EUROPE
Macron Law Jolts French Labor Market
Companies take advantage of President Emmanuel Macron’s looser labor regime to recast their ranks
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By William Horobin and Nick Kostov
Feb. 19, 2018 7:00 a.m. ET
PARIS—Some of France’s largest employers are seizing on President Emmanuel Macron’s labor-system overhaul to undertake mass layoffs, heralding a sea change for a country that has long coddled its workforce.
Peugeot SA, the country’s biggest car maker, plans to cut 1,300 jobs under new rules for voluntary layoffs that came into force at the start of the year. Société Générale SA, France’s third-largest listed bank by assets, and IBM Corp. are also preparing to take advantage of the measures.
The uptake is an early test of whether Mr. Macron’s changes will pave the way for a modernization of France’s workforce, or simply open the gates to widespread job cuts.
Mr. Macron is seeking a new era of labor cooperation with the goal of ending decades of wrangling between business owners and strike-prone labor unions. His government believes it can encourage job creation by peeling away layers of job protections and red tape that saddle companies with unwanted staff and impede worker mobility.
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Peugeot is applying the new rules to ease workers out of jobs affected by automation or that are cheaper to outsource. One employee planning to depart—a 47-year-old who has been with the car maker for a decade—said Peugeot is offering him €10,500 ($12,950) to retrain. He wants to become a teacher.
“We’ve gotten to a point where the company is no longer right for me, and I’m no longer right for the company,” he said. “Better a good divorce than a bad marriage.”
Mr. Macron’s approach could backfire, however, if companies use the new measures to cut staff without hiring new ones. France’s economy is finally in recovery, with latest figures showing unemployment at the end of 2017 at 8.9%, its lowest level since early 2009. But Mr. Macron remains under pressure to bring that rate down further, and the country’s powerful unions have their guard up against any evidence that the rules could cost jobs rather than create them.
Foreign businesses that have typically viewed France as a sinkhole for investment are also watching closely. Labor lawyers in Paris are already fielding calls from firms in the U.S. and elsewhere that “are interested in the possibility of moving fast in a consensual framework that isn’t traumatic for their teams,” said Claire Toumieux, a partner at law firm Allen & Overy.
IBM, based in Armonk, New York, plans to “hire aggressively in key skills areas” in France in parallel to conducting layoffs using the new rules, a company spokeswoman said.
In September, Mr. Macron decreed myriad changes, including capping court-ordered fines for dismissals and giving companies greater powers to negotiate working conditions with employees. One part of the broad package is a measure that absolves companies from using lengthy, complex procedures for voluntary layoffs.
A broken window at a Paris branch of Société Générale after a march in November against the French government’s overhaul of labor laws.
A broken window at a Paris branch of Société Générale after a march in November against the French government’s overhaul of labor laws.PHOTO: MICHEL STOUPAK/NURPHOTO/ZUMA PRESS
Previously a firm had to prove it was in financial difficulty before embarking on layoffs, even on a voluntary basis. Publicly traded firms were loath to declare they were struggling. Penalties for missteps in the procedure were high, and a company could ultimately be forced to hire back staff who left.
The new rules allow employers to instead negotiate a rupture conventionnelle collective—a voluntary severance agreement for large numbers of employees—regardless of the company’s health.
“It’s a complete change in philosophy,” said David Jonin, a partner specializing in employment law at Gide Loyrette Nouel.
Société Générale plans to use the measure to restructure its retail operations. As customers shift to online services, the bank is scrambling to close 300 of its 2,000 retail branches in France and automate 80% of the processes linking front and back offices. The plan, dubbed “Transform to Grow,” will entail 3,450 job cuts from its retail network between 2016 and 2020, the bank said in November.
Many of those cuts were expected to take place through attrition or the redeployment of staff to other units of the bank, but last month the bank disclosed it would also make use of the new rules.
Société Générale has scheduled talks with unions for later this month. Under the Macron law, any firm that wants to adopt the new scheme needs to win over a majority of its union representatives. In some cases that has emerged as a significant obstacle.
“Management is going too fast. When you want to get rid of so many jobs, you’ve got to explain why,” said Monique Motsch, a representative of the moderate CFDT union at Société Générale.
At French clothing retailer Pimkie, unions already shot down a Jan. 9 proposal to apply the new process, forcing the company to revert to France’s older, more onerous system requiring the firm to show itself as being in financial distress.
Peugeot, in contrast, secured the support of its unions in a matter of days. The car maker threaded the needle by sweetening the layoff offers and combining them with 900 early-retirement offers and a plan to recruit and train higher-skilled employees. That includes 1,300 new positions and 2,000 apprentices.
“Psychologically it’s softer. There’s no obligation to leave, everything is voluntary and it protects workers who want to stay,” said Jean-Francois Kondratiuk, an employee representative who sits on Peugeot’s supervisory board.
Workers who choose to stay at Peugeot are accepting more flexibility. Jean-Louis Thirot, 50, has agreed to train for a new job testing software for car electronics. The research center in the west of Paris where he currently works ordering parts is shutting down this year.
“I’m able to succeed because I can move internally,” said Mr. Thirot, who has worked for Peugeot for more than three decades.
Others say they have recognized that a job at Peugeot is no longer the safe bet it once was. A 40-year-old technician whose father, brother and wife have all worked for the car maker said he thought he had a job for life when he joined the company in 2003. Now that Peugeot has outsourced nearly all of his department’s work, he has decided to take the severance package.
“I’m the last of the Mohicans,” he said.