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How the French government aims at outdoing Reagan and Thatcher

by Agnes a Paris Mon Mar 6th, 2006 at 12:57:14 PM EST

[editor's note, by AgnesaParis] Noteworthy article in today's issue of the Financial Times providing a pretty fair assessment of the challenges the government is facing.
Link to the article:
De Villepin caught between protesters and opening markets

Yet another diary as part of my coverage of the reform the French rightwing government is implementing. It is a bold and sweeping reform indeed as it aims at, not less, dismantling the French labour code. If passed, this reform will leave Reagan and Thatcher far behind when it comes to ruthless liberalisation of the labour market.

I am convinced that this reform project is really harmful in the short and long term perspective. In the short term, it is hurting the country's moral very badly (for those aware of what the government has in store).
Over the long run, the risk of disruption of the whole social balance is not to be under estimated. It will widen the rift between employees and those self employed, and, as one put it, between work and capital ownership.
For that reason, it is critical that we remain aware of what is going on and not say, once it's too late, we did not see it coming.
I forgot to mention that the law project enacting the CPE (2 year probation employment contract specific to those under 26 years) was passed last night in Sénat (higher parliamentary chamber as opposed to the Assemblée nationale, the lower chamber).The law vas voted despite unanimous leftwing opposition and the bulk of UDF (moderate right) abstention. The debates are reported to have lasted ninety hours.
Noteworthy, this law is labelled law for equal opportunities.


For record purposes, the idea is to amend the whole corpus of employment contracts currently in force to come up with one single contract, providing for a two year probation period.
This probation period would apply to all new contracts entered into once the reform is enacted. A probation period is characterized by the fact that both parties can put an end to the employment contract without justification of the reasons why they do so.

The UMP government sees it as the triumph of flexibility that will cure the ills of our fossilized labour market and boost the country's competitiveness. This reform is based on the assumption that the current set of labour regulations is a deterrent for employers to hire people, hence the so much bemoaned French skyrocketing unemployment rate that the government targets to curb.
The topic has already been widely discussed here on ET, but it remains public belief that France is doing badly on the unemployment record when compared to its peers.

As luck would have it, the scope of the reform is starting worrying the business community.
Indeed, employers fear that disposing of people without justification will pave the way for an unprecedented number of lawsuits filed by employees claiming discrimination (racial, gender, etc.) as the motive for contract termination.
This is really bad luck as the government has restlessly bailed advantages to the French corporate leaders and now hopes to reap the electoral benefits of such a generous attitude.
Wouldn't that be well deserved for the UMP to have workers trade unions and employers team up against them? Wishful thinking at this stage, but one can indulge to dream sometimes.

Link to previous diaries
A two year probation period for everyone now?

Of the flexible job marketplace and those left behind

Display:
Indeed, employers fear that disposing of people without justification will pave the way for an unprecedented number of lawsuits filed by employees claiming discrimination (racial, gender, etc.) as the motive for contract termination.
Just because the law doesn't require the employer to give a reason doesn't mean that the employer has to give a reason. But that gives the fired employee a handle to argue for unfair dismissal if the reason put forward bu the employer cannot be supported.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 6th, 2006 at 08:35:41 AM EST
Quite right and that is what worries the French patronat.
So far, the process of filing a complaint with the French prud'hommes tribunal has been very discouraging for employees (cost, length of the procedure, obligation to prove the damage caused by the employer).

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 6th, 2006 at 08:39:59 AM EST
[ Parent ]
Just because the law doesn't require the employer to give a reason doesn't mean that the employer has to give a reason.
cannot

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Mon Mar 6th, 2006 at 09:40:23 AM EST
[ Parent ]
True, but the fact that he gives a reason does not mean this reason cannot be challenged.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 6th, 2006 at 09:55:56 AM EST
[ Parent ]
It does if no reason is given.

If I were an employer I'd make sure I never gave a reason. The burden of proof of discrimination would then be left to the employee. Since it's almost impossible to prove discrimination unless it's very overt, this is going to make it much harder for employees to make a claim, not easier.

But conversely it makes it much easier for employers to treat employees as disposable commodities. Which is of course the real point of the plan. Employees will be much less likely to rock the boat or stand up for themselves while they're on probation.

