The Works Council in the Context of International Offshoring Survey of France
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CUITREPJT TOPICS The Works Council in the Context of International Offshoring Survey of France Ming Henderson-Vu Thi ecently, companies in the metal and services opinion of the Works Council is not binding on the R industries such asJVC, Alcatel, Alstom and Bosch employer, therefore, the unfavourable decision of the have been faced with the issue of moving their Works Council will not stop an undertaking from workforce to territories where the cost of work and pursuing its offshoring objectives. This does not mean taxes are lower. The phenomenon of relocating a however that the Works Council’s positions or domestic business activity abroad with the aim of proposals can be ignored. exploiting international factor cost differentials is The purpose of this article is to provide a general often referred to as offshoring’ or outsourcing’. i overview of the role of the Works Council at national Both terms will be used as synonyms for the purpose and European level and to provide guidance on how to of this article. avoid that the Works Council blocks an outsourcing In 2003, a special report commissioned by the process. We will therefore examine in this article the French Prime Minister analysed the attractiveness of essential questions relating to: France for locating the headquarters of multinational • the main steps of the consultation procedure with corporations.’ In that report, among the ten proposals the Works Council prior to going forward with an made to encourage corporations to invest and remain offshoring project; in France was the modernisation of French labour law • the adverse outcome to not duly consulting the by inter alia promoting negotiation at company level, WorksCouncil; reducing statutory rights to the minimum and • the types of legal action the Works Council can take; introducing more flexibility in the workforce. and 7 More recently, a survey revealed that amajority of the role of the European Works Council. French people considered ofI~horinga serious (88 per cent) and long term (70 per cent) trend and 82 per The main steps of the consultation procedure with the cent of those surveyed believed that reducing labour Works Council prior to going forward with an costs would be the answer to offshoring. Though there offshoring project is no official data that directly measures offshoring, this survey indicated that 11,000jobs have been Council Directive 2002/14/EC of the European offshored from France in the last 12 months principally Parliament and the Council of 11 March 2002 to North Africa, Asia and the new European Member established an EU framework for the information and States. consultation of employees at local level. This Directive In such situations, what is the role of employee is in force and the deadline for implementation into representation and can employees interfere efficiently national legislation for most Member States— including and on along-term basis with the process? France — is March 2005. The Directive provides among In France the most structured body of employee other rules that multinational companies should form representation for all economic issues relating to the in-house WorksCouncils in the larger work places in cogipany is the Works Council. It is an institution the Member States. The Works Council is required to where trade unions sit and have representation either be informed of any proposals that are likely to affect as elected members or consultative members. The the terms and conditions of employment in the local 20 BA Legal Practice Division EMPLOYMENT AND INDUSTRIAL RELATIONS LAW COMMITTEE NEWSLETTER March 2005 CURRENT TOPICS work places, in the case for instance of a reduction in be precise and in writing’ (Article L431-5 LC) and the workforce, restructuring, offshoring or a merger. courts will consider the elements at stake to decide Without actually having to negotiate with the Works whether the requirements were fulfilled, in practice, Council, employers have a duty to hear in good faith depending on the size of the project, its complexity or Works Council’s suggestions and opinions. the number of employees affected, the information The laws of France do not differ radically from the should reach the representatives anything between principles set forth in the Council Directive and three days to three weeks prior to the first meeting. therefore it is considered as being already transposed The Works Council will open a discussion on the into French law. In practice, French laws relating to the basis of the documents prepared by the company for role and duties of the Works Council tend to be more their understanding. During the meeting, or in the constraining and often have a criminal penalty course of subsequent one, the employer has a duty to attached to them. respond to the questions of the Works Council and to provide a reasoned decision to the alternative proposals made by the Works Council. A broad definition of the Works Council’s economic role Furthermore, the information and consultation The Works Council in France is an elected employee process is required to take place prior to the project representation that is mandatory when the headcount being finalised and sufficiently in advance for the in a company reaches the equivalent of 50 full-time consultation to serve its purpose. Though there are no employees for a period of 12 months’ continuous or specific dates, the courts have developed two very 3 discontinuous employment over a three-year period. strong principles: Its purpose is to enable the expression of the (1) the consultation should take place before the employees and ensure their wellbeing. The prior outsourcing begins; and consultation of the Works Cotancil on all issues relating (2) the consultation should take place before the to the general functioning of the company has existed decision of outsourcing is final, ie at astage where since 1946 and is one of the corner stones of the Works outsourcing is only being contemplated. To the Council’s existence. i’herefore, the members of the extent the project is not finalised and that no Works Council will be expected to express their implementation has taken place, the consultation is opinion as to whether such projects are well founded not too late (Cass. Soc. 24 May 2004). In particular, and economically sound. if the outsourcing is envisaged in several phases, If the company is spread out over several the consultation should take place at each step establishments, the central Works Council and each of and notjust once (Cass. Soc. l8June 2003). the establishment’s Works Councils affected by the It is only once all questions have been reasonably project should be consulted. answered that the Works Council will issue an opinion, Pursuant to Article L432-1 of the French labour whether favourable or unfavourable, and that the code (LC), it is mandatory to consult the Works process may continue. If the Works Council refuses to Council on any issue concerning the organisation, the issue an official opinion, the employer may carry on management and the general business of the company. the outsourcing, insofar as the Works Council was duly Though this article does not expressly refer to and fully consulted. offshoring’, case law developed by the High court On the other hand, if the company fails to consult considers that any offshoring project falls within the the Works Council in the proper manner, such as by scope of the Work Council’s responsibilities. Also, as not responding to the Works Council’s proposals or offshoring is often a form of restructuring, it is obvious leaving some questions unanswered in the case of such that any restructuring or any decision that has an effect transfer, the Works Council is entitled to withhold its on the headcount falls within the scope of the Works opinion. Council’s duties. Article L439-15 LC on European In that case, should the company decide to start WorksCouncil on the other hand expressly refers to implementing the outsourcing project, it would ‘offshoring’ and ‘transfer of productions’ and likewise commit an offence considered as interfering with the considers that it is mandatory for the European Works operation of the Works Council dilit d’entrave. This is a Council to be consulted on such issues. criminal offence sanctioned by a penalty of €3,750 due as many times as the number of employees concerned and/or up to one year of imprisonment for the A prior and precise information and consultation of the company representative, both sanctions being doubled Works Council in cases of recidivism (Articles L32 1-1 1 and L483-l LC). Though some employers would sometimes prefer The company representative would usually be the this was not the case, it is not enough that the Works person that is or represents the employer, ie the chair Council was aware of the project or that the question of the company, the general manager, the liquidator in had been raised in previous meetings for the cases of bankruptcy or any individual that has power of consultation to be satisfactory. The information should attorney to act as an employer. BA Legal Practice Division EMPLOYMENT AND INDUSTRIAL RELATIONS LAW COMMITTEE NEWSLETTER March 2005 21 CURRENT TOPICS The adverse outcome to not duly consulting the (LCS), which entered into force on l8January 2005, Works Council any claim on the consultation process of the Works Council should be filed by the representatives within 15 Pursuant to Article L122-12 LC (and Council Directive days from the day on which the meeting was held, equivalent 2001/23/EC) in case of a transfer of whereas the individuals made redundant will have up undertaking, employment contracts should be pursued to 12 months from the notification of their redundancy in the entity where the activity is transferred, including to challenge the consultation and economic in the case of subcontracting or outsourcing of justification of the restructuring, instead of five years functions.