International Labor and Employment Law

The Long-Awaited Decisions of the Social Chamber on the Macron Scale Have Just Been Rendered

The Social Chamber of the Court of Cassation today issued two long-awaited decisions on the compensation scale currently applicable in the event of dismissal without real and serious cause.

The so-called “Macron Scale” is the result of an ordinance of 22 September 2017 (No. 2017-1387) and appears in Article L. 1235-3 of the Labour Code. It holds that, in the event of dismissal deemed to be without real and serious cause, a judge may propose the reinstatement of the employee in the company. If either party refuses this reinstatement, the judge then awards the employee an indemnity payable by the employer, the amount of which is between minimum and maximum amounts.

These amounts are expressed in months of gross salary and depend on the number of employees in the company and the seniority (in full years) of the employee. The scale is progressive and the maximum amount is capped at 20 months for employees with  at least 29 years of service.

According to the French government, the introduction of the scale aims to increase predictability and secure the employment relationship or the effects of its termination for employers and their employees. Other European states, notably Belgium, Denmark, Finland, Germany, Switzerland, and Spain, have set up similar scales.

France’s scale (and mainly the compensation ceiling) gave rise to lively debates that focused on the question of its enforceability, on the grounds that it would disregard international rules of treaty law, mainly:

  • Article 10 of ILO Convention No. 158, ratified by the France in 1989, which provides that national courts must “be empowered to order the payment of adequate compensation or any other form of compensation considered appropriate”; and
  • Article 24 of the European Social Charter, which requires national law to provide for “the right of workers dismissed without just cause to adequate compensation or other appropriate redress”.

The argument can be summarized thusly: given the compensation ceilings to which the judge is bound, the scale would not allow adequate compensation to the employee dismissed without valid reason.

The debate gave rise to numerous actions in France. The Court of Cassation considered, in an opinion of 17 July 2019, that the scale was compatible with Article 10 of the ILO Convention (it considered on this occasion that Article 24 of the Social Charter had no direct effect).

Despite this opinion (which does not has the value of a decision) , a number of French industrial tribunals have decided to set aside the scale. Some jurisdictions have decided that the scale is not compatible with international law (CPH of Angoulême of 9 July 2020 RG F 19/00184). Others, such as the Reims Court of Appeal (25 September 2019, No. 19/00003), considered that if the scale was not unconventional, the review of conventionality did not exempt the judge from assessing whether it did not disproportionately infringe the employee’s rights by imposing burdens disproportionate to the result sought.

The decisions of the Social Chamber were then expected. At the Chamber hearing held on 31 March, the First Advocate General had suggested that the Court should engage, like the Reims Court of Appeal, in an “in concreto review”.

This is not the route followed by the French Supreme Court today. In summary, the Court of Cassation:

  • Recognizes the conventionality of the scale with regard to Article 10 of ILO Convention No. 158 (judgment No. 654: “The provisions of Articles L. 1235-3, L. 1235-3-1 and L. 1235-4 of the Labour Code are thus such as to allow the payment of adequate compensation or compensation considered appropriate within the meaning of Article 10 of ILO Convention No. 158. It follows that the provisions of Article L. 1235-3 of the Labour Code are compatible with the provisions of Article 10 of the above-mentioned Convention”)
  • Refuses to engage in a review of conventionality in concretocontrary to the suggestions of the First Advocate General and the position adopted by the First Civil Chamber in 2013 (judgment n°654: “In ruling in this way, when it was only up to her to assess the concrete situation of the employee to determine the amount of compensation due between the minimum and maximum amounts determined by Article L. 1235-3 of the Labour Code, the Court of Appeal violated the above-mentioned texts”)
  • Refuses to recognise the direct effect of the European Social Charter (judgment no. 655).

The conventionality of the Macron scale is thus again affirmed without reservation by the Court of Cassation.

This is very good news for French employers.

The decisions provide indeed legal certainty: judges cannot in principle deviate from the scale and must assess damages awards within the limits of the scale.

Will this however  make it possible to put an end to the contentious debates on the unconventionality of the scale? Nothing is less certain as  industrial courts mays well decide to disregard these decisions and take the risk to have their decisions cancelled by higher Courts.

They should however be more and more reluctant to do so.

Reorganisations in France: How to Select the Best Tool

Alexandra Stocki, French & EU Employment Group partner, authored an article titled “Reorganisations in France: How to Select the Best Tool” in IEL (International Employment Lawyer).

This article discusses the points that must be checked before considering the best tool for a reorganisation.

To access the full article, please click here.

New Ways of Working

Beatrice Pola and Alexandra Stocki are contributing authors to IEL’s (International Employment Law) “New Ways of Working” resource page that explores and keeps track of key legal and compliance considerations for multinational employers as new ways of working become increasingly embedded as the pandemic begins to recede.

