French Employment Contracts and Labor Law

(List of articles in English and French relating to various legal issues)

Prepared by: Jonathon Wise Polier 
Attorney-at-Law (Paris, France) - Avocat à la Cour de Paris
j-polier@paris-law.com
www.paris-law.com

French labor law is especially challenging to:

• foreign companies seeking to hire staff in France for the first time,

• expatriate managers who are offered employment in France for the first time.

As French labor law is significantly different from the "employment-at-will" relationship which exists in many anglo-saxon countries, an understanding of the French legal environment is important before finalizing relationships.

Public Policy

French labor law includes a number of restraints that may not be avoided by the employer and the employee, even thought they may both wish to contractually agree to a different arrangement. If the employment contract tries to ignore these French principles, the French Labor Courts will hold them to be invalid.

The following are a few examples:

1. Maximum hours that even professional staff may work per week, irrespective of overtime payments.
2. Minimum of 5 weeks paid vacation per year.
3. Termination benefits, even if the job position has become redundant (except for a short-term or other special contract).
4. Excessive non-compete provisions, once employment is terminated by either the employer or the employee.
5. In the absence of a signed written employment contract on day one of employment, the employee is deemed to be a permanent employee whose employment may not be terminated except if termination benefits are paid.
6. Possibly a 13th month of salary each December, in accordance with the applicable "convention collective", a fact of life discussed below.

The Employment Contract of Staff Professionals

Point of View of the Employer

The employer will generally wish to consider the following provisions in the management contract:

1. The right to relocate the employee to a different geographic area in France or elsewhere in Europe, if the need should require.
2. A wide-ranging job description so that the employee may not refuse new responsibilities, as the company evolves.
3. Carefully crafted confidentiality provisions, if proprietary information is important.
4. Carefully crafted non-compete provisions, when appropriate. (Note: after termination of employment, contractually specified extra compensations must be paid to the employee during the period that the non-compete provisions is in effect .)
5. Clear and sufficiently broad definition of persons from whom the employee must accept the business-related instruction.
6. Choice of the appropriate and applicable "convention collective", issue discussed below.

Point of View of the Employee

The employee will generally wish to consider the following provisions in the contract:

1. Limits upon the employer's right to relocate the employee to a different geographic area in France or elsewhere in Europe.
2. Reasonable job description.
3. Acceptable reporting lines, organizational chart and title.
4. Minimum lead-time of termination notices to be given by the employer or the employee and the amount of severance benefits, if they are to exceed those specified in the "convention collective".
5. Reasonable non-compete provisions after termination of employment with maximum financial indemnity.
6. Choice of the appropriate and applicable "convention collective".
7. Category of employment position pursuant to the applicable "convention collective".
8. Relocation benefits upon joining and leaving and education expenses of children who will not be attending French public schools.
9. Tax indemnification, if French taxes are higher than home-country taxes.
10. Housing allowance (a taxable benefit like a number of benefits mentioned above).
11. Other fringe benefits (automobile, business class air fare on business trips, etc.)

The "convention collective".

In addition to the French Labor law and applicable Decrees, each sector of French business activity has been the subject of an umbrella contact negotiated between representatives of the employers and the employees in such sector and approved by France. This is called a "collective agreement" ("convention collective"). Each such agreement (which may be 50 pages in length), may impose sector specific rights and obligations that must be respected by the employer.

However, certain businesses can choose to contractually be bound by one of several "convention collectives". At times, this choice is negotiable between the employer and the employee.

Termination of Employment by the Employer

If the employer wishes to terminate an employee for cause or without cause (for example: "pour faute du salarié ou pour raison économique"), French law imposes strict procedures that must, at the employer's peril, be followed. The complexity of the termination procedures and the legal ramifications thereof are such that both the employer and the employee generally need to be guided by legal counsel.

Indeed, as soon as the relationship begins to deteriorate, such counsel is generally needed.

Hierarchy of Authorities

There is a natural hierarchy of legal and contractual authorities in employment related matters. Terms in an employment contract which are in contradiction with the superior "convention collective", decrees or labor laws are clearly invalid. And naturally the "convention collective" must respect the superior authority of the decrees and labor laws.

As a practical matter, contract terms granting more favorable benefits to the employee are seldom in contradiction with these higher authorities. However, the employer's room to maneuver is limited by these higher authorities, as they were in large part designed to protect the employee who was deemed to have less bargaining power and a greater need of protection.

This system is clearly similar to the "fair labor laws and practices" in other developed countries, but the degree of labor protection in France and elsewhere in certain other continental Western Europe countries takes the concept of "fair labor practices" to an unusual level of both protection for the employee and complexity.

Opting Out

Given the relative inflexibility of the French labor law framework, employers may seek to call upon the skills of executives in the form of independent consultants.

However, French tax and labor laws limit this option and it cannot be prudently considered without appropriate professional advice. For example, if the "consultant" is not truly "independent", the labor authorities and the tax authorities may well "requalify" the relationship as one of "employer" and "employee". Such "requalification" could naturally lead to significant administrative and tax consequences.