Concentration and merger transactions: information and consultation to the works council in french law

AutorDavid Jonin - Francis Kessler

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France has had Works Council legislation ever since 1945, long before the adoption of Directive 2012/14 on information and consultation of employees. That legislation was amended several times with a view to increasing the level of consultation between management and staff representatives. In 1982, an obligation on employers was created to consult with their Works Council (comité d'entreprise) prior to implementing a decision that leads to substantial changes in the workforce, the organisation of the company or the content of the work. In 2005, an obligation was introduced for large companies (300+ employees) to consult with their Works Council with respect to staff planning and training.

Until the Loi relative à la sécurisation de l’emploi and its implementing Decree of 27 December 2013, there was no firm time limit within which the Works Council had to complete the consultation process. By law, the consultation had to continue until the Works Council considered itself to be fully informed. Depending on the complexity of a topic, the Works Council could delay the consultation process for weeks or months, arguing that it had not been fully informed yet.

Following the election of President Hollande, the new government launched negotiations between the social partners that eventually led to the Accord National, which in turn led to the adoption, on 14 June 2013, of the Loi relative à la sécurisation de l’emploi (in English the ‘Secure Employment Act’) and an implementing Decree of 27 December 2013. This legislation brings a significant change by restricting on Works Councils’ ability to delay the consultation process,

One of the first questions to be asked in a concentration and merger transaction process is whether there will be a requirement to inform and consult any Works Council in connection with the transaction, as this can be a time-consuming and onerous procedure. A company with more than 50 employees is required to have a Works Council. This Works Council in a French company is made up of elected employees, union representatives and a management representative.

French law requires employers to share information and consult with the Works Council and, if necessary, with the group council or European group council in the face of mergers or acquisitions.

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Under article L. 2323-19 of the French Labor Code an employer must inform and consult with the Works Council "regarding any modification in the economic or legal organization of the company, including among others, in the event of a merger, sale, (...), or acquisition or sale of a subsidiary within the meaning of Article L. 233-1 of the French Commercial Code". The employer must consult with Works Council members regarding the effects that the contemplated transaction may have on employees.

Management is not required to obtain Works Council consent to contemplated transactions, but a formal information and consultation procedure must precede management's decision concerning proposed business combinations. If the Works Council submits a negative opinion, management may elect to disregard the Works Council's views and proceed with the transaction. Nonetheless, management must not relegate the information and consultation procedure to an empty formality. In particular, management must not bind the company irreversibly before receiving the opinion of the Works Council and must maintain the freedom of choice to seek modification or require revocation of the transaction in accordance with the views expressed in the Works Council report. Non-involvement of the employee representatives constitutes a criminal offence punishable by a sentence of up to one year’s imprisonment and a 3,750€ fine. The company itself can be sentenced to a fine of up to 18,750€ in addition to this.


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