On the France-specific page, Beatrice, Alexandra and Rachida address timely questions concerning remote work, return to work and vaccinations, health and safety, and unions and/or work counsels.

To access, please click here.

Why the EU Commission’s Gig Economy Proposals Will Not Meet French Expectations

Alexandra Stocki, French & EU Employment Group partner, recently published an article titled “Why the EU Commission’s Gig Economy Proposals Will Not Meet French Expectations” in IEL (International Employment Lawyer).

This article discusses a draft proposal directive which aims to improve working conditions in platform (contractual/gig economy) work. This proposed directive would ensure that people have or can obtain the correct employment status in light of their actual relationship with a digital labour platform resulting in these workers being classified as either employees of the platforms or as independent workers.

To access the full article, please click here.

Five Questions for Employers to Ask Before Metaverse Working

Alexandra Stocki, French & EU Employment Group partner, recently published an article titled “Five Questions for Employers to Ask Before Metaverse Working” in IEL (International Employment Lawyer).

This article addresses work performed within the metaverse (Mark Zuckerberg’s “embodied version of the internet”) and the evolving employment related legal concerns.

To access the full article, please click here.

Employment Law: Presidential Elections Part 2

Labor law is not central to the 2nd round campaign. The great opposition between Marine Le Pen and Emmanuel Macron is on pensions. Marine Le Pen is opposed to any increase in the current legal retirement age (62). The candidate of the Rassemblement national (RN) defends a legal retirement age of 60, for employees who worked before 20 and for forty years. Emmanuel Macron, on the other hand, wants to raise it to 64 or 65 and is still considering a broader reform, which could give rise to a referendum. The pension question might well be a key to the 2nd round of the election.

Besides this, Marine Le Pen still carries the idea of a national preference. Her program plans that the access of foreigners to any public or private employment, to the exercise of certain professions, economic or associative activities, functions of professional or union representation, would be fixed by law. Marine Le Pen clearly reserves the right to prohibit, by a simple law, any type of employment for foreigners in any sector of activity. Such a provision would most certainly be deemed contrary to the constitutional principle of equality, as well as to EU regulations. Before any adoption, such a provision would therefore require a modification of the constitution and of European commitments. Such a provision if adopted, would necessarily impact the activity of many French economic sectors.

Marine Le Pen refers from time to time to the need to make labor law more flexible. However, she usually does not specify her thoughts or give concrete examples. Such a statement is likely more of a slogan than an element of her program.

New Work Councils Roles Further France’s Climate and Resilience Law

Béatrice Pola, French & EU Employment Group partner, recently published an article titled “New Work Councils Roles Further France’s Climate and Resilience Law” in IEL (International Employment Lawyer.)

This article addresses Corporate Social Responsibility (CSR) and recently strengthened legal obligations companies must adhere to. It also discusses some of the options that companies and consultancy firms are now offering to quantify the impact of the Climate Law and to help companies implement their CSR policies.

To access the full article, please click here.

Employment Law: Presidential Elections

Labor law is not at the heart of the French presidential campaign, which is rather unusual. The latest major reforms, initiated under the presidency of François Hollande and then extended by the “Marcon” ordinances of September 22, 2017, seem to lead to an exhaustion of legislative inflation in this area. The overhaul of the organization of social dialogue, collective bargaining and the predictability of labor relations have considerably reformed labor law. There is no longer any political or social space for further reform.

Despite the uncertainties resulting from the war in Ukraine, the candidates are counting on a continuation of the economic growth that followed the end of the confinements and, probably in response to the social movements (yellow jackets), propose to strengthen the profit-sharing schemes.

  • Retirement

Emmanuel Macron and Valérie Pécresse propose an increase in the legal retirement age to 65. The main consequence – and objective – of this measure would be to significantly increase the working population. For the outgoing President, this proposal is part of a certain continuity with regard to his initiatives in terms of further economic development, and support for companies towards growth. This systemic reform, initiated during the mandate, had indeed been suspended in the light of the health crisis. Although it is not yet time to assess the consequences of such a measure in figures, pension funds were concerned as early as 2021 about the postponement of the retirement age in view of the foreseeable increase in claims (with regard to risks related to occupational diseases and accidents at work). Such an increase would affect the employer (additional payment to be made to the social security regime in case of occupational disease / work accident and protection against the dismissal for the employee). In addition, employers would have to redefine their HR practice, by creating favorable conditions for older employee to remain in employment. Please note that employers must negotiate on an annual basis on “quality of life at work” with the unions. The increase of the retirement age would also most certainly result in an increase of claims for discrimination based on the age, as regards dismissal, salary increase etc.

Finally, with regard to Valérie Pécresse’s program, she proposes to allow workers freely to combine employment and retirement, on an unlimited basis.

