France to reform ‘overly complex’ labour laws next year, PM says

Manuel Valls

Prime Minister Manuel Valls. Socialist Party's Summer University, 30 August. [Parti Socialiste/Flickr]

The government will propose legislation to simplify over-complex labour laws and promote more collective bargaining accords at a sectoral level, French Prime Minister Manuel Valls said on Wednesday (9 September).

France, where unemployment remains stubbornly high at a near record 10%, has promised to speed up structural reforms demanded by its European Union partners in exchange for more leeway on deficit reduction.

The European Commission, International Monetary Fund and Organization for Economic Cooperation and Development have all said that a reform of the labour sector should be the top priority for the eurozone’s second-largest economy.

>>Read: France wins EU approval for two-year reprieve on deficit

The prime minister, speaking after he took delivery of government-commissioned recommendations on the revamp, said draft legislation will be proposed by year-end after talks between labour unions and employers. Final adoption by parliament is expected by the summer of 2016.

“This report is a major milestone of this mandate,” Valls said. “It’s a fact, our labour code has become too complex, sometimes even unreadable.”

The reforms would give “more flexibility, but not less protection” to workers, Valls said after the release of the report. The main recommendation in the report is that companies must be able to negotiate with unions on certain key issues – such as working conditions or salaries – where the law currently ties their hands.

Valls said the reform would not unstitch statutes stating that the legal work week is 35 hours in France. However, there are still plenty of areas in which unwieldy labour laws could be slimmed down and more room allowed for collective bargaining, among other things by greatly reducing the number of sectors where negotiations apply from 750 now to 100 eventually.

In another proposal, management will only be able to sign deals with organisations representing at least 50 percent of workers who voted in union elections, up from the current 30 percent.

A bill will be submitted to cabinet at the end of the year or the beginning of 2016, and parliament is expected to vote on it by next summer.

Uphill struggle

But the government faces an uphill struggle to convince unions and workers that the current code governing the labour market needs to be shaken up.

In neighbouring Germany, where collective bargaining has long been a bedrock of society, the number of sectors is only 50, according to the report’s author.

“France is culturally one of the most centralised countries,” said Jean-Denis Combrexelle, the top civil servant who drafted the document. “Here, a good rule must come from the state. We have to abandon that mindset.”

Employers’ organisation Medef hailed Combrexelle’s work as “bold” and urged the government to quickly translate it into law. Reformist union CFDT also welcomed the recommendations.

Unions were also quick to react, and while some said they were not hostile to the proposed changes as long as they offer “better protection” for workers, others instantly voiced their opposition.

Philippe Martinez, head of the influential CGT union, said he was “resolutely against this development in the labour law.”

System ‘works very well’

Analysts said the mooted changes would bring France into line with its European competitors.

“It makes a lot of sense to give more power to (negotiations) that can take place at company level,” said Stephane Garelli, an expert in world competitiveness at the Swiss-based IMD business school.

“This is a system which is in operation in Germany, in Switzerland, in the Scandinavian countries… and it works very well. Italy is also going in this direction.”

He added: “What we have found is that if you want to promote the flexibility of the labour market, it starts by letting people who are in the labour market make their own agreements.”

However, further labour reforms could also face resistance from increasingly vocal rebel Socialist lawmakers and prompt street protests.

Valls recently had to force through parliament a package of free-market measures known as the “Macron Law” by invoking a little-used legal device, article 49.3 of the constitution.

The European Commission granted France until 2017 to bring its budget deficit below the EU limit of 3% of GDP after Paris missed an already extended 2015 deadline.

In return, Paris must commit to rapid and ambitious economic reforms, the Commission said. Paris was asked to cut labour costs, reform its pension system and open up its protected markets. The reforms were suggested as part of the Commission's economic policy recommendations, which are sent to member states each year.

>> Read: Barroso urges ‘credible reforms’ in France in return for deficit grace period

While many countries have tightened their belts by laying off civil servants and cutting pay, France has done neither. Brussels said it expected to receive a new programme of structural reforms from Paris by April 2015, despite the recent adoption of the controversial Macron economic reform bill.

>> Read: Brussels demands more ambitious reforms from France

Since 2001, France had a deficit below 3% only in 2006 and 2007 and has repeatedly missed consolidation deadlines.

Fiscal hawks, including the the German centre-right MEP Herbert Reul (CDU), said they were "disappointed" with the new deadline extension.

>> Read: German centre-right ‘disappointed’ over extension of French deficit deadline


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