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The "El Khomri Law" on François Hollande's Employment and Competitiveness Politics (2012-2017)

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Abstract

After the first two changes to the body of the Code du Travail, the "El Khomri" Law of 2016 promoted an intense change in the regulation of employment relations in the country. From a relaxation of corporate bargaining power to a reactionary trade union action, the project materialized Hollande's declining popularity and further damaged his already questioned governability. In this matter, the "El Khomri" Law became the most famous bill implemented by any French president of the millennium and brought to the French a power of popular collectiveness that put the opposing demonstrations on the podium of the largest social uprisings in French history.
The "El Khomri Law" on François Hollande’s Employment and
Competitiveness Politics (2012-2017)
Leonardo Caus Sampaio
Federal University of Espírito Santo
Abstract
The government of former French President Francois Hollande promoted three labor market
reforms during the president's years in office. After the first two changes to the body of the
Code du Travail France's labor code, first enacted in 1910 the "El Khomri" Law of 2016
promoted an intense change in the regulation of employment relations in the country. From a
relaxation of corporate bargaining power to a reactionary trade union action, the project
materialized Hollande's declining popularity and further damaged his already questioned
governability, which reached an all-time low in the final months of his administration. In an
economy largely affected by the effects of the 2008 Crisis trying to rebuild its tax system under
constant pressure from the European Commission (EC), the impact of the loss of internal
competitiveness and the consequent restructuring of the code have led to a strong social
polarization on the establishment of the law. On one hand, members of the Socialist party,
united with labor unions and young students newly entered the labor market, endeared the help
of François Hollande's political opponents such as far-right presidential candidate Marine Le
Pen to declare that the government's third labor reform was discriminatory against French
families and workers, who would be subjugated to the favoring of large corporations benefiting
themselves of an agenda of liberalization of the economy. On the other hand, the European
Union's command had as internal cooperation large companies and small entrepreneurs,
directly benefited by the exclusion of the legal union power governed that most of the rules on
wages, workload and working conditions in France. Thus, the "El Khomri" Law became the most
famous bill implemented by any French president of the millennium and brought to the French
a power of popular collectiveness that put the opposing demonstrations on the podium of the
largest social uprisings in French history.
Introduction and Hollande's Policy
Since the re-election of the neoliberal Jacques Chirac (UMP - Union pour a
Mouvandment Populaire) in 2002, the popular approval rate for all subsequent French rulers
has not remained above 30% in the final weeks of their governments. Chirac ended his second
term with an approval of 29%; Nicolas Sarkozy (UMP), who reached a peak of 64% in its fifth
month in office, saw its numbers drop to 26% for the last week. Both presidents of the
conservative party suffered from the impacts of events outside France during their
governments, such as the financial crises of Southeast Asia (1997) and Russia (1998), the 2008
Global Crisis, and the Crisis of the Euro Zone's Public Debt (2009). However, the most serious
case is that of François Hollande (Parti Socialiste). Coming into power with a comfortable margin
of approval that bordered on 55%, the then president saw his numbers be cut in half already in
his first two months in office. In a government with several turbulences involving the French
political-economic restructuring given the effects of the 2008 Crisis, his term ended with the
lowest approval rate of any French president in recent years, at 16% (DOWNES, 2017).
François Hollande's high disapproval can be assigned to a major factor: the reform of
the labour code by the El Khomri Law (loi no. 2016-1088 du 8 août 2016 relative au travail, à la
modernisation du dialogue social et à la sécurisation des parcours professionnels). Instituted by
then Minister of Labor Myriam El Khomri, the project aimed to combat rising unemployment
through new business measures regarding regulate relations between employers and
employees. Among the changes made, the greater impact surrounded an ease given to
companies to reduce overtime payments, the possibility of drying up compensatory indemnities
to involuntary layoffs, a maximum amount for legal refunds in legal proceedings against the
employer, and the power to perform personnel cuts in milder situations of financial and
administrative turmoil (economic redundancies). On the other hand, workers especially young
and underemployed apprentices were granted the possibility of transferring paid leave and
days of leave between different jobs, as well as being provided with internships and training for
those between 18 and 25 years without work experience (plus a monthly aid of 461) and by
the legal institution of the "right to disconnection" (droit à la déconnexion), by which the
regulation of the use of digital devices and media for work in rest times was ensured.