Agnes, I think you're understating the amount of damage this will cause. It's a monstrous broadside from the New Victorians and the only possible effect will be to drive down job security and wages, while also filling companies with time-serving politically adept careerists.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Mar 6th, 2006 at 01:43:56 PM EST
[ Parent ]
In at-will states (which is most) in the US, employers never give a reason for terminations unless there has been a gross and well documented violation of company policy or a crime has been committed.  The only benefit to terminating for cause is that company is not liable for our meager unemployment benefits.  Since the outlay for unemployment is tiny compared to the costs of a potential lawsuit, terminating for cause is extremely rare in the US.
by Monkey In Chief on Tue Mar 7th, 2006 at 01:32:45 AM EST
[ Parent ]
In America, where most workers work under what is called the "at will" arrangement (i.e. either side can terminate employment at any time), it is routine for mass layoffs at large companies to be structured so as to eliminate the possibility of discrimination lawsuits. The typical "layoff" package (it's not really a layoff, because that implies re-hiring on a seniority basis as is done under some uniion contracts) includes the following:

  • A fixed sum of money roughly comparable to one year's gross wages.
  • An agreement on the ex-employee's part to not sue, the penalty being the loss of the money.
  • A statement about how long before the employee can apply to work at the company again, typically a year.
  • A summary of the demographics of the layoff, showing the total population in each of several classes, and the layoff number in each class. The company might have 10% of its employees over age 60, say, and the layoff summary would show that 10% of those losing their jobs are also over 60.

This "programmatic" selection of people to be made redundant is done by a computer program in the human resources department, and can be quite brutal. For example, long-term highly skilled employees may be let go simply in order to meet a demographic requirement.
by asdf on Mon Mar 6th, 2006 at 08:02:55 PM EST
[ Parent ]
The amount of severance pay differs from industry to industry and company to company in the US.  There is are no legal requirements so sometimes it is zero.  Two to three months is more common.  Six is considered extremely generous.

I've never heard of a restriction on how long you'd have to wait to be rehired.  

by Monkey In Chief on Tue Mar 7th, 2006 at 01:28:38 AM EST
[ Parent ]
When it comes to France, should this new contract be implemented, the layoff would take place without any compensation being due to the employee since the layoff takes place during the trial period.

That would be the big change vs the current practise : when fired, an employee under a fixed term or an unlimited term contract is entitled to compensation according to the motives that have led to the termination of the contract by the employer.
The lack of compensation is valid only when the redundancy occurs as a consequence of gross or/and wilful misconduct.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Tue Mar 7th, 2006 at 03:08:51 AM EST
[ Parent ]
I am convinced that this reform project is really harmful in the short and long term perspective; In the short term, it is hurting the country's moral very badly (for those aware of what the government has in store.

Over the long run, the risk of disruption of the whole social balance is not to be under estimated. It will widen the rift between employees and those self employed, or, as one put it, between work and capital ownership.

For that reason, it is critical that we remain aware of what is going on and not say, once it's too late, we did not see it coming.

When through hell, just keep going. W. Churchill

by Agnes a Paris on Mon Mar 6th, 2006 at 08:48:13 AM EST
I think it is ridiculous to speak of "outdoing Reagan" or "letting Thatcher and Reagan" far behind.

This is going in the same (wrong) direction, that's true, but we still have far to go, thankfully. I am not sure that such hyperbole is helpful.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Mar 6th, 2006 at 01:42:25 PM EST
That thought struck me also.

In some US states they have "employment at will" which is a vastly less secure state than the proposals outlined here.

UK employees in small companies are pretty insecure too. There are laws about replacement, but precious few about "downsizing."

by Metatone (metatone [a|t] gmail (dot) com) on Mon Mar 6th, 2006 at 02:38:03 PM EST
[ Parent ]
"At will" employment is the overwhelming norm in the U.S., not limited to a subset of states. The European type of employment contract is rare.
by asdf on Mon Mar 6th, 2006 at 08:04:24 PM EST
[ Parent ]
Hm, do you have figures on that?

Whilst it is true that "European contracts" are not used often, I have seen reports that "at will" is not even a majority of the US workforce these days.

by Metatone (metatone [a|t] gmail (dot) com) on Tue Mar 7th, 2006 at 03:40:56 AM EST
[ Parent ]
I think you are confusing "at will" employment with something else. Even executives have contracts that specifically spell out that they can quit at any time, and they can be fired without cause at any time. The only significant exception to this is unionized labor, which is a pretty small part of the overall workforce.

