We are writing with another update on French labor law that could impact international corporate transactions.  French President Francois Hollande has proposed a change to French legislation that could remove the threat of imprisonment for directors and senior employees who are found to have breached obligations to consult with works councils and other employee representatives.  The implications of this change would be important for businesses in France, and also for international companies involved in mergers, acquisitions and divestitures in France.

In France, the works council (an employee representative body that is mandatory in companies with 50 or more employees) must be informed and consulted before a company takes various decisions impacting the workforce.  For example, in the event of a transfer of a business in France, consultations with the works council (and the health and safety committee) are required before any decision is implemented.  These consultations are subject to a timeline of up to a maximum of three months from the date on which employee representatives are provided with full details of the proposed transfer.  As we reported in a recent post, a French law that came into force on November 1, 2014, expanded the rights of employees to be informed prior to the sale of a small- or medium-sized company.

French legislation currently provides that if an employer fails to comply with mandatory consultation obligations, employee representatives may have a claim before the civil courts.  This could, in the case of a business sale, allow employee representatives to file summary court proceedings and request the suspension of a potential sale until the consultation process is carried out.  Additionally, the employee representatives may bring a claim for hindrance, which is a criminal offence.  If a company is found to have breached its consultation obligations, this could lead to a fine of up to €18,750.  Individual directors and other senior employees found in breach of the legislation can also be held liable for a fine of up to €3,750 or even one year’s imprisonment.

The President has assured international investors that upcoming reforms aimed at reducing the penalty to a fine are being considered.  Despite significant opposition from the trade unions, the reforms are expected to be considered by the French Parliament in early 2015.  The policy aim behind the proposed change is to make France a more appealing jurisdiction for businesses who operate internationally.  In contrast to the recent law expanding the rights of employees in France in the case of a potential sale, this change would be welcome news for international companies involved in mergers, acquisitions and divestitures in France, who may be surprised by the broad scope of employees’ rights — and the potentially severe consequences for companies and individuals who proceed unawares.

Author Note: Luciana Griebel is a trainee solicitor in our London office and she graduated with an LL.M degree from Peterhouse, University of Cambridge.

 

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Photo of Chris Bracebridge Chris Bracebridge

Chris Bracebridge specialises in advising multinational employers on international employment and global mobility matters, including complex transactional issues and senior employee retention and termination arrangements. He co-heads a Global Workforce Solutions team providing the employment, benefits, tax and immigration advice required in these…

Chris Bracebridge specialises in advising multinational employers on international employment and global mobility matters, including complex transactional issues and senior employee retention and termination arrangements. He co-heads a Global Workforce Solutions team providing the employment, benefits, tax and immigration advice required in these complex situations. A keen advocate for increasing the diversity of the legal profession, Chris also leads the London office’s diversity and inclusion efforts.

Chris’ UK domestic practice comprises contentious, commercial and advisory employment experience. He advises on the HR aspects of company and business acquisitions and disposals, and outsourcing transactions, represents major employers in dismissal, discrimination, and whistle-blowing cases, and advises corporate clients on the full range of day-to-day employment issues (in particular, listed company executive departures), as well as data privacy and pensions matters.

Covington’s Employment team was shortlisted for three UK national awards in 2014/2015. Mr. Bracebridge was shortlisted for Assistant Solicitor of the Year 2009 by The Lawyer magazine. He has gained valuable in-house experience whilst on secondment to two global financial institutions – a major U.S. investment bank and a leading UK bank.

Chris regularly trains and presents to clients and external organizations and writes articles for both the legal press and client publications. He has spoken at events and conferences in the UK, U.S., and Europe on a range of issues such as global mobility, executive departures, redundancy, gender pay gap reporting, data protection and transfers of undertakings.

Photo of Luciana Griebel Luciana Griebel

Luciana Griebel advises clients on global acquisitions and divestitures, private equity transactions, and strategic investments. Luciana has particular expertise in cross-border M&A and acts for companies at all stages of development, as well as investors and management teams.

Luciana serves on Covington’s Diversity…

Luciana Griebel advises clients on global acquisitions and divestitures, private equity transactions, and strategic investments. Luciana has particular expertise in cross-border M&A and acts for companies at all stages of development, as well as investors and management teams.

Luciana serves on Covington’s Diversity and Inclusion Committee and supports the work of the Public Service Committee. She chaired the Associate Advisory Committee for two years, representing the interests of Covington’s associates across the firm.

Luciana’s practice is international and she regularly:

  • represents leading life sciences and technology companies in some of their most important transactions; and
  • assists clients with corporate governance, compliance, and other matters.

Luciana’s pro bono work includes advising charities on a range of corporate matters, including SolarAid, a charity focused on the development of renewable energy technologies in Africa and South America and Barnardo’s (the UK’s leading children’s charity).

Luciana gained valuable in-house experience, while seconded to the legal department of a global pharmaceutical company.

Photo of Helena Milner-Smith Helena Milner-Smith

Helena Milner-Smith helps companies navigate complex international HR-legal compliance issues.

Helena advises clients across a range of industries on all aspects of UK and international employment law, including the HR aspects of privacy compliance and human rights regulation.

Helena has particular expertise advising…

Helena Milner-Smith helps companies navigate complex international HR-legal compliance issues.

Helena advises clients across a range of industries on all aspects of UK and international employment law, including the HR aspects of privacy compliance and human rights regulation.

Helena has particular expertise advising on the HR-legal aspects of multi-jurisdictional transactions. She also regularly assists clients seeking to protect their business and increase international compliance by designing and implementing global policies, employment contracts and restrictive covenants.

Helena has been recognised by Legal 500 UK for her “exceptional service” and “responsive and practical” advice.

In addition, Helena has gained valuable in-house experience while on secondment at three large multinational corporations – a pharmaceutical company, an oil company and a leading investment bank

Photo of Jenna Wallace Jenna Wallace

Jenna Wallace’s practice covers tax-qualified retirement plans, health and welfare plans, equity compensation, nonqualified deferred compensation plans, employment and restrictive covenant agreements, employee terminations and international employment arrangements, among other areas.  She has significant experience assisting employers with respect to the administration of…

Jenna Wallace’s practice covers tax-qualified retirement plans, health and welfare plans, equity compensation, nonqualified deferred compensation plans, employment and restrictive covenant agreements, employee terminations and international employment arrangements, among other areas.  She has significant experience assisting employers with respect to the administration of 401(k) and pension plans (including standards applicable to the investment of ERISA-covered assets), the new requirements of the Patient Protection and Affordable Care Act, Section 409A of the Internal Revenue Code, and management employment and equity arrangements.  Ms. Wallace also advises private funds regarding investments by employee benefit plans.