FRANCE: An Introduction to Employment

Overall, 2023 was shaped by both economic and social trends in line with those of the previous year, as high inflation averaging almost 5% heavily affected discussions with social partners and weighed on employment in France. 2024 seems to follow in the footsteps of the last semester of 2023 by confirming the downward inflation trend, which is expected to slow to around 2.6%.

As for the political climate, government reshuffles have marked recent months and are closely scrutinised by employers. Most notably, Prime Minister E. Borne, who had spearheaded the major pension reform for the past two years, was replaced by the youngest prime minister to date, G. Attal. Numerous socio-economic challenges await this new government in 2024, amid the domestic landscape revolving around July's Olympic Games in Paris as well as a geopolitical framework that remains highly tense, impacting both France and the European Union. Despite criticism, the Games organisation is expected to have a positive impact on employment, generating numerous recruitments in many sectors such as transport, construction, event organisation, security and tourism.

As for employment law, 2024 is expected to be a year packed with new changes. President E. Macron has officially confirmed his intention to boost French growth, especially by introducing a new labour reform project for this spring, the so-called “Macron II” Act, following his major reform in 2016, heralding a new upheaval in French employment law aiming at streamlining many obligations in this field.

Undoubtedly, 2024 will be defined by the Games, which, beyond its sport-related dimension, will involve numerous environmental, political, economic and social stakes. Acting as a national metronome, this event will set the tone and pace of political reform and debate, especially as regards labour law.

Aftermath of the Adopted Pension Reform 

2023 was dominated by debates surrounding the pension reform, culminating in its adoption. Implementing decrees were adopted in summer 2023, and the Act entered into force on September 1st.

In practice, the Act gradually raises the statutory retirement age from 62 to 64, with an increase in the duration of contributory service from 167 to 172 annuities. Automatic full pension entitlement is maintained at age 67. The supplementary AGIRC-ARRCO pension scheme is also affected by the extension of the legal retirement age and the increase in the contribution period, resulting in a corresponding postponement of the AGIRC-ARRCO settlement date without life-long reduction. The national cross-industry agreement signed in October 2023 abolished the solidarity coefficient (malus) and the bonus coefficient (majorant). Other key measures include the end of special schemes for new entrants, and a reorganisation of the early retirement system for long-term careers, with two new age limits added to the existing ones. Employees who started work before age 16, 18, 20 and 21 will be able to retire respectively at age 58, 60, 62 and 63. For disabled workers, retirement at 55 is still possible, and even simplified. Lastly, an early retirement age of 62 has been introduced for unfit or disabled employees.

New Information Obligations Incumbent on Employers

The so-called “DADDUE” Act of 9 March 2023 finally transposed into French law the EU directive of 20 June 2019 regarding economic, health, labour, transport and agricultural matters. A decree dated 30 October 2023 sets out application rules for the new legal provisions added in the French Labour Code.

Concisely, employers are required to provide employees with one or more written documents containing key information relating to the employment relationship. The decree lists this key information and sets out the procedures for preparing and issuing them. Should the employer fail to provide these to the employee following a formal notice, the latter may bring the matter before the Labour Court. Furthermore, following entry into force of this law, any employee on a fixed-term contract who has been with the company for at least six months may now ask the employer to provide information on job vacancies to be filled on a permanent basis.

New Features and Reinforcement of the Value-Sharing Bonus Mechanism

The so-called “PPV”, value-sharing bonus, has replaced the exceptional premium for purchasing power since August 2022. The PPV can amount to up to EUR3,000 / 6,000 per employee. In February 2023, social partners drew up a national cross-industry agreement (ANI) to promote profit-sharing in companies with 11 to 49 employees, and boost employee savings schemes. An Act of 29 November 2023 transposed this ANI into French law.

