Reform of the Labour Code : perspectives in companies after ordinances

“To govern is to plan”: this was understood more than 180 years ago by the publicist Emile Girardin, creator of the affordable press. To plan means learning the lessons of the past in order to anticipate the future. The ordinances reforming the Labour Code are only one stage in a series of developments that began many years ago. The paths on which they are leading companies, managers, employees, elected representatives and unions are not necessarily those that receive a lot of media coverage. Their choice, in reality, does not depend on the will of the government, but on that of the two sides of industry and their ability to dialogue.

At the time of writing, the final text of the ordinances is not known. However, the parliamentary debates are over, and the consultation with the unions is drawing to a close. Although the details of the measures have not been determined, the nature of the modifications has been identified and the uncertainty relates only to the fine tuning of certain aspects. Those that remain on the back burner will probably be adjusted later, as explained by the Minister of Labour at the end of the National Assembly debates: “(…) this first bill is just a beginning: it is intended to fundamentally renovate our social model on the basis of our historical values. This will be followed by bills relative to the Labour Code, unemployment insurance, purchasing power, vocational training, apprenticeships and pensions”. This modification of the Labour Code is part of a series of developments that will most likely continue after the autumn. They call into question the nature of the social relations and the legal construction that began with Waldeck-Rousseau on 21 March 1884.

An antagonistic relationship which makes use of the balance of power

The history of trade unionism is full of struggles between wage labour and employers. This antagonism is an integral part of the birth of the trade union movement and its development. Social progress has been written into laws, collective bargaining agreements, inter-trade accords and company-level agreements. Weekly rest, paid holidays, working hours, safety, working conditions, collective benefits, the SMIG and SMIC are the result of this antagonistic relationship, which has often utilised the balance of power. It was about securing new benefits for employees. The favourability principle ensured that the local balance of power could not lead to measures for workers that were less favourable than those defined by the higher standard. Workers and their representatives demanded; employers and their representatives resisted. It was risky on the part of the political power to try to reduce certain benefits. Thus, the Prime Minister who had supported the draft law establishing the first employment contract (contrat première embauche – CPE) adopted by Parliament on 31 March 2006 was ultimately forced to announce that the conditions were not right for the CPE to apply, whereas the stated intention was to reduce youth unemployment.

It is worth noting that since that event, successive governments, of all kinds, have been seeking a lever in labour law in order to boost employment. To achieve this, many labour ministers put forward reforms that gradually contributed to a disengagement of the legislator, disrupted the hierarchy of norms, developed normative freedom at the company level, trained and secured staff representatives, informed them, lent weight to local bargaining, clarified and simplified the governance of social relations in the company, and secured career paths.

We need only refer to the ordinance of 16 January 1982, already an ordinance, which authorised a collective agreement to implement a solution less favourable than the law in a field that, it is true, was limited. It has hardly had any effect. The law of 4 August 2004 gave allowed, under certain conditions, a lower-ranking agreement to derogate from an agreement of higher rank. Following on from this, Articles 2253-1 and 2253-3 of the Labour Code established the principle that a company agreement may derogate from a branch or professional or inter-trade agreement in a way that is less favourable to the employee. However, certain domains remained protected, such as minimum wages, classifications, or social security or pension schemes. On the other hand, it was possible to negotiate, for example, termination payments, the length of the probationary period or the abolition of end-of-mission compensation with temporary work, the derogation from daily rest, derogation from working hours, overtime quota, overtime rates, the reduction of the notice period…). In this sense, according to the labour administration (Circular DRT n° 09 of 22 September 2004) it was up to the signatories of an inter-trade agreement (signed after the 2004 law) to determine, clause by clause, the suppletive or imperative nature of the provision. Where the agreement was silent, the lower level agreements could freely depart from it.

Change the weight of sources of labor law

Thus, the current Minister of Labour declared on July 10 during parliamentary debates, “No, there is no reversal of the hierarchy of norms. In simple terms, we can finally clearly distinguish what falls within the scope of the law – the fundamental rights and principles – from what doesn’t have to be defined extremely precisely by the law, or even by the branch”. Indeed, the principle of the reversal of the hierarchy of norms has been effective in law since 2004. In the current reform, the legislator distinguishes three levels. At the first level, explains the Minister of Labour, “branch agreements take precedence over company-level agreements. (…) The second block consists of the areas for which the branch may decide to take precedence over company agreements. This concerns the prevention of occupational risks, the prevention of arduousness, disability, the conditions and means of exercising a trade union mandate, the recognition of skills acquired, and career development. The third block, which falls within the scope of the company agreement, consists of those areas which are not contained in the two preceding blocks” or those which are contained in them but whose branch has not issued any pronouncements. Company agreements will therefore have to comply with the public policy rules defined by law. The question that arises concerns the balance between the normative freedom given to the company and the protection that can be represented by standards set at the trade or national level. The developments since 2004 have increased the responsibility of the two sides of industry, at the trade level and in companies. The proper exercise of this responsibility requires collaborative social relations. The observation of reality may raise doubts about this.

