French President Emmanuel Macron Signs Unpopular labour Bill

French on Friday formally signed controversial laws overhauling the country’s labor rules, Reuters reported.

Macron promised when he was elected earlier this year to reform the labor legislation. The new rules aim to inject greater flexibility into the job market and kickstart hiring to reduce unemployment.

Other changes Macron wants to push through to reinvigorate the economy include a change to the unemployment benefit and pension systems.

Macron’s popularity has plummeted over the past month, partly due to controversy over the reform, which has been greeted with mass street protests.

The law will take effect until further decrees containing further details are signed before the end of the year.

1. More emphasis on in-house labor talks as opposed to sector-level discussions

This is a major change. Workers and employers would be free to negotiate agreements within the confines of an individual firm, as opposed to during sector-wide talks comprising dozens of firms that often have little connection to one another. In the case of a downturn, a company would be able to strike a rapid, “simplified” deal with a union or works council to change wages or working hours to better suit the new market conditions.

This is a move toward German- or Swedish-style labor negotiations, depriving formidable French unions such as the CGT of some of their power. What remains to be seen is exactly what terms can be negotiated in-house, and how the legal system responds to the change.

2. A firm’s global economic health can’t be used to oppose plans to fire workers

In France, any plan to lay off multiple workers needs to be approved by a chamber of commerce. In the past, a judge could block layoff plans or penalize the firm by pointing out that its global operations were profitable and the dismissals were not justified. Under the new plans, judges could only refer to the firm’s performance in France when deciding whether to approve a layoff plan. This is a major shift as global profitability was the central issue in many recent controversies over company shutdowns, including at ArcelorMittal’s Florange steelworks in 2013.

3. A set scale for damages in the event of wrongful dismissal

This one is guaranteed to anger unions. In the event of wrongful dismissal, a firm would have to pay damages according to a set scale starting at three months’ salary for every two years of employment. At present, every professional sector has guidelines on wrongful dismissal damages, but these are notional. Most cases are handled in an arbitration process that can result in massive payments, a process that many firms find unpredictable. Companies have long demanded more clarity. As an olive branch to unions, the government is offering to increase minimum damages for dismissal.

4. Red tape slashed for firms with more than 50 employees

This is sure to cause cheers in many boardrooms. Currently, when a company hires its 50th employee in France, it must comply with a long list of requirements, notably the nomination of workers’ representatives and the setting up of a works council and a health and safety committee. Under Macron’s reform plans, all three of these groups will be folded into a single structure, cutting down on costs. Separate health and safety committees will remain in high-risk sectors like nuclear power.

5. Changes to short-term job contracts, but not to long-term ones

The terms of France’s most common short-term job contract (the CDD) had been set by law, which determined its minimum length and how many times it could be renewed (a maximum of twice). The system is open to abuse, with firms routinely rehiring employees on short-term contracts after a hiatus to avoid the cost of giving the worker an ironclad, long-term contract (the CDI). If the decrees are approved, duration and renewal terms will be set at the level of the professional sector, not by national law. So for example, the newspaper industry could decide that the minimum duration for a short-term contract is 4 months, and it can be renewed 6 times.

However, the government is making no change to the CDI contract. Its strong protections are often blamed for France’s “insider-outsider” labor system, under which some employees enjoy top-notch job security, while others struggle from one short-term contract to another. Bank loans and all forms of credit are heavily conditioned on the possession of a CDI job contract.