It can be mentioned as causes for the malaise experienced by France at the end of
François Hollande's government the strong internal crisis for his party, an intense popular
disapproval given the economic inefficiency of his government and the high unemployment rate
that forced France to remain and third place among the largest European economies with the
worst indicators of employability since 2012 (STATISTA, 2022). The result of the economy of the
Hollande government was a GDP of US$2.4 trillion, a national debt of US$2.3 trillion (97% of
GDP), an inflationary index of 0.31%, and one of the highest unemployment rates since the turn
of the millennium, close to 10%. In addition to the intensification of the internal crisis to the
Parti Socialiste, the president's announcement that he would not run for re-election marked the
end of the French leftist sector's attempt to regain power after François Mitterrand's departure
in 1988.
The electoral process of 2017 made evident the loss of support of the socialist sector.
Benoît Hamon (Parti Socialiste), the name chosen to succeed Holland, raised only 6.36% of the
vote in the first round, placing fifth and making room for the increase in popularity of candidates
such as Jean-Luc Mélenchon (la France Insoumise) and François Fillon (les Républicains).
However, the race for the second round was unprecedented in French history: Emmanuel
Macron (En Marche!), Minister of Economy until 2016 and considered a young political figure in
the presidential process, won against the candidate with a long-standing surname Marine Le
Pen (Rassemblement National). With 66.1% of the popular vote (MINISTÈRE DE L'INTÉRIEUR,
2017), Macron's arrival in power through a new neoliberal party promoted a continuity of
policies in support of business especially evident in the El Khomri Law that dissatisfied the
socialist movement.
Post-Crisis Unemployment
According to the International Monetary Fund (IMF) and the Organization for Economic
Cooperation and Development (OECD), the increase in unemployment levels in France after the
2008 financial crisis is especially due to the internal structural loss of competitiveness. In 2008,
the country’s unemployment rate was 7.06%, the lowest in decades. The effects of the crisis,
which caused high layoffs in several companies linked to the financial system, led this index to
subsequent increases up to the maximum annual average already recorded in the millennium,
of 10.35% in 2015.
This was a result of the increase in employability costs in the country between 1995 and
2008, involving new trade union agreements that did not promote the flexibilities desired by
French corporations. In this sense, it is possible to compare the French case with the
employability status in Germany, a country that had a boost in its competitiveness during the
same period. While France has a vertically regulated labour market, with an intense presence of
government administrative bodies in the regulation of laws and agreements, the Germans
incorporated into their system the opposite: the opening and horizontalization of regulations
(opening or hardship clauses) allowed working conditions, service time, and wages to be defined
at the level of the companies themselves, leaving aside the exclusive validity of agreements for
the whole industry. The well-known Hartz's reforms have given small and large corporations
greater flexibility, using this benefit to promote working regulations that could put them into
advantage into the economic ecosystem. Consequently, the guarantees provided by export
companies contributed to the increase of the country's competitiveness at the international
level, a factor of weight for the level of employability of an economy.
In this sense, if carried out in an appropriate manner and at a time when there are viable
political and economic conditions for its execution (as was had by Germany, which did not have
unemployment rates as high as the French), the attempt to break the verticalization of the
French labour market may have effects similar to those seen by its neighbor after the 1990s.
El Khomri Law (Law 2016-1088)
The labor law produced by Myriam El Khomri was the last of the three labor reforms
enacted by François Hollande's government. Previously, new guidelines had been established to
the Constitution in June 2013 (National Interprofessional Agreement) and August 2015 (Law
2015-994), but none with such a social effect as the proposal by the minister. Born in Morocco,
Myriam El Khomri specialized in political science from the University of Paris 1 Pantheon-
Sorbonne, having been part of the Parti Socialiste throughout François Hollande’s government.
In the face of political turbulence over the Hollande government's ineffectiveness in
reestablishing an effective economic policy in post-Crisis France, structural problems in the labor
sector were evident to increase the severity of unemployment in the country. Thus, in 2015 it
was elaborated the Combrexelle Report (Rapport Combrexelle), named after the president of
the social session of the French Council of State and editor of the proposal, Jean-Dennis
Combrexelle. Aiming at changes in collective bargaining structures in the employment market,
the report addressed to Prime Minister Manuel Valls produced a series of measures to overcome
such failures of labor architecture and consequently to improve the performance of the French
economy. Its report recommended a fundamental reorganization of the collective bargaining
system and a change of social bargaining of the sectorial level to individual companies
(SYROVATKA, 2020). Some main proposals may have been analyzed by Panu Poutvaara et al.
The suggestion to expand collective bargaining (proposition no. 30) can improve
competitiveness in firms, which would promote increases in hiring and economic growth. In
addition, the legal limitation of the duration of industrial and firm agreements (proposition no.