Henceforth, PPV may be allocated twice a year, up to the total exemption ceilings (EUR3,000 or EUR6,000), and may be invested in an employee savings plan. It may be paid to all employees. In 2024, PPV paid will be exempt from social contributions but will be liable to CSG-CRDS (social surtax) and income tax. In companies with fewer than 50 employees between 1 January 2024 and 31 December 2026, PPV will be exempted from income tax and all social charges (including CGS-CGRDS) when paid to employees who, during the year preceding payment of their bonus, received remuneration of less than three times the French minimum wage (SMIC).

The Act only includes specific provisions for small companies (11 to 49 employees). In addition, for companies with 50 employees or more, required to set up a profit-sharing scheme, and with at least one union representative, the Act introduced a new obligation: negotiating on the definition of what is “an exceptional increase in profits” and on the resulting arrangements for sharing value with employees. This obligation applies immediately to companies that open negotiations on profit-sharing or employee savings schemes. For other companies, negotiations must be initiated before 30 June 2024. There is no obligation to conclude, only an obligation to negotiate.

New Employment Measures under the New Immigration Act

The so-called “Immigration” Act of 26 January 2024 introduces new labour-related measures. It provides for the implementation, on an experimental basis and until 31 December 2026, of a residence permit for undocumented employees working in shortage occupations (according to a list drawn up and updated once a year by the authorities, after consultation with the social partners).

Other noteworthy measures include the possibility for employers to offer foreign-speaking employees training to enable them to reach a specific French skill level. Employers hiring foreigners without a work permit will be subject to an administrative fine of up to 5,000 times the hourly guaranteed minimum wage. The Act also introduces new features for the “talent passport”, which is replaced by a multi-annual residence permit, known as the “talent card”. This card will be granted to workers with a diploma at least equivalent to a Master's degree, or recruited into a young innovative company, or coming on a mission between establishments of the same company or between companies of the same group, and having a seniority of three months in the group or company. A “talent card” will also be issued to foreign nationals working as doctors, surgeons, dentists, midwives or pharmacists, for a four-year maximum period.

Many Significant Developments in French Case Law - Two Important Ones

The end of 2023 was highlighted by a significant turnaround in French case law regarding paid leave following important European case law. The French Supreme Court issued a series of rulings in order to bring French law into compliance with European law on paid leave. For instance, it ruled that employees who are ill or have suffered accident will be entitled to paid leave during their absences, even if these absences are not due to an occupational accident or illness. In case of occupational accident, paid leave entitlement will no longer be limited to the first year of sick leave. The statute of limitations on the paid leave entitlement will only start to run once the employer has given the employee the opportunity to exercise this right in due time. Although these decisions aimed at improving effectiveness of employees' entitlement to paid leave, it undoubtedly has implications for French businesses. According to MEDEF, a leading French employers' organisation, these decisions will undermine French companies' competitiveness as overall costs for companies are estimated at EUR3.2 billion per year, times the number of adjustments required. In practice, this has already had a significant impact on French companies, pushing them to significantly increase their financial provisions for risks related to paid leave as of 2023 year-end, pending the French lawmakers' reaction. The French Constitutional Council ruled on 8 February 2024 that French legal provisions were in compliance with the French Constitution. Although debate on French law's compliance with the EU directive now seems pointless, the right to paid leave in light of the EU Charter and its interpretation by the European Court of Justice remain topical. Thus, a new French law aimed at harmonising national jurisdictions is not ruled out and the French Constitutional Council's decision should provide lawmakers with more room to manoeuvre in order to limit the impact of all the recent case law on this topic for employers.

In December 2023, the French Supreme Court ruled in a major turnaround in French case law that evidence obtained or produced in an unfair manner does not necessarily have to be excluded from the proceedings. Unfair evidence may now be admitted in court if, after weighing up rights at stake, it proves to be essential and proportionate to the aim sought. While this reversal represents a major improvement in terms of evidence rights, the judge's scrutiny of the evidence still makes the admissibility of unfair evidence uncertain. In any event, this decision requires employers to exercise the utmost vigilance when dealing with employees.