Employment Update, France – February 2009

19 February 2009

Christopher Ivey

Legislation

Retirement of employees before the age of 70 now requires their express agreement

Background

Enforcing retirement on employees has in the past been a realistic and relatively widely used option for companies looking to reduce their headcount without needing to follow a strict redundancy procedure or compensating the employees in the same way as under a redundancy plan.

Over recent years however, despite specific collective bargaining agreement provisions, the scope of such retirement has been reduced. Initially available to companies as of their employees' 60th birthdays, this option was pushed back to the age of 65, and only possible if the employee had their full pension contribution quota, although it still remained possible for employees aged between 60 and 65 provided that a specific collective agreement provided for training and hiring efforts by the company as "consideration" for retiring an employee.

Until now, employees could be required to leave to take their pension as of the age of 65.

New legislation

The Social Security Financing Law for 2009 has modified the terms applicable to this procedure, re-writing Article L. 1237-5 of the Labour code. This modification entitles all employees to work until the age of 70, only allowing companies to retire them before this age if they expressly agree to this.

Effect on employers

In order to retire an employee before the age of 70 a specific procedure must be followed, requiring the company to ask the employee whether they would leave the company on a voluntary basis. This process must be commenced 3 months before their birthday. If the employee refuses, they cannot be forced to retire. They can be asked the question once a year until their 69th birthday.

2009 is a transitional year for this legislation, which does not apply to employees who have already been notified that they will retire before 1 January 2009. For this year, employees aged between 60 and 65 can still be forced to retire providing this measure falls within the terms of a collective agreement. As of 2010 however, the provisions will enter into full force.

This obligation to obtain the employee's acceptance in order to retire them rather limits the employer's options for older employees, preventing the shortcut which was often used to reduce headcount without actual redundancies.

 

Case law

Collective redundancy thresholds: only employees based in France are taken into account

Background

Companies of at least 50 employees who make 10 or more employees redundant on economic grounds within a period of 30 days are required to implement a social plan known as a "plan de sauvegarde de l'emploi."

This plan includes all the measures to be applied in order to limit the number of redundancies and promote redeployment of those employees whose redundancy cannot be avoided. Employee representatives must be informed and consulted on the plan, which must then be sent to the Labour Inspectorate.

It is therefore important to determine whether a company has an obligation to implement such a plan, particularly as not doing so where necessary will result in the redundancies being considered null and void.
Facts

An Italian bank took the decision to close its French branch and therefore make all 28 of its employees redundant. As the bank's presence in France was less than 50 employees, the management did not implement a social plan.

The Court of Appeal held that the 28 redundancies were null and void as no social plan had been implemented as it held was required, on the basis that the headcount of the entire company should be taken into consideration, irrespective of the location of the employees. A branch is not a separate legal entity, and, on the basis of the Court of Appeal's decision, should be considered as merely a part of the global company, which employed considerably more than 50 employees.

The Cour de Cassation refused this analysis of the law however, and held that given the limit of the application of French law to the French territory, only those employees directly attached to the employer in France are subject to French employment law, such that the workforce to be taken into account should only include those employees in France.

Effect on employers

This case limits the application of French collective redundancy rules to situations where the French entity itself fulfils the criteria, and therefore releases a considerable number of foreign companies from requirements which are procedurally complex, particularly for entities managed abroad.

Cass. Soc., 23 September 2008, n° 07-42.862 F-P