9) and the priority given to negotiations within each company (proposition no. 35) could be
catalysts for reductions in trading costs and uncertainties, especially if accompanied by "peace
agreements" to avoid demonstrations and strikes during the contractual period. Finally, the
provision of standardized agreements at the industry level (proposition no. 38) could not only
save trading costs for small businesses, but also guarantee access to more favorable contractual
environments (POUTVAARA et. al., 2016). In this sense, the Combrexelle Report pleased the
business sector to the downgrade of union guarantees taken until then, a fact that justifies the
subsequent protests contrary to the promulgation of the law.
The first draft of the El Khomri law, presented in February 2016, was rejected by all trade
union organizations and members of the Parti Socialiste, triggering strikes and popular
demonstrations for about four months. After a parliamentary review, the clause on the
relaxation of compensation for layoffs was withdrawn from the project. On May 10, Prime
Minister Manuel Valls used the appeal of Article 49-3 of the French Constitution that allows the
referral of bills and amendments to the Senate without prior approval of the lower layer of the
legislative power to thus avoid the vote on the law by the National Assembly. On July 21, after
the constitutional instrument was used two more times, it was approved in both legislative
houses, revised by the Constitutional Council, and taken into effect immediately on August 9,
the date of the signature of President François Hollande. The final approval of the El Khomri law
did not bring together, however, the end of objections to its project, much less the end of
popular movements, which continued in the form of mass protests.
The French Constitution establishes that employers must comply with the requirements
not only of the Labor Code, but also of sectoral agreements made through labor unions, known
as collective bargaining agreements (CBA). These agreements are promoted between employee
organizations and their respective contractors at the legal level, establishing individual and
collective relationships regarding working conditions and employment benefits in a certain
industry for example, the pharmaceutical, banking, and chemical refining industries. CBAs
were governed at the industrial level by trade unions and could not be derogated from the
exclusivity of a single agreement with a given company without it being proven that such a
change would be of greater benefit to employees. This understanding has been modified in
recent years, starting with the flexibilization of CBAs for workload in 2008. More closely, the El
Khomri Law expanded the possibility of modifying sectoral CBAs with an internal corporate
agreement, at a time when the French Ministry of Labor itself stated that most labor agreements
should gradually be only in the regency of the business scale (not industrial/trade union as a
whole). This signals a movement of horizontalization of labor logistics regulations and distancing
themselves from the "blind eye" of the State in this system.
Another point of interest which instigated large labor demonstrations throughout
France deals with Article 2 of the law, which states that the promotion of individual convictions
of employees can be restricted by the employer if this is justified by the exercise of other rights
and freedoms fundamental to the operation of the company. This would be guaranteed by the
possibility of applying a "principle of neutrality" in the internal corporate rules, which can be
instituted at the exclusively corporate level, given the flexibility of the collective agreements.
The concept of "economic redundancy" was also clarified in El Khomri: the interruption,
reorganization, or closure of the business activity of a given company for the purpose of
protecting its competitiveness. This would allow companies to carry out layoffs and
restructurings in their labor body if they felt the need for so that their degree of productivity
would not be lost. In this sense, the arguments for the execution of the power of "redundancy"
were established by the French Supreme Court and are taken by falls in sales of products and
services, operational losses, and financial disorientations of high complexity, among other
aspects of weight in the proper corporate functioning. The French courts, in other turn, have the
power to verify the legitimacy of the economic conditions of restructuring presented by the
companies, in order to prevent artificialities to maneuver the law (KESSLER, 2016).
The implementation also consecrated France as one of the pioneer countries in the
constitutional guarantee of the "right to disconnection" (droit à la déconnexion), promoting
intelligent management of information and communication technologies at the service of
improvements in business competitiveness and respect for the private life of workers (CHIUFFO,
2018). The disconnection al El Khomri is defined as the right granted to workers for the possibility
of remaining inaccessible or not being contacted by any digital tool for labor tasks when they
are outside their working period (such as rest times, vacations, and leaves). In articles 55 and
56, the business obligations of collectively negotiating the right to disconnection, the adaptation
of such digital work tools for employees with disabilities, and the logistics of teleworking and
remote work are guaranteed. In the absence of a trade union agreement, the law also
establishes that internal agreements with companies can be made with a view to implementing
training actions and raising awareness of the reasonable use of digital tools.
The impact of lei at the end of the Hollande government
The movements opposed to the El Khomri Law were the strongest and longest lasting
during a leftist bias government since the beginning of the Fifth Republic in 1958. The
demonstrations promoted a new type of protest in the country, in which public places were
occupied in numerous cities around Franceby the so-called Nuit Debout movement. It was the
most important social conflict of François Hollande's five years in office, given the obvious
contradiction of the El Khomri law with his proposal for government: as much as it was seen to
regain competitiveness and the fall in unemployment levels, there was a clear antithesis
between the promulgation of a labor restructuring project of great favor to corporate business
and the support of a socialist party in power.
