Lyon, 2018-10-01

1. Largely employer-friendly innovations in labour law

a. Termination for operational reasons:

The obligation to offer the employee an opportunity of continued employment at the group’s foreign locations is abolished.

In the case of international groups, dismissal for operational reasons was previously only justified if the economic difficulties affected the entire group and thus also the foreign parent/sister companies. The reality check of the economic difficulties is now limited solely to the French (subsidiary) company.

In addition, the DIRECCTE (the supreme French labour inspectorate) legality audit of collective redundancies of insolvent companies is limited to the company concerned and not to the entire group. Optionally, employers or even the insolvency administrator can ask the group company for financial support. The economic social plan (so called PSE) and also the compensation claims are thus more proportionate and adapted to the company concerned.

b. Limitation of claims for damages in termination proceedings:

The French termination procedure, which was very formal in any case, was characterised by high compensation sums for the employees, the amount of which was largely within the discretionary powers of the judges. In particular, the employees were entitled to considerable claims for damages in the event of unjustified dismissal: An employee with two years’ service was already entitled to claim damages for at least six months’ salary at larger companies (more than 10 employees); there was no upper limit.

The following mandatory legal requirements now apply to companies with 11 or more employees:

• If the length of service is less than 1 year: maximum 1 monthly salary as compensation;
• Between 1 and 2 years: between 1 and 3.5 monthly salary
• From 3 years: At least 3 monthly salaries, the upper limit increases gradually: 4 (for 3 years); […] 9 (for 9 years); […] 13 (for 15 years) and a maximum of 20 (from 30 years).

For companies with up to 10 employees, there are different lower limits for a length of service of up to 10 years.

2. Client-friendly jurisdiction in French commercial agency law

In contrast to German law, for example, the commercial agent is always entitled to compensation when the contract is terminated. It is therefore irrelevant under French law whether the principal continues to do business with clients acquired by the former commercial agent after termination of the contract. The agent's claim for compensation only lapses if the latter has committed a serious fault ("faute grave") and then the contract was subsequently terminated.

In a decision dated 14 February 2018 (file reference 16-26037), the supreme French court ruled that the agent’s claim for compensation does not apply even if the fault was only discovered after the termination of the contract. It is also irrelevant whether or not the principal explicitly invoked gross negligence when terminating the contract.

Rather, it is decisive that the agent’s breach of contract has happened before the termination of the contract. In the present case, the principal had terminated the contract without notice and without compensation and had only noticed later that his agent had sold competing products during the contractual period.

3. Data Protection Act passed

By law of 20 June 2018, France adapted its data protection regulations to the DS-GVO; the regulations come into force retroactively to 25 May 2018. The French national data protection authority CNIL not only acts as a controlling body, but has also issued various working instructions and codes of conduct for companies in the meantime (see 6-point-plan: https://www.cnil.fr/fr/principes-cles/rgpd-se-preparer-en-6-etapes and practical guide from CNIL/BPI France https://www.cnil.fr/sites/default/files/atoms/files/bpi-cnil-guide-rgpd-tpe-pme.pdf).

Companies should continuously review their data protection practices, as breaches can now be punished with fines of up to EUR 20 million or 4% of global annual revenue.

Author: Petra Kuhn, Avocat à la Cour – diploma judicial officer

ZGS Avocats Associés