Soft Restructuring in FranceSoft Restructuring in France

and and

Other Updates on Employment Issues Other Updates on Employment Issues

AmCham position paper October 2013 http://www.amchamfrance.org/assets/position_papers/67743_amcham-bain-barometer-2013-for-e-mail.pdf

1240 US groups are operating in France through 14,000 facilities (factories, warehouses, shops, sites, R&D centers, laboratories, office premises) and thanks to 440,000 employeesAmerican companies are the biggest investors in France; and the US are destination N°1 for French investorsUS give precedence to France over other European countries in terms of geographical situation, qualification of employees and quality of local infrastructureAmerican employees working in France praise French social security and school system

But the position paper also outlines US investors gloomy perception of France:

only 10% expect the French economy to improveonly 13% have a positive vision of France more than 80% regret France’s lack of attractiveness in terms of salary costs, work flexibility and termination process and costslast and not least, 9% of American employees working in France would recommend foreign colleagues to move to France because of personal income tax, red tape and social climate

Despite legal and red tape drawbacks, France has simplified some Despite legal and red tape drawbacks, France has simplified some processes and is ready now for new challengesprocesses and is ready now for new challenges

US FranceDiscovery No

Fishing expeditions No

Cross examinations No

Jury trial No

Pleadings may last 30 days + Pleadings do not exceed 30 mn +

Judgment sometimes on the bench Judgement issued 8 weeks + after hearing

Legal costs to defend against a claim for wrongful termination or wage and hour can exceed 500K USD (up to Supreme Court)

Legal costs to defend against a claim for wrongful termination or wage and hour may not exceed 50K USD (up to Supreme Court)

No win no fee: « ambulance chasing » lawyers may solicit redundant employees and display adds on TV

Prohibition of no win no fee : employees hesitate to file claimsSolicitation prohibited and TV adds as well

Punitive damages No

Direct and indirect damage indemnified Only direct damage indemnified

Class actions Not in employment issues

Case law = Binding precedents Case law = never binding

Genesis

Global groups are supposedly wealthy.

In French public opinion it is not acceptable to see wealthy foreign groups lay off French workers.

Plaintiffs lawyers have long looked for a way to reach out to groups.

They found the JOINT EMPLOYMENT

Shift in traditional analysis…

No more “subordination link” criteria

But a “business oriented” vision based on a confusion of interest, activity and management between a parent company and its subsidiary

The mere characterization of another potential employer different from the contractual one is enough to deem the subsidiary’s employees jointly employed by that other employer

Who’s going to hold the bag?

Convergent indications used by Courts Do’s and Don’t’s

1.Keep distinct officers for the parent company and the French subsidiary

2.Anticipate possible divestments and refrain from or stop interfering in the French subsidiary, far in advance.

3.Carefully consider recapitalizing or financing a French subsidiary that face financial troubles or melting profitability

4.Never accept to pay for the French subsidiary’s Social Plan ; think about the ‘double blade’ effect

5.Locate shareholders meetings, board meetings and alike at the head office of the French subsidiary

6.Limit service agreements, cash pooling arrangements

7.Keep group support services away from direct communication with French clients, suppliers, personnel, media, French authorities

8.Within SOX constraints, limit reporting imposed on French subsidiary ; Do not set low limits on the PoA of French subsidiary’s officers for d-to-d decisions or investments

9.Refrain from assessing restructuring costs by yourself

10. Go to:

Key changes on collective lay-off (1/2)

Priority set to negotiating with unions, under the supervision of State department of Labor

Companies contemplating collective lay-off may now:

Social Plan CBA Social Plan unilateral doc

Less uncertainty for employers on lay-off timing

After the ‘go’ from the State Department of Labor, works council consultation process cannot last more than

4 months where 250 + lay-off are contemplated

3 months where 100 to 249 lay-off are contemplated

2 months where max 99 lay-off are contemplated

Works council cannot stall before issuing an opinion on a contemplated lay-off: it either agrees or disagrees within 2, 3 or 4 months. Failing what, employers can carry on the process and send redundancy letters

The works council cannot delay the procedure anymore

Claim against State Department of Labor’s go/no go decision must be filed within 2 months. First Court must rule over the case within 3 months. Appeal court as well.

Tight deadlines bind the judges

Since 2000, white collar workers enjoy some sort of exempt working time status : their time is accounted for in days per year

CBA must contain provisions protecting sufficiently employees’ health and safety

Branch CBA are generally inconsistent with that requirement

Covenant providing for lump sum working time system are null and void

Employees may claim for overtime pay over the past 3 years + an indemnity for illegal work ; 45 hours a week = a claim costing 3 years of salary to the employer ; windfall effect

No corrective action can be taken for the past

Corrective actions should be implemented for the future by :

concluding a new CBA, at the company level

concluding a covenant with employees

MITIGATING STRATEGIC DATABASE NEW OBLIGATIONMITIGATING STRATEGIC DATABASE NEW OBLIGATION

Make things difficult (1/2)

New law creates an additional mandatory consultation of the works council regarding the company’s strategy and a single database containing information for the works council

MITIGATING STRATEGIC DATABASE NEW OBLIGATIONMITIGATING STRATEGIC DATABASE NEW OBLIGATION

Make things difficult (2/2)

How to avoid interference of the works council with confidential information regarding the group?

LAST ADVICE: STAY ALERT!LAST ADVICE: STAY ALERT!

Without falling into the joint employment theory, foreign groups must not forget to monitor their

French subsidiaries

Otherwise, groups can be held responsible for management misbehavior: bonuses self awarded,

days off improperly accounted for, etc...

Each US Group should keep an insider on site or close to it, who will report to Group headquarter