French Employment law updates: what happened this summer?

The employment law team at Ginestié Magellan Paley-Vincent sets out the employment law updates to keep in mind for the new academic year!

New measures:

• Update of the internal rules
• Revaluation of the national minimum wage (French “SMIC”)
• Information for newly hired employees
• Monetisation of time-off in lieu

Summer case law

• Teleworking and moving: the payment of employees' transportation expenses
• Social and tax schemes applicable to settlement indemnities

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New measures 

Update of the internal rules

Companies employing at least 50 employees are required to update their internal rules as of 1st September 2022, and in any case as soon as possible, to take into account recent legislative changes. In particular, the internal rules must now state the existence of the whistle-blower protection scheme¹.

Read our full article here.

Revaluation of the national minimum wage (French “SMIC”)

The hourly minimum wage has been revalued as of 1st August 2022. After having reached €10.85 gross in May 2022, it is now €11.07 gross.

Appropriate revaluations should therefore be carried out, if need be (e.g. the salary of apprentices/trainees indexed to the SMIC).

Information for newly hired employees

As of 1st August 2022, all French companies must comply with certain obligations arising from a European directive dated 20 June 2019², relating to the information of newly hired employees.

This directive provides rules and concepts that are in fact already applicable for the most part in French labour law. In this respect, there should be no significant changes in employment contracts or in human resources practices in France. The most basic employment contracts should nevertheless be adapted, and at least contain information such as the identity of the social security bodies collecting the social contributions, for example.

More specifically, items of interest of this directive are the following:

• Article 3 allows information to be provided to employees in electronic form,which explicitly allows the employer to communicate contractual obligations to employees in this form;

• The employer has to comply with new deadlines for the provision of mandatory contractual information (between 7 days and 1 month - Article 5);

• The employer must provide information on the statute of limitation for challenging the termination of the employment contract (Article 4.2.j and §18);

• The Directive limits the use of exclusivity clauses.However, under French and European regulations, the limitation of employees' freedom must already be limited and proportionate to the aim pursued, which seems to correspond to the exceptions authorised by Article 9.2 of the Directive;

• The possibility of retroactive modification of the employment contract might be jeopardized (Article 6).

Monetisation of time-off in lieu

The amended finance law for 2022, dated 16 August 2022, has created the possibility for employees to ask their employer to pay them for their rest days acquired between 1 January 2022 and 31 December 2025, within an advantageous social and tax framework.

In this respect, and regardless of the size of the company, the employer and the employee may agree to monetise all or part of certain days or half-days of rest (otherwise known as French "JRTT").

This scheme applies to rest days linked to the application of a collective bargaining agreement establishing a scheme of reduced working hours ³, or in application of a conventional rest days scheme set up in the context of the reorganisation of working hours over a period longer than a week⁴.

Please note that the payment of these days has the following impact :

• It gives rise to an increase in salary, which should at least equal the increase rate for the first overtime hour applicable in the company ;
• Such hours are not deducted from the annual overtime threshold;
• Such a payment benefits from reduced employee’s contributions and a flat-rate deduction of employer’s contributions;⁴ ;
• Such payment is exempted from income tax up to an annual cap of €7.500.

Summer case law 

Teleworking and moving: the payment of employees' transportation expenses

If a teleworker moves away from the company for personal reasons, should he or she be reimbursed for his or her transportation expenses, or can the company make this reimbursement conditional on the geographical distance? This is the question that was addressed by the Paris Civil Court in a judgment dated 5 July 2022.⁶.

As a reminder, the employer is required to bear 50% of the cost of the season ticket that its employees take out for travel between their usual residence and their place of work, by means of public transport or public bicycle hire services (XNUMX). The cost is covered if the employee actually travels between his / her usual place of residence and his / her place of work. This is the case for employees who alternate between teleworking and working on site.

According to the official social security report, this obligation is of general application, and employees whose distance from their usual place of residence is due to personal convenience must be covered by the employer.

The rise of regular teleworking and the desire of employees to move away from large cities can make this obligation costly for employers. This is what led the company in the case at hand to unilaterally require a limited geographical distance for the reimbursement of transportation costs (the reimbursement was excluded for journeys between Paris and the provinces lasting 4 hours or more per day, return journey).

For the Paris Civil court, the defendant could not "claim that the employee was geographically distant for personal reasons in order to refuse the reimbursement of public transportation costs ".

In so doing, the company had set supra legem conditions for the exclusion of a benefit in kind to the detriment of remote employees and had thereby instituted a difference in treatment between the company's employees.

It should be noted that in this case, there was no collective agreement providing for other methods of reimbursing transportation costs, as provided for in Article L.3261-6 of the French Labour Code. Would this decision have been different if a collective bargaining agreement, negotiated and validated by trade unions, had introduced such a criterion? We must wait for the judges to rule on this point.

Social and tax schemes applicable to settlement indemnities

The Nancy Court of Appeal (XNUMX July XNUMX, n°XNUMX/XNUMX.) validates that two settlement indemnities shall be deemed as damages (and therefore be exempted from social security contributions), in a resignation case and following the end of a fixed-term employment contract.

The first settlement indemnity was paid following the resignation of an employee who was subject to a disciplinary dismissal procedure. After having notified the company of his resignation, the employee withdrew his decision, stating that it had been forced by the disciplinary proceedings against him. The parties finally reached an agreement.

For the Nancy Court of Appeal, there was a dispute between the parties as to the accountability of the termination of the employment contract. As a result, the settlement payment "did not constitute an element of remuneration due on the resignation of the employee, but was of a damages nature, so that it should not be included in the calculation for social security contributions".

The second settlement indemnity was paid in the context of a claim for the reclassification of a fixed-term employment contract into a permanent employment contract, after the former employee had brought an action before the French Labour tribunal to assert his rights.  

The settlement agreement clearly stated that the settlement indemnity was a compensation for "all material and moral damages relating to the conclusion, performance and termination of fixed-term employment contracts". Thus, the Court of Appeal ruled that the company did indeed prove that the settlement indemnity compensated "the damages suffered for non-compliance with the provisions relating to fixed-term contracts, so that, having an exclusively damages nature, this indemnity is not included in the calculation for social contributions".

These clarifications are welcome in an field where uncertainty still reigns far too often as to the position to adopt regarding the rules on the social and tax treatment of settlement indemnities.

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1 - Article L. 1321-2 of the French Labour Code.

2 - Directive 2019/1152 of the European Parliament and of the Council of 20 June 2019 on transparent and predictable working conditions in the European Union became directly applicable in France as of 1 August 2022, in the absence of the adoption of regulations to implement it.

3 - Which has been maintained in force in application of law no. 3121-41 of 3121 August 47.

4 - Articles L. 241-17 to L. 241-18 of the French Labour Code.

5 - Articles L.5-2022 et 22-04735 of the French Social Security Code.

6 - Paris Civil Court, 3261 July 1, n° 3261/1 

7 - Articles L. 5-2022 et seq. and R. 20-02290 et seq. Of the French Labour Code. The scheme does not distinguish between employees working on-site and teleworkers.