Bignon Lebray
 
What are the implications of employing at least 11, 20 and 50 employees in France?

In France, the headcount of a company is of crucial importance to determine the level of its labour related obligations. 

In practice, the fact for a company to reach the thresholds of 11 employees, 20 employees and 50 employees triggers specific obligations from a French employment perspective.    

1. Employment-related implications for companies reaching the threshold of 11 employees in France

Companies that employ 11 or more employees are required to organise elections for the appointment of staff delegates (délégués du personnel). More precisely, this obligation applies to companies, which employ an average of 11 employees or more for at least a 12 months period -not necessarily consecutive- over a 3 year period.

Staff delegates are generally responsible for presenting individual and collective grievances to management and ensuring the implementation of legislation and agreements.

Failure to organise the election of staff delegates constitutes a criminal offence of délit d’entrave. The penalties for this offence are a fine of up to € 3,750 and -theoretically- a maximum prison sentence of one year.  The Company itself may also be convicted of this offence, in which case the maximum penalty is € 18,750.

Finally, it should be noted that a 17 May 2011 ruling of the French Supreme Court considered that any employee can claim for damages against the company on the basis that no elections of employees’ representatives were organized by the company. 
 

2. Employment-related implications for companies reaching the threshold of 20 employees in France

2.1 Internal rules (règlement intérieur)

All companies with at least 20 employees in France must implement company’s internal rules (règlement intérieur) dealing with matters in relation to hygiene and safety, disciplinary sanctions, moral and sexual harassment. It should also be noted that such company rules must be filed by the company with the relevant Labour authorities.

French Courts have recently considered that to be able to notify a sanction validly, employers with at least 20 employees must have mentioned the relevant type of sanction in their internal rules. 

Consequently, all companies with at least 20 employees which did not implement internal rules, and/or whose internal rules do not mention the relevant sanctions (e.g. warning, disciplinary suspension, demotion etc.) would legally be at risk when notifying a sanction. Indeed, the sanction notified without the internal rules’ support is illegal, and can be nullified -at the employee’s request- by an industrial tribunal. This restriction does not however apply to dismissals.

Failure to implement company’s internal rules constitutes a criminal offence punishable also by a fine.


2.2 Disabled Employees (salariés handicapés)

Companies with over 20 employees must have 6% of workforce registered as disabled. Otherwise, the company has to pay towards a fund to facilitate the training of disabled people. Newly created companies have 3 years from the point of having reached 20 employees to comply with this.  Nonetheless they must complete a declaration to the relevant authority in the interim.  
 

3. Employment-related implications for companies reaching the threshold of 50 employees in France

3.1 Works council (Comité d’Entreprise)

Companies that employ 50 or more employees are required to organise elections to set up a works council. More precisely, this obligation applies to companies, which employ an average of 50 employees or more for at least a 12 months period -not necessarily consecutive- over a 3 year period.

The works council receives information from the employer concerning the economic and social situation of the company.  It also responds to formal consultations by the employer in areas which affect employees, such as redundancies, vocational training and changes to the legal structure of the company.  It is also responsible for managing social and cultural activities, for which it has a budget at its disposal.

Failure to organise the election of the works council or to comply with the works council’s attributions constitutes a criminal offence of délit d’entrave. The penalties for this offence are a fine of up to € 3,750 and -theoretically- a maximum prison sentence of one year.  The Company itself may also be convicted of this offence, in which case the maximum penalty is € 18,750.

Finally, it should be noted that a 17 May 2011 ruling of the French Supreme Court considered that any employee can claim for damages against the company on the basis that no elections of employees’ representatives were organized by the company.


3.2 Health and safety committee (CHSCT)

A health and safety committee must be set up in companies with 50 or more employees. More precisely, this obligation applies to companies, which employ an average of 50 employees or more for at least a 12 months period -not necessarily consecutive- over a 3 year period.

The role of the committee is to contribute to the protection of the employees' health and safety and to the improvement of working conditions.  The committee must be consulted in respect of all major changes concerning the health and safety and working conditions in the company.

