors concerned.
The draft PACTE law will be examined by a Senate committee as from January 2019. We will keep you informed of the conditions for the effective implementation of the new measures.
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Decision by the Social Chamber of the Court of Cassation dated June 21, 2018
(Cass. Civ 2e. 21 juin 2018, n°17-15.984)As per a June 21, 2018 decision, the Court of Cassation answered the following question: Is a skiing accident during a company seminar considered a work-related accident?
Company seminars bringing together employees often give rise to various activities, in particular sports.
In this instance, an employee was attending a seminar in the mountains. A day of free time for relaxation was planned, during which the employees could do whatever activities they wanted to. This particular employee chose to go skiing and consequently bought a ski pass for the ski lifts since the employer did not cover the costs for any of the activities. As the employee was skiing down a slope, she was the victim of an accident. She considered that it was a work-related accident since it had occurred during the seminar, however the health care insurance fund (Caisse Primaire d’Assurance Maladie – CPAM) disputed that claim.
Yet, The Court of Cassation confirmed the Court of Appeal decision, ruling that employees participating in that day remained subject to the employer’s authority as the latter was announced in the seminar schedule, paid as working time and could therefore not be considered as a day off. As such, the skiing accident, which occurred within the free time designated for relaxation, must be considered as a work-related accident.
This legal precedent settles various Courts of Appeal hesitations regarding similar cases of accidents during company seminars. Indeed, certain Courts of Appeal have indeed judged that an accident in such circumstances fell within the employee’s private life.
Thus, with this ruling, the Court of Cassation has indicated that during a company seminar, by nature paid, employees which are paid remain subject to their employer’s authority even though they may have free time for relaxation, unrelated to their professional activity. Any accident that might occur during the seminar is considered a work-related accident.