Macron's Efforts to Loosen Labor Market Meet Court Resistance

(Bloomberg) -- One of President Emmanuel Macron’s most emblematic measures to free up France’s labor market is at risk after three separate courts decided last month to disregard the cap he set on unfair dismissal damage awards to workers.

An employment tribunal in the eastern France city of Troyes first ruled that the cap violates international law, and in particular regulations set out by the International Labour Organization and the European Social Charter. Soon after, courts in Amiens and Lyon dealt a similar blow to the measure Macron signed into law just a few months after taking office.

The cap on damages “prevents judges from assessing individual situations of workers unjustly fired and to fairly repair the prejudice they suffered,” according to the Troyes employment tribunal.

Macron sought to limit awards by judges to about one month’s pay for a year of service up to 10 years, and cap the maximum payout to 20 months. The 41-year-old president has vowed to loosen labor laws to turn France into “a start-up nation” and make the country more appealing to investors. The court rulings will create uncertainty for foreign employers, one lawyer said.

“From now on, we can’t tell our Anglo-Saxon clients -- as we could even a month ago -- ‘look, it’s going to cost you maximum this much,’” said Marie-Helene Bensadoun, a Paris lawyer who usually represents employers. “We have to warn them that the cap might not be upheld, depending on the employment tribunal.”

Bensadoun said she expects several other cases will be decided similarly. But she also pointed to another labor-law decision, handed down in Le Mans last year, which backed Macron’s award limitation.

In U.K. unfair dismissal cases, workers are limited to a maximum award of 84,000 pounds ($107,000) unless they can prove other circumstances, for instance that they are whistle-blowers.

The uncertainty in France will likely last for a few more years before the cases are examined on appeal and then by the country’s top court, the Cour de Cassation. Representatives at the Labor Ministry declined to comment on the rulings.

  • France’s 3,582-page labor code governs everything from the length of bathroom breaks to window dimensions in work areas
  • Easing the burden of this code on small-to-midsized companies has been central to Macron’s promise of an economic revival to lower unemployment that has hovered near 10 percent for years
  • One of the biggest risks for small French companies is an adverse ruling by the labor tribunals that adjudicate employer-employee disputes; damages payouts for unfair dismissal claims average 24,000 euros ($27,500) but can run into the hundreds of thousands, according to Justice Ministry figures from 2016
  • An analysis by the European Union found that employment growth at companies with fewer than 250 workers in France was the second-lowest in the region and ranked far below the EU average.

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