Failure to organise the election of the health and safety committee or to comply with such committee’s attributions constitutes a criminal offence of délit d’entrave. The penalties for this offence are a fine of up to € 3,750 and -theoretically- a maximum prison sentence of one year.  The Company itself may also be convicted of this offence, in which case the maximum penalty is € 18,750.

Finally, it should be noted that a 17 May 2011 ruling of the French Supreme Court considered that any employee can claim for damages on the basis that no elections of employees’ representatives were organized by the company.


3.3 Other staff representative bodies

Staff representative bodies may also be set up at other levels within a company or group, e.g. at a local level (a particular site), a group level or European level.


3.4 Union representatives (délégués syndicaux)

Trade unions, which are representative in the company (according to the outcome of latest employee's representatives' elections), may appoint specific trade union delegates in companies with over 50 employees.

It should be noted that most collective agreements may be entered into only with trade union delegates.

Where a company has one or several union delegates, it must annually discuss with them the wage raise, the working conditions and the duration of working time. However, there is no obligation to reach an agreement with them.


3.5 Mandatory Profit Sharing (participation aux résultats de l’entreprise)

If a company has at least 50 employees (during 6 months at least during the fiscal year) and is showing a profit, it must set up a scheme under which employees can participate in the company's profits (called participation).

Such mandatory profit-sharing arrangement permits employees to a share in the profits of the business and gives rise to a favourable tax and social security regime both for the employer and the employee provided that the profit-sharing agreement was duly registered with the Labour authorities.

The profit-sharing reserve must be shared out between all the employees of the Company according to certain criteria set forth by the Company (e.g. equal repartition, repartition according to the remuneration of employees, presence in the company).

French recent legislation provides that the employees benefiting from the mandatory profit-sharing scheme would have the choice to elect for their payments from the following:
- the immediate payment, upon their request, of the sums which would then be subject to personal income tax, or
- the investment of these sums on a saving-plan for a 5-year minimum period, in which case the sums would remain exempt from personal income tax and social security contributions.

The funds are blocked for five years with some exceptions for early access (such as birth of a child, divorce, death
of an employee, termination of contract).  


3.6 Savings Plans (Plan d’Epargne d’Entreprise)

Companies which set up a mandatory profit-sharing plan since 2007 must set up a savings plan. 

There are significant tax and social security advantages to employees participating in the plan if the funds come from a profit sharing plan and they remain in the saving plan for 5 years.

Companies can match up to 3 times the employees investment but is capped at Euro 2 828
per year (in 2011); there is no standard rule for this investment but employers must at least pay for the management costs of the plan.

There are employee and Company tax advantages to participating in a saving plan.

This being said, the Company also has the option to set up this saving plan if the headcount is below 50 employees.


3
.7 Company’s agreements and/or action plans on old-aged employees, work hardness, and equality of treatment between men and women

3.7.1 Agreements on old-aged employees

Since 1 January 2010, all companies with at least 50 employees -or companies belonging to a French group comprising at least 50 employees- must have agreed a collective agreement or an action plan to favour the work of old-aged employees (emploi des seniors). It should be noted that companies/groups having between 50 and 299 employees may also comply with their obligations in this respect when an agreement on these aspects is negotiated at the level of their branch of activity. Failure to comply with this obligation would trigger the payment of a penalty of maximum 1% of the wages bill.

3.7.2 Agreements on work hardness

As at 31 December 2011, companies with at least 50 employees (or companies belonging to a French group comprising at least 50 employees) employing staff exposed to specific professional risk factors must have agreed a collective agreement or an action plan to prevent work hardness (pénibilité au travail). It should be noted that companies/groups having between 50 and 299 employees may also comply with their obligations in this respect when an agreement is negotiated at the level of their branch of activity. Failure to comply with this obligation would trigger (in 2012) the payment of a penalty of maximum 1% of the wages bill.

3.7.3 Agreements on equality of treatment between men and women at work  

As at 31 December 2011, all companies with at least 50 employees must have agreed a collective agreement or an action plan to favour equality between men and women at work. Some companies may already have implemented this type of agreement and are therefore already in line with French legislation in this respect. Failure to comply with this obligation would trigger (in 2012) the payment of a penalty of maximum 1% of the wages bill.

 
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