Rising unemployment and the initial countercyclical response to the effects of the
Eurozone crisis have exacerbated old fiscal problems in France. Based on the European
Commission's (EC) prerogative to implement excessive deficit procedures (EDP), the French
government has been limited in its ability to use tax manipulation to stimulate domestic demand
in order to instigate economic recovery. The obvious deterioration of external competitiveness
vis-à-vis Germany has led the 2012 and 2013 European Union half-yearly recommendations to
suggest a reduction in unit labour costs (ULC), especially through reductions in the contribution
to workers' social security. In addition, it was also recommended the increase of companies
flexibility in determining wages and working conditions. The implementation of such structural
reforms would be the main condition for France to obtain legal freedom to maneuver the
European Commission's fiscal determinations and an extension (until 2015) to align its excessive
deficit.
The European Commission's pressure for labor reform was accompanied by threats of
penalties not only within the scope of EDP in the amount of €11 billion, according to the NGO
Corporate Europe Observatory but also of the macroeconomic imbalance procedure (MIP) that
had, among its measures, the application of financial sanctions in the event of non-compliance
with the recommendations issued by the alert system. In turn, this system would detect
macroeconomic imbalances in early stages, based on a program of "scoring" of economic
indicators skewed by the development of ULCs. If excessive imbalances are identified, the
government of the country concerned shall submit to the Commission a corrective action plan,
which typically includes measures to improve and improve industrial and market
competitiveness through reforms in the structure of the labour market (SCHULTEN and MÜLLER,
2013; ERNE, 2015). Thus, for the recovery of economic competitiveness and for the
improvement of the French image in the international scenario given that the non-compliance
with fiscal measures has proven to be detractor for the credibility of a State, removing direct
investment capital , françois Hollande's government has focused its attention on promoting
the export sector, together with the implementation of economic liberalization policies focused
on reducing labor costs through supply reforms (RATHGEB and TASSINARI, 2020).
The opposition was made by three distinct movements: from students, of short
duration; in a union mobilization between March and July 2016; and the political and social
protest of Nuit Debout. It is worth noting that the movement of students was repressed by a
direct reformulation in the body of law: measures of protection and guarantee to student
employability were inserted in early years of higher education, sustained by the offer of training,
mentoring and internships in different sectors of the economy. Grants of €461 would also be
offered to help young people in new jobs. These measures were able to curb the protests of this
portion of the opposition, which has become a major center of vote-raising by sectors to the
right of the political spectrum, especially Marine Le Pen's National Rassemblement.
There were three moments of prominence in these demonstrations. In early February,
the movement increased scope with the petition "loi travail: non merci! " ("labor law: no thank
you!"), instigating the start of union support that culminated in the first major protest, dated
March 9. In sequence, the permanence of Protestants in the Place de la République on March
31 resulted in an expansion of the movement in terms of diversity of its participants and their
demands. Finally, at the end of April and June, the multiplication of blockades in ports and
highways along with sectoral strikes in the face of intensified police repression in protests
made clear the union disunity in the country and the consequent difficulty of organizing strikes
in corporations and public administrations.
Protests against François Hollande's government intensified with discussions over the
president's announcement of a possible extension of constitutional power to confiscate the right
to French nationality to french binationals born in France. This would be done through a
complement (Article 3-1) to the country's constitutional text, motivated especially after the
attacks of November 13, 2015 resulting in the deaths of more than 130 people in coordinated
armed attacks in different regions of Paris and Saint-Denis and for the increase in the
occurrence of episodes of terrorist spread in other key cities in Europe.
The full approval of the Law 2016-1088 "El Khomri" to the Constitution took place at a
time when the approval rate of the Hollande government was at the worst levels ever seen: in
the 52nd month of his administration, the month of the law, its approval reached 12%, one of
the lowest values ever recorded in more than 65 years for the country.
Emmanuel Macron and Marine Le Pen for Loi Travail
The strongest candidates in the 2017 and 2022 French elections had opposing views on
the viability of the El Khomri Law and its continuity. Emmanuel Macron not only supported the
establishment of the law while he was Minister of Economy François Hollande but instituted
even stronger measures in his own administration (2017-2022; recently elected to 2022-2027).
