New law requires franchise networks to establish social dialogue committees

Introduction
Initial franchise amendment
Revised bill
Comment

Introduction

After a heated debate fuelled by at least five national strikes in 2016, the National Assembly has finally adopted the bill relating to new freedoms and protections for undertakings and employees (known as the 'El Khomri Bill' after the minister of labour).(1)

As is often the case in France when adopting a general law, some members of Parliament (MPs) attempted to incorporate specific provisions that had little to do with the government's intended scope. During the first reading of the bill, a group of Socialist MPs sought to introduce a far-reaching amendment requiring franchise networks to establish social dialogue committees. The justification for the amendment was that franchisees' employees – as is the case for most people working for small companies – may not benefit from staff representation, union presence and other social benefits deriving from works councils.

Initial franchise amendment

The initial amendment put forward by the Socialist MPs (which the National Assembly voted on during its first reading) had a clear social purpose: it provided for the mandatory institution of social dialogue committees in franchise networks with more than 50 franchisees' employees. It was proposed that the committees comprise:

• elected employee representatives;
• one franchisee representative; and
• one franchisor representative.

Under the proposed amendment, social dialogue committees would have to meet at least four times per year and whenever the majority of the elected employee representatives requested it. On a quarterly basis, the network would have to inform the committee of:

• the state of business;
• the network's economic and financial situation, social policy and working conditions; and
• the organisation, management and general running of the network – in particular, any measures affecting the size or structure of the labour force and employee working hours.

In addition, if the franchisor or a franchisee intended to make an employee redundant, it would have to seek job opportunities for such person within the network.

Unsurprisingly, the amendment led to uproar in the French franchise community, with criticism coming from both franchisors and franchisees. Both sides argued that the amendment – by creating a direct link between franchisors and their franchisees' employees – would negate the legal independence of the franchisees and their authority over their employees. Further, under this system, franchisors could interfere with the social management of their franchisees and consequently be held directly liable to the franchisees' employees. Franchisee representatives observed that the level of information to be provided to employees as part of the social dialogue committee model was to some extent more extensive than that given to their employers (ie, the franchisees).

Revised bill

After two readings, the bill was finally adopted by the National Assembly without a vote, as permitted by the French Constitution. While the amendment has not been repealed, it has been softened substantially.

Under the final bill, social dialogue committees must be established in franchise networks that have more than 300 employees in France and whose franchise agreements contain clauses relating to franchisee working conditions.

If a relevant representative trade union so requests, franchisors must start negotiations with a view to setting up such a committee. Committees must include both employees' and franchisees'representatives and will be chaired by the franchisor. The agreement reached after such negotiations will provide for, among other things:

• the committee's composition;
• the way in which members are appointed;
• the committee's term of office; and
• the frequency of meetings.

The committee must be informed of any franchisor decisions that will affect the size and structure of the labour force and employee working hours, terms of employment or training conditions. Further, the committee must examine – either of its own initiative or that of the franchisees' representatives – any proposal to improve employee working and training conditions across the whole network, as well as the terms of additional health and welfare insurance.

Comment

Although the functions of social dialogue committees have been substantially limited compared to the initial amendment, most franchise networks will likely still be concerned about the new provision. Franchise networks quickly reach the 300-employee threshold and all franchise agreements contain clauses relating to working conditions (eg, uniform requirements and hours of business). However, the law fails to specify what will happen if a franchisor refuses to negotiate the establishment of a committee or if no agreement can be reached with unions. An implementing decree will therefore be required.

For further information on this topic please contact Raphael Mellerio at Aramis Law Firm by telephone (+33 1 53 30 7700) or email (mellerio@aramis-law.com). The Aramis Law Firm website can be accessed at www.aramis-law.com.