  • Flexibility

Despite a major pandemic episode that has led companies to make massive use of teleworking, the flexibility measures proposed by the main candidates do not address the new ways of organizing work. On the other hand, both the outgoing President and the candidate Valérie Pécresse propose to liberalize the monetization of working time. The candidate of Les Républicains (liberal party) proposes to open the “possibility of converting the RTT into salary, without charge and without limit”, while Emmanuel Macron proposes a device of “universal savings-time account”.

  • Equality between women and men

This subject was a “major cause” of Emmanuel Macron last five-year term, which explains why it is not repeated.

The Socialist candidate, Anne Hidalgo, proposes to establish as a rule “the presence of employees in remuneration committees”. The program thus presented does not detail a possible mechanism for employee representation in the company’s decision-making bodies on remuneration. The desire to fight against the large wage gaps nevertheless led the Socialist candidate to propose the introduction of a bonus/malus system directly linked to employers’ contributions with regard to the sharing of added value.

  • Employee profit-sharing

Promoting the development of value-added sharing mechanisms also stands out as a measure likely to have strong impacts on companies. Emmanuel Macron proposes to make mandatory, for companies that pay dividends, participation or profit-sharing schemes or the payment of an exceptional purchasing power bonus. While participation is mandatory for companies with at least 50 employees, profit-sharing and the payment of the so-called “Macron” bonus are optional mechanisms. With regard to the exceptional purchasing power premium, the conditions were first relaxed. From now on, the outgoing President proposes to triple the amount.

  • Wage increases

At the heart of the presidential campaign, purchasing power is erected as the main concern of the French by the presidential candidates. This concern is correlated by proposals for wage increases. Indeed, Anne Hidalgo proposes an increase of 15%, while Valérie Pécresse proposes an increase in net wages of 10% in 5 years for all employees who earn less than € 2,800 net per month.

 

IFLR European In-House Counsel Summit

Proskauer is a proud sponsor of the IFLR European In-House Counsel Summit taking place virtually on February 9-10, 2021. This conference will cover developments in the UK and European capital markets, M&A, legal technology, corporate sustainability, Brexit, competition law, and the global impact of COVID-19.

On day two of this event Béatrice Pola, Partner in the French & EU Employment Group in our Paris office, will present on a panel titled “Employment Law and the Future of the Workforce.” As companies adapt to the new reality of working from home employers have had to face situations unfamiliar to them until recently including how to hire and train new employees online and how to manage a team that may be split between the office and telecommuting.

During this timely discussion Béatrice will address the impact of remote working on employment law and employment contracts in France. She will also discuss the rise in telecommuting and some of the differences encountered working from home during normal circumstances versus during a crisis such as the COVID-19 global pandemic.

In addition, Béatrice will provide guidance on how to equally manage employees who have returned to the office and those who continue to work remotely, how to maintain a healthy work-life balance, and how to find innovative solutions to unprecedented remote situations.

For more information on this conference, or if you would like to register to attend, please click here.

Overview of the UK Coronavirus Job Retention Scheme

The UK Government has published further guidance and The Coronavirus Act 2020 Functions of Her Majesty’s Revenue and Customs (Coronavirus Job Retention Scheme) Direction (the “Direction”) in relation to the Coronavirus Job Retention Scheme (“CJRS”). The Direction is available here and the guidance is available here, here and here. This blog post covers similar ground to, and updates, the prior blog post on this topic.

What is the CJRS?

By way of reminder, the CJRS is a government scheme set up to support UK employers who have been affected by the coronavirus. Under the CJRS, UK employers are able to obtain a grant equal to the lower of 80% of the wages or £2,500 per month per furloughed employee plus the associated employer National Insurance contributions and minimum automatic enrolment employer pension contributions (if payable) on the subsidised wage.

The CJRS was backdated so that it commenced on 1 March 2020 and was initially expected to run until the end of May. However, it has now been extended until the end of June and could be extended again, if necessary.

Which employers are covered?

The CJRS is open to all UK employers who have a PAYE payroll scheme and have a UK bank account.

Which employees are covered?

Eligible employees can be employed on any type of contract, including full-time and part-time contracts, agency worker contracts and flexible or zero-hour contracts.

Employees must have been on their employer’s PAYE payroll on or before 19 March 2020 and notified to HMRC on an RTI submission on or before 19 March 2020. The date stated under previous iterations of the guidance was 28 February 2020.

To be eligible, when on furlough, an employee can not undertake any work for their employer, so employees who simply reduce their hours will not be covered. However employees can engage in certain training and volunteer work for the employer. In addition, if their contract allows, employees can work for a different employer.

In addition, office holders (e.g. company directors), salaried members of LLPS, and certain workers could also be entitled to a grant.

How should I place an employee on furlough?

