Actance Tribune
What's NEW under French Employment Law?
N° 22 – Décember 4, 2023
The Job Protection Plan : what to remember
A Job Protection Plan (“PSE” in French) is a procedure intended to regulate the reduction of the workforce and therefore eliminate positions.
In France, given the economic context, many companies are considering reorganisation to adapt to the economic situation, leading to job cuts that could require the implementation of a PSE.
It appears that the number of PSE currently in progress is increasing. In the 2nd quarter of 2023, the number of PSE approved increased by 56% compared to that of the previous quarter, reaching 112 procedures (Dares : Public mechanisms to support restructuring, November 3, 2023).
Note that in France, in companies with at least 50 employees, as soon as a significant number of layoffs are planned (layoffs of at least 10 employees over a period of 30 days), the company is obliged to follow the specific PSE procedure.
This procedure can only be justified by an economic reason. The French Labour Code specifies which economic reasons are valid (economic difficulties, technological changes, company reorganisation necessary to safeguard its competitiveness, cessation of the company activity).
This procedure involves :
- To consult the social and economic committee (“CSE” in French) to present the economic reason, the new organisation as well as its consequences in terms of health and safety for employees as well as in environmental matters ;
- Simultaneously, management must negotiate with the trade union organisations and conclude a collective agreement. This agreement includes support measures, particularly for internal or external reclassification of employees and training actions. Depending on the company size (more or less than 1,000 employees) or the Group to which they belong, the employer can also offer employees the opportunity to take reclassification leave or a professional security contract. If there is no agreement, the PSE can be an unilateral document prepared by the employer.
To do this, the PSE must be validated when it is an agreement, or approved when it is a unilateral document from the employer, by the Administration.
Care is required in the preparation and implementation of this very specific procedure. Indeed, there are numerous case law decisions in this area and judges do not hesitate to question the layoffs that may be announced.
The PSE can be declared illegal :
- Should the Administration refuse to validate the agreement or to approve the document, particularly if the Administration considers the measures provided for in the PSE as insufficient or when the procedure for consulting staff representative institutions has not been respected ;
- In case of non-compliance with the procedure etc.
In case of litigation, if the PSE is declared illegal, the judge can then consider layoffs null and void. Then employees can request reinstatement within the company or damages.
A PSE is a financial cost for the company with real cancellation risks. Therefore, it is important to obtain support in setting up and implementing a PSE.
Subcontracting: the external labour solution under close supervision
Some French companies require specific labour, which they do not have internally. To fill this need, sometimes they may subcontract in France or abroad.
Subcontracting is not defined by the Labour Code. Its definition and identification criteria are specified by the Labour Administration and case law.
Subcontracting is the operation by which a principal entrusts, via a subcontracting contract, a specific activity to a subcontractor completely or partially, under their own responsibility and using their own staff.
To be legal, subcontracting must be based on an identified specialty.
Thus, subcontracting is permitted under several cumulative criteria :
- A subcontracting contract is concluded ;
- The mission entrusted to the subcontractor is precise and separate from the activity carried out within the principal company ;
- The subcontractor’s personnel carry out their mission in complete autonomy and independence, that is, outside of any subordination relationship with the principal company ;
- The price of the mission is defined at a flat rate according to the specificity and importance of the task, and not according to a number of hours worked.
Should the subcontracting contract not meet these criteria, the penalties can be significant for the principal company. They may be exposed to criminal, civil and administrative penalties.
Therefore, the principal company must ensure that they comply with all the criteria.
Moreover, the principal company has a vigilance obligation requiring them to request various documents from the subcontractor (specifically a vigilance certificate demonstrating that the subcontractor is up to date with their social declarations, dues and contributions). Failing this, the principal company may be jointly and severally penalised along with the subcontractor should the latter be convicted.
Finally, the principal company is bound by a duty of care. Informed of a breach by the subcontractor of certain mandatory rules, particularly regarding payment of the minimum wage or any breach of labour legislation, the principal company must act quickly and order the subcontractor to cease immediately. Failing this, the principal can be penalised and held jointly and severally liable along with the subcontractor.
The use of subcontracting may be necessary for the company however, it is recommended to carefully observe the governing rules because the identified risks are real and the penalties heavy.