By way of illustration, the model that emerged following the development of the digital economy turned out to be anachronistic in the end. The B to B relationship that the UBER platform set up with drivers was soon viewed as a distortion of the employer-employee relationship that was sanctioned by the social administration and by the collective protest of the drivers. The contractual leeway, the collaborative relations, created by this new economy were ignored by UBER, which entrenched itself in an antagonistic relationship reminiscent of the beginnings of industrialisation. The UBER example shows that, however flexible the legal framework is, the establishment of responsible and collaborative social relations depends completely on the social maturity and will of the parties involved.

Incidentally, many companies did not wait for the legal framework to evolve before developing social relations that made it possible, where necessary, to safeguard their competitiveness, and to distribute more added value to employees when possible. They have been able to do so within the existing legal framework. The issue of social dumping, resulting from an imbalance of power in favour of the employer, was raised several times in the parliamentary debates. The response of the current reform is to reserve for sectoral agreements (the first block) themes whose deregulation at the level of companies could create a harmful competitive effect within the same industry. This is the case for contractual minima, classifications, the pooling of co-determination financing – co-determination funding, vocational training funds, provident funds, supplementary health insurance and daily subsistence supplements, part-time work and hourly supplements, rules of short contracts, conditions governing the use of indefinite-term construction contracts, and professional gender equality. The negotiators at the level of each branch will, as recalled by the Minister of Labour on July 10, have an important responsibility “to regulate the situation between large and small companies, ensure fair competition and avoid social dumping”. The future will tell whether the domains reserved for them will be sufficient to enable them to carry out this task.

Strengthen the responsibility of company negotiators

It is worth recalling that previous antagonisms, in the absence of negotiation and agreement, merely prevented the acquisition of a new advantage, whereas they will henceforth have the effect of shifting to the company those topics that are not dealt with by the branch and that may otherwise entail more commitments. The fact remains that the political will is to strengthen the responsibility of company negotiators, as the impact study unambiguously states. “The success of this major structural change, which should be viewed in the long-term context, depends on a rapid and wholesale changeover to the new rationale, so that the Labour Code can be quickly and resolutely drafted in terms that reflect the primacy of the company-level agreement and that the coming years can be devoted to the implementation of those initiatives likely to generalise the use of local and fair bargaining”. The will of the political power is to induce negotiators to tackle within companies national causes, regretting, in particular, that as regards the employment of older workers, professional equality, the prevention of arduousness and, to a certain extent, the prevention of psychosocial risks, “many negotiations were motivated by administrative constraint and did not lead to convincing agreements and achievements”. The redeployment of our economy is one of them. The political power expects, at the level of the company, negotiation partners with the ability to take on issues, listen to each other, take other points of view into account, argue and document, and honestly try to find a balanced solution. This will probably be the case with labour inspectorates, but also with judges whose view may be influenced. The traceability of the desire of companies’ management to develop collaborative social relations will very probably take on importance in the relations with the labour administration and in many court actions. These could be method agreements, as advocated in the EL KHOMRI law, or agreements on social dialogue.

This, of course, requires trained and informed staff representatives. New measures in this respect have recently been added to the EL KHOMRI law. Companies have every interest in being proactive on these topics in order to have interlocutors who are aware of the issues and economic realities. Some embarked on this path a long time ago. This increased competence of staff representatives is all the more necessary insofar as it is clear from the parliamentary discussions that they are likely to be granted greater powers. Indeed, the Minister of Labour observed that, “When the merged bodies incorporate the works councils and will thus have a power of information, consultation and negotiation, the issue of governance and the need to have consistent opinions for some topics will arise”.

The professionalization of staff representatives within the framework of a single body allowing them to have an overall view should ultimately result in a joint decision-making process involving the employer and staff representatives. Neither the subjects nor the deadline are mentioned. Only the direction is announced. However, the impact study observes that, “subjects such as training and employability are not currently concerned by this assent procedure”. The first step is to organise the merging of staff representative bodies.

The Rebsamen law opened the door to this possibility. Success being limited, this merger becomes mandatory for the competencies of staff representatives, the works council and the CHSCT (Health, Safety and Working Conditions Committee). Regarding the power to negotiate, the reform allows companies to decide, with the Minister of Labour observing that, “given the maturity of social culture in France today, it is necessary, for the sake of clarity, to maintain a distinction between union representatives, negotiating power and the three information-consultation bodies. In some companies, however, the social dialogue is very advanced, very demanding, without being a rubber-stamping process : trade unions and employers want to go further and their goals for social and economic dialogue are more ambitious. As a result of the consultation, we will therefore propose that a company may establish, by majority agreement, a works council vested with a power of information, consultation and negotiation”.

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