Last week’s webinar Employment Law in France: Avoiding Common Pitfalls encouraged a lot of discussion. There were several interesting questions from attendees for HSP's advisory services expert Dafydd Williams; here are some of the highlights, and answers:
What is the best location for a U.S.-based small-to-medium sized company to set up a European office from an employment and tax standpoint?
It is difficult to state that one country is better than another from the perspective of ease of employment and tax effectiveness. A company has to include many other factors in making this decision, including commercial markets, logistics, available skills, overall business environment, bureaucracy and other influences which may be important to a particular company.
With respect to employment issues (ease of hiring, termination, etc.), we typically see Germany and the U.K. as the less onerous countries. The tax perspective is trickier to address. Ireland has grabbed the headlines in the last decade or so as having one of the lowest tax rates in Europe. However, to fully address tax costs, you do need to look at all costs and not just the headline corporate rate of tax, as this rate alone may be less relevant if the operation in Europe is making little or no profit.
You said that all employment related documents should be made available in the French language. Does this include non-contractual items, such as travel and expense policies?
While there has been no case law focused on the implications of not translating travel and expense policies into French in the same way as the example we provided on bonuses, the latter case could be seen as precedent in respect of a court decision if a travel and expense policy was challenged on the basis that it was not translated into French. We would therefore suggest that such policies are translated.
Similarly we talked about adapting policies as well as translating. Expense and travel costs are treated differently with respect to tax and employment law in every country. France is no different. What is considered a compliant and reasonable policy in the U.S. may not be compliant in France. For example, tax-free reimbursement of fuel for business mileage in France is based on a combination of engine size and total distance traveled in a year. There is no single rate published by the government to provide for tax-free reimbursement as there is in other countries.
How is sick leave handled?
Employee entitlement may be increased by a prevailing collective bargaining agreement (CBA). However as a minimum, employees are entitled to continuation of pay 90 percent of gross salary during the first 30 days of illness and 66 percent of gross salary thereafter. Payments are reimbursed either through the state social security or through a mandatory disability insurance policy required under the CBAs.
Is it required to get employee agreement if there is a significant change in job responsibilities if there is not a change of compensation or benefits?
In most countries an employer should secure the employee’s written agreement to a change in any term of employment irrespective of whether there is a change in compensation or benefits, if only as a matter of good HR management and to avoid later disputes and misundertandings.
In France, a change in position and the responsibilities that go with the position would be considered a change of employment terms. If this is done without employee written consent, the employee will likely use this in a future claim against the employer as an example of unreasonable treatment and behavior. Consultation with the employee is key and in most situations a clear consultation process with plenty of information as to why the position requires modification typically ends with a positive response.
Are all employees eligible for overtime in excess of 35 hours (ex. country manager)?
This will depend on the working time arrangement under French law and a prevailing CBA, documented in the employment agreement .
The most senior positions in an organization, for example the country manager or managing director, may be outside of working time restrictions and work unlimited hours without overtime. In all cases a detailed review of the position, its responsibilities and the candidate would be required to assess this. Getting it wrong could result in significant claims for backdated overtime pay and other unpaid employee entitlements in the event of a later termination.
Where can industry specific CBAs be found? Are there English translations of these?
The French government portal provides access to CBAs, but there are no English translations. We do not recommend machine translation given the legal interpretations of these agreements. Similarly we do not recommend having a legal translation made. This is costly and will need constant updating as amendments to the CBA regularly occur.
We encourage our clients to speak with a French labor lawyer or with us whenever they have a question relating to employment law in France. This is the only other way to ensure accurate advice in respect of employee entitlements in France.
What if you want to terminate due to a reduction in force (cease operations in France)?
Retrenchment or redundancy is only considered a reasonable cause for termination in France if the alternative is the complete failure of the company on a global basis. Failure of the business in France is not considered a sufficiently important reason to eliminate a position in France. Terminations for this reason are typically settled between the employer and employee.
Will a French court rewrite ("blue-pencil") a non-compete, or if they find it unreasonable will the whole non-compete be rendered unenforceable?
French courts will not rewrite a non-compete clause. If any of the conditions of the non-compete (geographic, business and time restrictions, level of compensation) are considered unreasonable, the courts will simply render the agreement unenforceable.
Can a company limit the amount of vacation carry over days from one year to the next year?
Minimum entitlement of vacation cannot be rolled over from year to year. An employer must essentially make every effort to allow employees to take the minimum entitlement (national legislation mandates 25 days, or five weeks, in France, but this can be increased through different CBAs). However, days over and above the required minimum may be able to be rolled over. For example, if an employee has 30 vacation days, 25 statutorily required and five provided as an additional benefit, the employee could potentially roll over those five extra days into the next year if they are not used at the end of the year. Conversely, additional RTT days cannot be carried over.