Normal employment rules and protections apply in terms of placing an employee on furlough. For instance, employers will need to discuss the changes with employees and seek their agreement to change the employment contract. Employers must confirm in writing that an employee has been furloughed. The Direction states that the employee and employer must agree in writing. The guidance states that an employee need not provide a written response, but there does need to be a written record of the communication/s that should be kept for 5 years.

The guidance for employees notes that if an employee refuses to be furloughed then the employee could be at risk of redundancy or termination of employment, subject to the normal rules and protections.

If the employer is selecting employees to be furloughed, then normal rules in relation to equality and discrimination apply and employers will need to consider any selection criteria accordingly. Employers should also consider if collective consultation obligations are triggered.

Note that, employees must be placed on furlough for a minimum of 3 weeks, but need not be furloughed for the entire period.

What happens to employees on sick leave, who are shielding in line with public health guidance or are dealing with caring responsibilities?

If an employee is:

  • on sick leave or self-isolating: the employee should get statutory sick pay whilst on sick leave or self-isolating. The Direction indicates that an employee can be furloughed after their entitlement to statutory sick pay has ended. However, the guidance states that if employees are off sick and an employer wants to furlough them for business reasons, the employer can;
  • shielding in line with public health guidance: the employee can be placed on furlough but they should speak to their employer about this;
  • dealing with caring responsibilities: the employee can be placed on furlough, e.g. if an employees has childcare responsibilities.

What happens if a furloughed employee becomes sick?

Furloughed employees must be paid at least statutory sick pay but the employer can choose to keep them on furlough at their furloughed rate or move them onto statutory sick pay. In practise, that will mean employers are likely to keep employees as furloughed.

What happens to employees who have already been made redundant?

If an employee was made redundant or stopped working after 28 February 2020 but prior to 19 March 2020 (subject to the employee being on payroll and notified to HMRC on an RTI submission on or before 28 February 2020), then an employer can rehire them and then designate them as a “furlough worker” instead.

Does being placed on furlough, impact an employee’s right?

Termination/Dismissal – Employers can still make employees redundant while on furlough or afterwards but an employee’s rights, including their right not to be unfairly dismissed (if applicable) and their redundancy rights (including to redundancy pay), are unaffected.

Family Leaves – The normal rules on statutory maternity pay, paternity pay and shared parental pay apply. Any enhanced contractual pay an employee is entitled to could be claimed through CJRS.

Holiday – Employers will want to carefully consider how holiday is managed. Furloughed employees will continue to accrue leave as per their contract. Holiday can be taken whilst on furlough and employers can also require that employees take certain holiday days whilst employees are on furlough. If holiday is taken (including if bank holidays are usually taken as leave), an employee will be entitled to be paid at their normal rate. The guidance notes that this policy on holiday pay is being kept under review.

How is an employee’s salary calculated?

HM Revenue and Customs (“HMRC”) have created a specific page to assist employers in working out how to calculate the grant, including a calculator (see link).

Broadly, in order to calculate 80% of wages:

  • for employees whose pay does not vary, the employee’s actual gross salary from their last pay period before 19 March 2020 should be used.
  • for employees employed for a full year but whose pay varies, then the amount will be the highest of: (i) 80% of the gross salary the employee earned in the equivalent month last year; or (ii) 80% of the average of the employee’s gross monthly wages for the 2019 to 2020 tax year.

If the 80% amount exceeds £2500 per month (equating to £30,000 per year or £576.92 per week), then the capped figure should be used instead.

The guidance sets out that an employee’s wages for the purposes of the calculation should include: regular wages, non-discretionary overtime, non-discretionary fees and non-discretionary commission payments. Conversely, any discretionary payments should not be included, nor should non-cash payments and non-monetary benefits in kind and salary sacrifice schemes that reduce an employees’ taxable pay. Employers should however be mindful that the direction also states that payments to be included in the calculation of wages should not vary because of relevant matters (e.g. contributions made by the employees to the performance of the business or any duties of employment) and also should “not [be] conditional on any matter”.

Employers can top up salaries if they wish.

An employer can also claim for national insurance contributions (for the wage claimed from HMRC) and mandatory pension contributions.

How does the employer access the money for furloughed employees?

Employers calculate their claim and should submit it through the online portal. This portal was opened on 20 April 2020 and in the first day alone over 180,000 claims were made by businesses with 1.3 million employees reported as being furloughed. It has been reported that it takes 6 days from submission for employers to receive the grant.

If the employer is eligible for a grant, the grant will be paid to the employer’s UK bank account.

What happens when the CJRS ends?

CJRS is currently open for at least 4 months through to at least 30 June 2020. The Government will keep the scheme under review and may extend it further.

At the end of CJRS, the employer will need to make a decision on whether the employee returns to work or is made redundant. Employers may also want to consider implementing and agreeing a transitional period in getting employees back into work.

Will the Direction and/or guidance be updated again?

It is likely that the Direction and/or guidance will be updated again given the inconsistencies that exist currently, so watch this space.

Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

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