SIX Q&AS FOR THE EMPLOYMENT SAFEGUARD PLAN (ESP)

What is an Employment Safeguard Plan (ESP)?

An Employment Safeguard Plans (ESP) concerns companies of more than 50 employees who are intending to conduct a large scale economic dismissal (redundancy).

It involves a set of measures to prevent the dismissals, minimize them and facilitate the reclassification of personnel, whose dismissal was unavoidable.

When should a company set up an ESP?

Two cumulative conditions are set by the law:

• Only the companies “with at least 50 employees” are subject to this obligation;
• And only during an intended collective dismissal for economic reasons “concerning at least ten employees in the same thirty day period”(Article L1233-61 and 1233-3 of the French Labor Code for the definition of economic reason).

The companies with less than 50 employees envisaging the dismissal of 10 employees or more over the same period of 30 days are also obliged to comply with obligations in this regard.

They must also set up measures to prevent the dismissals, minimize them and facilitate the reclassification of personnel. These measures shall not be considered as an ESP. (Article L.1233-32 of the French Labor Code).

What must be included in the ESP?

The ESP is part of a set of documents established during the collective dismissal procedure for economic reasons to be submitted to the personnel representatives and the DIRECCTE (Labor Administrative Authority)

Therefore, it may be the case that the term “ESP” is used generically to define all the employer’s obligations during a large-scale economic dismissal.

The ESP must not however be confused with the other documents submitted to the personnel representatives during an economic dismissal, such as:

• the presentation of the plan for restructuring and the reduction of personnel (Articles 1233-30and L.2323-31 of the French Labor Code),
• the presentation of the intended economic dismissal: i.e., the presentation of the company’s economic and financial situation, the number of dismissals envisaged, the professional categories concerned by the removal of the positions, the criteria for the order of dismissals … (Article L.1233-31 of the French Labor Code)

The ESP must provide for measures (Article 1233-62 of the French Labor Code):

1. To prevent and reduce the number of dismissals:

• Initiatives to propose to employees another position in the company or in the group in positions of the same category or equivalent or, subject to the employee’s approval, a position of a lower category
  (in-house reclassification);
• Initiatives for the reduction or adjustment of working time and initiatives for reducing the amount of overtime;
• Initiatives to encourage the continuation of all or part of the activities to avoid the closure of one or several establishments;
• Training opportunities to facilitate the reclassification to another position.

1. When the dismissal was unavoidable, to prevent situations of unemployment:

By the creation of employment or new professional activities:

• The creation of new activities by the company,
• Financial aids to encourage companies in the same geographic sector to create employment.

In the event of dismissals in companies or groups of more than 1,000 employees, affecting the employment area due to its scale, such companies are also subject to an obligation to enhance employment, i.e., contribute to the creation of activities and job development and mitigate the effects of the dismissals on the other companies in the employment area (Article 1233-84 of the French Labor Code).

• Initiatives to support and encourage the creation of new activities or the continuation of current activities by the employees.

By providing support in the search for new employment:

• Training opportunities for the validation of experience or reconversion to assist the employee to find an equivalent position outside the company (i.e., outside of the company or the group)
• The companies or the group of more than 1,000 employees must incorporate a document in the ESP presenting the conditions for the implementation of the reclassification leave (Article L.1233-71 of theFrench Labor Code), which is an alternative measure to the employment safeguard agreement (ESA).

Finally, the ESP must include specific measures for the “older employees or those presenting social characteristics or qualifications that would make a professional reinsertion particularly difficult” whose dismissal was unavoidable. (Article L1233-61 of the French Labor Code).

This is an essential aspect of the ESP, the absence of which may result in the refusal of validation or approval of the ESP by the DIRECCTE.

Who sets up the employment safeguard plan (ESP)?

The ESP is a document established:

• either by the social partners in a collective agreement.

The content of the ESP shall then be subject to a negotiation (Article L.1233-24-1 of the French Labor Code). The collective agreement may, more generally, include the conditions for the information and consultation of the Works Council or the intended economic dismissal (Article L1233-24-2 of the French Labor Code).

