France: New Obstacles to Company Shutdowns

In France, the shutdown of a company is accompanied by a number of obstacles, if the shutdown would entail mass dismissals. Initially, the owner of the company must try to find a buyer for the company. In addition, each employee must be given the opportunity to submit a takeover bid.

Pursuant to the 2014 “Florange” Act, the implementing regulation of which was published in 2015, companies with over 1,000 employees in Europe which intend to close a business premise or similar in France must first attempt to find a buyer to take over the business if the shutdown would result in mass dismissals.

Initially, employers must inform the works, hygiene and safety councils of their intentions and give them an opportunity to issue a statement in response thereto. Furthermore, they must inform every employee of their plans early enough to enable him to submit a takeover bid, should he or she be inclined to do so.

The numerous new obligations also include notifying and providing a complete informational file to the regulatory authority (Direccte), as well as the mayor of the municipality in which the business premises in question are located, and the responsible prefect (who will in turn inform the pertinent citizens’ representatives).

Given that the Direccte will examine — in the course of deciding whether or not to approve a social compensation plan (i.e. mass dismissals) — if an employer has discharged its obligation to attempt to find a potential buyer for the business, employers are advised to undertake and comprehensively document an exhaustive search in this regard. Should the Direccte determine that this condition is not satisfied, it may suspend the approval procedure until the employer has discharged its obligations.

In addition, in the event of infringing behaviour by an employer, all administrative agencies have the possibility to revoke and demand repayments of any aid, subsidies or similar awards granted by them to the company in question during the two-year period preceding the first meeting held by the works council.
Furthermore, the company’s management may face criminal prosecution on grounds of tortious interference (so-called “délits d’entrave”), in particular for impeding the works council in the performance of its tasks.

Finally, the possibility that employees may file individual claims for damages cannot be excluded.

Comment

The French legislator attempts to use all means at its disposal to prevent job losses. Whether the new measures will help to do so is questionable. However, company shutdowns in France will certainly involve an even more protracted process in future than has been the case to date, and new liability risks will have to be observed.

Nicola Kömpf
Alerion Avocats, Paris