And I don't know of any American company that has worker representation on the board of directors. There might be a few exceptions, but they would be in the extreme minority.

We simply accept the fact that the boss can (and will) fire you at any time, and the boss accepts that you can (and will) quit at any time.

by asdf on Tue Mar 7th, 2006 at 11:14:29 PM EST
[ Parent ]
If you look carefully into the reforms implemented in the eighties in the US and UK, I am sure you will agree with me.

I stick to the opinion that if this single contract is implemented in the form the governmental think tanks are planning it, it will leave the US and UK far behind.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 6th, 2006 at 03:54:33 PM EST
[ Parent ]
Plus I would add that the word "ridiculous" is misplaced here.
An opinion may be wrong, but ridiculous is a judgement I am surprised and disappointed to hear from you Jérôme.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Mon Mar 6th, 2006 at 03:56:16 PM EST
[ Parent ]
this seems very bizarre to an american reader, where we have the terminable at will doctrine.  i have been an employer for 20 years of a small business, and perhaps 40 people have either quit or been fired.  all of them, every one,(except for a few deaths), is working and in a job at least as good, often better.  the system only works, of course, where there are many jobs available.  and the kind of restriction you favor does seem odd to us.  no one hires someone and takes the time and effort to train them unless one is hopeful that it will work out and that the relationship will be mutually beneficial. but that sometimes is not the case. sometimes it does not work, and always firing the person is better for everyone.  similarly, sometimes business turns bad, and one needs to cut to protect the jobs of the others. Employers are not looking for excuses to fire, but for reasons to hire.  The french system has it backwards.
by tomcunn (tomcunn@execpc.com) on Mon Mar 6th, 2006 at 08:24:55 PM EST
That is my experience as well.
by Lupin on Tue Mar 7th, 2006 at 02:20:22 AM EST
[ Parent ]
I'm not quite sure how to express this. There are many things aberrant with the present-day US of A (like, say, Spain under Franco) but were we having this discussion say, ten years ago, I'd vigorously defend the US employment system.

I willingly confess that I know very little about the French system; I've never worked in France and my entire adult life was spent in the US. I have however experience with the way things work in the US, or to be technical in Southern California.

I am pro-union (as we understand that term in America) in terms of providing a balance of power in big businesses, administering pensions, etc. (It's a great shame many unions became so corrupt but I digress.) My wife belongs to a Union and I do appreciate the role they play.

I also supported the notion of a government-supported healthcare system, and opposed the dismantlement of the so-called welfare system. (People forgot that Johnson's war against poverty actually worked.)

But employment at will, I will defend as being perhaps the most natural form of employment; I've been on both ends of it, have seen it practiced for 30 years, and frankly I don't understand any of your objections.

by Lupin on Tue Mar 7th, 2006 at 02:10:15 AM EST
Two very interesting points.
the system only works, of course, where there are many jobs available
that's the problem we have in France, the demand and the offer do not match, there are bottlenecks on the job market which prevent a seamless confrontation of the offer and demand.
it makes it much easier for employers to treat employees as disposable commodities. Which is of course the real point of the plan. Employees will be much less likely to rock the boat or stand up for themselves while they're on probation.

My impression is that here in France many employers tend to think that employees should be grateful to have a job in the first place, and the balance of power is clearly in favour of the employers. As BritGuy rightly points out, the new law will only contribute to more imbalance at the employees' detriment.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Tue Mar 7th, 2006 at 03:28:17 AM EST
[ Parent ]
It is perhaps true that employees tend to rock the boat less when they are at risk of being terminated without cause, but on the other hand, there is pressure on employers to treat employees better in the hopes of keeping them from quitting.

Perhaps the amount of job turnover here in the U.S. is not apparent from the European viewpoint. Few people spend their entire careers at one company. Many people change jobs every two years, and I'm not talking about burger flippers but professionals, factory workers, etc. It would be interesting to try to find statistics on this...

by asdf on Tue Mar 7th, 2006 at 11:18:22 PM EST
[ Parent ]
I'm not an economist and understand very little about it, and I don't know labor laws either.