• or by the employer in a unilateral document, after consultation with the Works Council
  (Article L1233-24-4 of the French Labor Code).

During the implementation procedure of the ESP, the DIRECCTE, upon being informed of the start of the negotiations and upon receiving the documents communicated to the personnel representatives, may present any proposal to complete or modify the employment safeguard plan, taking into consideration the company’s economic situation. (Article 1233-57 of the French Labor Code).

Does the ESP need to provide for more substantial departure indemnities?

The ESP is generally perceived as the document fixing the “indemnities for the termination of the dismissed employees” (compensation).

Whilst there is nothing to prevent the ESP from providing for an additional indemnification for the benefit of the dismissed employees (i.e., beyond the statutory or conventional dismissal indemnities stricto sensu), this is not standard practice in the ESP.

The ESP may be misperceived by the mediatization of the voluntary departure plans, in major groups, in which employee assistance was provided for voluntary or premature departures, under optimal conditions. The purpose of the ESP was therefore contradictory as the intention was no longer to avoid dismissals but, on the contrary, to encourage them.

The objective to be pursued by the ESP is to facilitate the reclassification of employees either in-house or externally with training opportunities and reclassification assistance.

The financial aid granted by the employer may be fully invested in the reclassification of employees and the reimbursement of the actual expenses incurred.

Accordingly, the company may focus its costs on necessary initiatives in terms of mobility and training and the financial aid may only cover the actual expenses incurred by the employees.

Accordingly, for example:

• The in-house reclassification measures may take the form of financial aid for employees accepting mobility to another position in another company location (removal expenses coverage, installation etc.) or a sliding scale of financial aids for a reclassification to a position with a lower salary,
• The ESP may organize financial aid for company creation solely upon documentary proof, such as the reimbursement of expenses or social contributions to assist with the set-up,
• The coverage of training expenses may be made on the basis of the actual costs incurred (training costs, travel – meals- accommodation) within a maximum threshold,
• When the company is not obliged to set up reclassification leave, the ESP may provide for the financing of an outplacement unit, reclassification sections or provide for the reimbursement of expenses to attend recruitment sessions and assistance for mobility upon presentation of receipts (coverage of removal, installation expenses, etc.).

What are the control measures for the ESP ?

The content of the ESP is controlled by the administrative authorities.

Besides the exchanges made during the set-up of the ESP, once the plan has been finalized, it is submitted by the employer to the validation by the DIRECCTE (if it is a collective agreement – Article L.1233-57-2 of the French Labor Code) or its approval (if it is a unilateral document – Article L.1233-57-3 of the French Labor Code).

The DIRECCTE shall verify:

• in the event of a collective agreement, the compliance of the safeguard plan with Articles 1233-61 to
  L.1233-63 of the French Labor Code.

and,

• in the event of an approval of a unilateral document, the respect of these same Articles according to the following criteria (1°) the means of the company, the economic and social status and the group ; (2°) the support mechanisms provided depending on the scale of the intended dismissal; (3°) the training and adaptation opportunities such as mentioned in Articles 1233-4and L. 6321-1 of the French Labor Code.

If it considers its content to be insufficient, despite the decision for the validation or approval, the trade union organizations and employees should challenge this decision before the French Administrative Courts (Article L.1235-7-1 of the French Labor Code).

Similarly, if the employer intends to challenge the DIRECCTE decision, he must do so before the French Administrative Courts, in the event of a refusal or validation or approval, which he considers to be unjustified.

The control of the performance of the Employment Safeguard Plan is made according to the monitoring formalities defined by the ESP (Article L1233-63 of the French Labor Code). A monitoring committee is set up, including employee representatives, management representatives, members of the DIRECCTE, reclassification board …

In the event whereby the employer has failed to respect his commitments under the employment safeguard plan, the employee may obtain compensation for his prejudice, at the sole discretion of the judges, and even for his dismissal if it is judged to be without real and serious cause, in case the employer has breached its reclassification obligation by failing to apply the reclassification measures provided in the ESP.