French labor reform caps dismissal awards, gives firms flexibility

PARIS (Reuters) – The French government said on Thursday it would cap payouts for dismissals deemed unfair and give companies more flexibility to adapt pay and working hours to market conditions in a labor reform France’s biggest union said was disappointing.

The reform, President Emmanuel Macron’s first major policy step since his election in May, is also the first big test of his plans to reform the euro zone’s second-biggest economy.

For decades governments of the left and right have tried to reform France’s strict labor rules, but have always diluted them in the face of street protests.

Labour Minister Muriel Penicaud described the reforms as “a transformation of labor rules on an unprecedented scale”.

Prime Minister Edouard Philippe said the reforms were necessary to fight France’s stubbornly high unemployment.

“The truth is that for bosses, especially of small companies, and foreign investors, the existing labor law is seen as a brake on hiring and investment,” Philippe said.

The decrees hand companies more power to adapt work time and pay to market conditions based on agreements reached by a simple majority between employers and workers.

Compensation for a dismissal judged in a labor court to be unfair would be set at three months of wages for two-years in the company with the amount rising progressively depending on how long a worker was with the firm, unions said.

In a concession to unions, normal severance pay would be increased from 20 percent of wages for each year in a company to 25 percent.


The government, which already has parliament’s backing for the reform, consulted with unions for weeks as it drafted its plans.

“All of our fears have been confirmed,” said Philippe Martinez, head of the hard-left CGT union, after the government presented the decrees to unions and employers.

He said the union would press ahead with its plan for a protest on Sept. 12.

France’s biggest union, the reformist CFDT, said that it was disappointed…

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