On January 11, 2013, most French employees' and employers' unions entered into an Inter-Professional National Agreement (the "Agreement"), the purpose of which is to combine company competitiveness with employment-related guarantees.

The Agreement covers various topics without any specific connections between them. It sets the basis for a compromise between employers' and employees' interests and tries to find the right balance between increased flexibility for employers and additional rights and guarantees for employees. Listed below are six areas— among the 20 topics covered—that focus on and illustrate this search for a more balanced employment law:

Alternative Collective Dismissal Procedures. Employers will be entitled to derogate from the French Labor Code as regards the main features (contents of the economic documentation, meetings with the employee representatives, redeployment measures, etc.) of economic dismissals. To do so, employers will have the choice between negotiating an "ad hoc" agreement with the unions or unilaterally proceeding, in this latter case subject to Labor administration approval. Still, the legal justification required from employers to validly proceed with economic dismissals as set forth by the French Labor Code (i.e., mainly long-lasting economic difficulties or safeguard of competitiveness) is not affected by this reform and will therefore still need to be complied with by employers.

Changes in Employment Litigation. Among the changes resulting from the Agreement are (i) the possibility for employers and employees to settle cases as from the first employment litigation phase—the conciliatory phase—contingent on them agreeing to use a fixed scale of damages awards based on employee seniority, and (ii) the reduction of the legal statute of limitation for employment litigation from the current five years for all employment litigation to two years for termination-related litigation and three years for salary-related litigation as a result of the Agreement. Discrimination cases will, however, remain governed by a five-year litigation.

Increase of the Unemployment Contribution Paid by Employers Using Fixed-Term Employment Agreements. Employers will be kindly "invited" to limit the use of very short (three months and less) fixed-term employment agreements, since the unemployment contribution they will pay in this connection will be increased from 4 percent to 4.5 percent and up to 7 percent depending on the length of the employment agreement.

Increased Flexibility in Case of Serious Temporary Economic Difficulties. Employers faced with such difficulties will be allowed to reduce employee compensation and/or working time over a maximum two-year period, contingent on successful negotiation on these topics with employee representatives. Employees refusing the modifications brought to their employment as a result of this negotiation will be treated as dismissed employees.

Additional Access to Information Provided to Employee Representatives and Employees. The Agreement requires that (i) every company create an information database made available to the employee representatives and to any certified accountant (mostly paid by the company) retained by them to review this documentation, and (ii) employees of companies having at least 10,000 employees worldwide, or 5,000 employees in France, be represented by one of them at the management board of these companies.

Extension of Health Care Coverage to All Employees.Negotiations must start on this at the industry or company level.

The contents of the Agreement must be inserted in a law before it becomes applicable. However, its coming into force raises concern as its contents have been severely criticized by employment law experts for two main reasons. First, some of the main employees' trade unions refused to sign the Agreement because they considered its contents to be insufficiently favorable to the employees, which brings into question the democratic nature of the Agreement. Second, the Agreement will involve various modifications to the existing Labor Code, the exact nature and scope of which have not been anticipated and dealt with, in advance. Still, its existence should be considered as a major step in collective bargaining in France on the difficult path between flexibility and protection of employment.

A first draft of the law was presented to the Government on 6 March 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.