What you need to know about French employment contracts

6 July 2016

France can be perceived stereotypically abroad as a country where strikes happened too regularly, workers do not work many hours, businesses are burdened with taxation, trade unions remain all-powerful, free enterprise is a pipe dream and employers must comply with cumbersome red tape. And there are varying degrees of truth to all of these perceptions. To take the first example only, worker strikes over proposed labor reforms have in fact occurred in recent months all over France, affecting public utilities, oil and gas import terminals and other important areas of the economy. For these reasons and others, multinationals are understandably wary of expanding into the French market.

And yet … the French economy remains alive and well and is a key player in Europe and beyond. Since 2014 new labor laws have been passed to significantly reform the economy and make France more competitive on the international markets and encourage entrepreneurship. (For additional information about recent reforms, and recommendations for additional measures, read this OECD survey overview.)

It’s also worth emphasizing that some of the stereotypical perceptions about France are not grounded in reality. Some experts have argued that the number of days lost in France to strikes is far lower than its reputation suggests, and that statistics put France near the average for European countries. As mentioned, strikes in France do happen but mostly in the public sector and mostly in Paris, where the world media is more likely to report on them. As for productivity, contrary to widespread perception, outside of the public sector and in large industries, French workers log long hours; figures from the OECD (2014) show that productivity per hours (GDP) in France is among the highest in Europe.

Corporate taxation is indeed high in France, and this is particularly burdensome for smaller businesses hoping to expand into the country. These high rates, however, are seen as a necessary evil to maintain the high levels of social welfare enjoyed in France. The red tape mentioned also exists, but like corporate tax rates it too should be regarded in light of local culture, where a sense of purpose and need for order are prized.

It should also be noted that bureaucratic red tape in France is often not as cumbersome as widely assumed, and it is possible to navigate through it effectively with expert guidance. And while the phrase, “Why make things simple when they can be complicated?” can at times seem to be the driving principle of French regulations, the intention to bring rigid structure to tax, labor and other laws can be both a boon and a bane for employers.

The drafting of an employment contract in France illustrates this point. Prospective employers in France must always keep in mind that there is no such a thing as a standard French employment contract. Consider that any contract cannot be drafted until after a determination has been made as to which Collective Bargaining Agreement (CBA) applies, based on the activity of the employer in France.

It is critical for employers to apply the correct CBA to their employment contracts, and employers should in virtually all cases consult with an expert familiar with French labor laws when making their determinations. If your contracts are written under an inappropriate CBA, insurers of such benefits as the Mutuelle (or additional health insurance mandatory since January 2016) and the Prévoyance (death and disability insurance) may refuse to grant coverage. In addition, the wrong CBA will provide incorrect terms and conditions related to leave entitlements, probation and notice periods, and other important benefits.

Again, it is critical to make a proper CBA determination before drafting a French employment contract to avoid problems  that may come to light after the employee has been engaged under an improperly classified agreement. For example, an incorrect CBA determination could result in potential legal challenges from employees who argue that the misclassification resulted in diminished benefits such as reduced annual leave or overtime compensation.

The classifications of the role of an employee, and the job level within that role, are also important steps that must be taken before drafting a French employment contract. Employee experience, age, qualifications and responsibilities will all need to be carefully assessed and confirmed and detailed in the contract. Collectively, these factors will determine the working time and overtime rules the employee will be subject to and will shape the relevant clauses in the contract.

Employers that have existing employees should regularly review their employment contracts to ensure that the classification and job levels described accurately reflect the expertise and responsibilities of the employees under agreement.

Finally, a note on terminating permanent employees. Virtually all of our clients operating in France employ workers under a CDI contract (contract duration indeterminée), which has no employee-termination date. Terminating an employee under a CDI can be an extremely long and costly proposition for an employer. This is one area in which France’s notorious reputation for employee-friendly labor laws is perhaps fully justified. However, it should be noted that the strikes mentioned earlier are in large part due to proposed reforms that may in the future allow employers in France to terminate workers more easily and cheaply.

There are other considerations when drafting French employment contracts, including accounting for general employment rights and obligations as set out in the ever-expanding Code Civil, which leaves even some lawyers puzzled as to application. But the task is far from insurmountable if you obtain expert advice. And that can be a small price to pay for operating in one of the top economies in the world.