The 2017 labour reforms instituted by the president were deeper than the ones Myriam El
Khomri had previously applied, directly reducing employment protection legislation (EPL) by
limiting the maximum amount of compensation for possible layoffs to be paid something that
had been drafted by the original draft of 2016-1088, but subsequently removed before its
approval by Congress. In addition, the possibility of conducting negotiations at the level of
companies without any passage through sectoral union mediations was finally established. As
much as the reform has received opposition from two-thirds of the electorate, significantly
reducing the president's popularity, the Macron government prioritized compliance policies with
the European Commission's guidelines and employee preferences in promoting external
competitiveness.
On the other hand, Marine Le Pen's integralist agenda states that not only is the labor
code not a priority, but there are plans to repeal the measures imposed by the El Khomri Act
and subsequent modifications to the Code. The Candidate of Rassemblement National states
that the legal restructurings promoted in previous governments are destructive to French
families and precarious to the working conditions of employees, who are being left aside from
the process of economic restructuring of the country for the greater benefit to large
corporations subsidized by the ideology of the European Union (EU). This position further
reaffirms the position of Marine Le Pen’s eurosceptism, who believes that France's subservience
to the european bloc's guidelines has been detrimental to the country's economy instigating
the creation of a "Frexit" movement, symbolising the possible attempt to withdraw the French
from the EU in reference to the United Kingdom’s consolidated attempt in 2020.
Conclusions
The effects of the law’s institution can be concluded in three segments: social, economic,
and political. Firstly, the intense demonstrations that took over France's main public centers for
almost the half of 2016 made evident the dissatisfaction of a large portion of the population
with the measures implemented by El Khomri. French trade unionism, strong and present in the
regulation of labor since the French Revolution (1789-1799), has been weakened and ignored
from the basis of its principles. As much as certain measures have been enacted in favor of the
quality of student training and the labor transition between different jobs, the loss of regulatory
union stability puts workers at the mercy of their direct relationship with their employees. Thus,
as much as the flexibility given to companies to negotiate contracts and employment
relationships enables them to better manage their internal administration and, consequently,
be free of other other regiments trade unions that prevented them from resuming their pre-
Crisis competitiveness standards, workers no longer have a large support center for the security
of their trade.
Impacts on the economy are also visible. The transition to horizontal coordination of
work along German lines, whereby the government would no longer impose itself on direct
regulation and would guarantee greater freedom for companies for such determinations, can
be a good aid in regaining competitiveness on the international stage and for increasing
employability. In fact, this is evident in recent figures: from the year of the law, youth
unemployment between 18 and 25 years has suffered constant declines, from a maximum for
the millennium from 24.65% in 2015 to 22.13% in 2017 and 20.75% in 2018. The accumulated
decrease between 2016 and 2019, the year before the consequent effects of the COVID-19
pandemic, was of approximately 21%, reaching 19.51%. Additionally, the reduction in overall
unemployment in the French economy was also satisfactory, with an accumulated drop of 17%
between 2016 and 2019 (STATISTA SEARCH DEPARTMENT, 2022). It has also been reported that
the number of lawsuits for dismissals without cause has fallen by 15% (RATHGEB and TASSINARI,
2020), especially given the limits set by macron's reforms (law 2015-990), Rebsamen (law 2015-
994), and El Khomri (law 2016-1088). In turn, this scenario reduces the risks and potential costs
of new hires, which justifies the increase reported by The Economist (2018) in which the
percentage of employees between 15 and 64 years increased for the year in question. However,
it is worth establishing that, from 2017, new labor reforms were established from the
government of President Emmanuel Macron and, thus, it is not possible to affirm that the
benefits seen from 2018 in the labor figures in the economy are derived in part significant by
the measures of the law 2016-1088.
Finally, the end of François Hollande's government exemplifies the political impact of
the reform. El Khomri's degree of liberalisation was superior to any other previous projects on
French labor relations, such as the laws of Macron and Rebsamen (2015). It is possible to
understand that the 2016-1088 law marked the first break in ideological competitiveness among
French parties, given that it was the first time that the Parti Socialiste fostered the opening of
the labor market in a movement that generated internal antagonisms to the Hollande
administration. French newspaper Le Monde reported an approval of only 4% for the former
president in October 2016, making him the most unpopular ruler in the world for the year
inquestion. By leaving the government with a rate of just 16%, the collusion between François
Hollande and his representative party further weakened the left-wing movement in France,
already decentralized and unable to contain the advance of ultranationalism and conservative
parties such as Marine Le Pen's Rassemblement National. The distension of the government was
such that Emmanuel Macron, in charge of the Ministry of Economy in the Hollande government,
founded his own party (La République en Marche!) to run in the 2017 elections, of which he
emerged victorious.
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El Derecho a la Desconexión: contenidos y perspectivas para su implementación desde la experiencia francesa (the right to disconnect: contents and perspectives for its implementation from the French experience)
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