I'll be the first to admit that bosses don't make it easy to defend pro-business policies when you see the kind of corporate looting that has been going on in the States where assets have been sold and treasuries plundered only to divert more money into the pockets of a few rich fatcats.  

I know from experience that while Disney was "cutting costs" (ie: shafting every and freelancer in sight), while the company's profits were down, Michael Eisner's total remuneration in the tens of millions of $ was still going up.

This is wrong. I'm all in favor of kidnaping and ransoming Mr Eisner and distributing the money to the poor.

That said, I've also run small businesses and as long as my sales go up and down, I need to be able to adjust my costs, and if that means firing two or three guys at will, and perhaps rehire them (or others) three or six months later, well then I'm sorry, but I don't see any alternative.

I don't know what the problems are with France, nor how to best approach them, and when you deal with large companies, I think having powerful unions opposite them is a good idea in general, but unless you can legally hire and fire people at will, you've got a screwed up system.

by Lupin on Tue Mar 7th, 2006 at 06:04:31 AM EST
I need to be able to adjust my costs, and if that means firing two or three guys at will, and perhaps rehire them (or others) three or six months later, well then I'm sorry, but I don't see any alternative.
Make their salaries a function of company revenue and if sales slump and you can't pay them enough, they can quit. After all, you can't pay yourself enough either.

But the really evil point of this reform is fire-at-will without severance pay. In that case you're not sending fired employees to unemployment but to homelessness.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Tue Mar 7th, 2006 at 06:09:53 AM EST
[ Parent ]
That's usually called profit sharing, and it's something companies like to avoid at all costs. Except among upper management, who - obviously - are the only ones who actually earn their share.

I think if profit sharing were more common, the world would be a better place for everyone. If profits go down, everyone is affected personally and to an extent everyone is in the same boat.

The current system of 'salaries' seems odd. The difference is between earning a fixed amount which can drop to zero without notice, or earning a variable amount that will offers substantial savings potential when things go well to offset lower income when things go badly. As well as direct investment in company performance.

But this assumes an inclusive rather than an adversarial and exploitative relationship between owners and employees. Smaller companies sometimes have that. Larger companies like to pretend they do, but often don't.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 7th, 2006 at 06:36:44 AM EST
[ Parent ]
But in the American system, employees aren't very enthusiastic about profit sharing--except for sales people who like the "thrill of the chase." Most people would rather have a fixed salary (with perhaps a small profit-related bonus) than variable.

In fact, I've worked in organizations where profit sharing time was extremely damaging to morale because everybody got the same share--even the groups that lost money.

by asdf on Tue Mar 7th, 2006 at 11:21:40 PM EST
[ Parent ]
At this point it's not clear to anyone that there won't be severance pay: the employers' unions are very lukewarm about the new contract because they expect that unjustified firings even during the probation period will be challenged and they will end up with massive court obligations or severance payments or both.

As to making people homeless because they don't get sevrance pay, surely that's hyperbole as well, isn't it?

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Mar 7th, 2006 at 06:46:56 AM EST
[ Parent ]
It is, but how quickly can someone turn around and get another job to pay rent?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Mar 7th, 2006 at 06:51:38 AM EST
[ Parent ]
The basic principle underlying a trial period is that each of the parties can terminate the employment at will without having to pay compensation to the other party.
If you stick to the definition, there is no severance pay provided for. Unless you already own your flat and have a comfortable cushion of spare money, homelessness is not an hyperbole.
I am starting to think you are supportive of this measure, Jérôme.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Tue Mar 7th, 2006 at 08:01:49 AM EST
[ Parent ]
Agnes:

I must be very dense because I read your posts and I don't understand what you want (for your country).

I don't want to build a straw man here. Explain to me in plain English in the simplest terms possible how you would like the average employer-average employee situation to be like?

Because I sure don't get what you're after.

by Lupin on Tue Mar 7th, 2006 at 12:59:21 PM EST
[ Parent ]
a fair balance of power between employees and employers, and ability to defend one's interests within a sensible contractual framework. Hope that helps.

My view is that the system we've had in place in France until now was not that bad.

When through hell, just keep going. W. Churchill
by Agnes a Paris on Wed Mar 8th, 2006 at 03:29:31 AM EST
[ Parent ]


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