FRANCE: An Introduction to Employment

2024 was shaped by significant economic and social developments. French inflation dropped significantly, providing for a welcome respite for businesses. Major events took place in France, such as the Paris Olympics, which impacted both economic and legal spheres, acting as a driving force and boosting employment.

As for the political climate, 2024 was a year marked by heated debates, political tensions and the dissolution of the French National Assembly following the European elections results in June 2024. In 2025, government reshuffles will be closely scrutinised by employers looking for a much-needed guiding compass.

As for employment law, changes in economic and legal frameworks, especially through new regulations and case law, have redefined ground rules for employers in 2024, who have also been facing a turbulent period since Q4 2024, with an increasing number of restructurings. Employers are starting 2025 navigating an unstable global landscape of geopolitical tensions and legal uncertainties, in which competitiveness remains a major challenge. In many respects, 2025 could prove to be a decisive year for consolidating both a fragile economic recovery and legal frameworks, especially via case law refinements to offset the current legislative inertia.

Tense Political Landscape: Reforms Potentially Called Into Question or Dropped

2025 is shaping up to be an important turning point following the adoption of the 2023 pension reform, which introduced several significant changes, including a progressive increase in statutory retirement age, with an increased length of contributory period. However, political turmoil could call into question some aspects of the reform. In only three months, the lack of political cohesion brought down the first government that followed the French National Assembly’s dissolution. In January 2025, the current Prime Minister, F. Bayrou, suggested that discussions could be reopened this year, possibly leading to adjustments or revision of some measures. Nonetheless, a few measures have already come into force as of January. Basic pensions have been increased by 2.2% to match inflation and in response to a motion of censure of 4 December 2024. The 2025 French Social Security Finance Bill proposed two additional increases: in January for all pensions and in July for small pensions. However, the 2025 budget was not adopted. Thus, only standard adjustments set out in legal provisions apply.

The same goes for the so-called Macron II Act, dropped after the French National Assembly’s dissolution. In early 2024, President Macron officially confirmed his intention to boost French growth by introducing a new labour reform aimed at ensuring “academic, scientific, technological, industrial and agricultural rearmament” and “no longer having to rely on other powers”. French labour law will thus now have to patiently wait for a new upheaval.

Therefore, political instability in 2025 is generating uncertainty for future social reforms and hindering the implementation of sustainable solutions and potential important legal changes.

French Legislation on Paid Leave Brought Into Line With European Law

In 2023, and in response to several European Court of Justice warnings, the French Supreme Court amended French case law on paid leave, acknowledging rights for employees on sick leave or who have suffered an accident or illness, regardless of whether it is work-related. While this development complies with European law, it generates financial burdens for employers, estimated at EUR3.2 billion annually, leading to the implementation of new legislation under the so-called DDADUE Act of 22 April 2024. French law now aligns with European regulations on paid leave accrual in case of non-occupational illness. Effective as of 24 April 2024, it introduced several major changes: employees on sick leave due to non-occupational illness acquire two holiday days per month versus two-and-a-half holiday days per month for occupational illnesses. It also provides for a 15-month carry-over period for paid leave acquired before or during sick leave, as well as specific rules for unused paid leave. In case of termination, employees may claim paid leave for a period of up to three years, while those still with their employer have two years to do so. Lastly, employers are now required to inform employees, within a specific timeframe following their return to work, regarding the paid leave balance accrued during the sick leave period.

This reform entails additional administrative and financial constraints for employers, which must adapt accordingly to comply with new legal requirements. Grey areas remain and 2025 case law on this topic would be most welcome in clarifying practical situations regarding the implementation of these provisions.

Pay Equity: Stakes and Obligations Resulting From Transposition of the EU Directive on Financial Transparency

EU Directive 2023/970 of 10 May 2023 marked a significant step forward in pay equity between genders, strengthening transparency obligations for employers. By 7 June 2026, EU member states, including France, will have to transpose these measures, which are designed to remedy the lack of information available to victims of pay discrimination. Studies conducted in November 2024 highlight that more than 80% of French companies believe that the main incentive for greater transparency is to comply with the EU Directive. In 2024, former French Labour Minister Ms C. Vautrin stated her wish to transpose the EU Directive “by the beginning of 2025”. If so, employers will be faced with new recruitment obligations since the EU Directive enshrines job applicants’ right to be informed of their initial remuneration or salary range based on objective, gender-neutral criteria, as soon as they are hired. Employers will be required to disclose criteria for setting and increasing salaries during the employment relationship. Throughout the latter, employers will be required to make pay-setting and progression criteria accessible, while allowing employees to request detailed information on their pay and pay differentials within the company, with breakdowns by gender. Alongside these measures, pay secrecy provisions will be prohibited to promote transparency and uphold the principle of pay equity. Companies will have to comply with these obligations or risk facing financial sanctions.

Value-Sharing Mechanisms: Promoting Fair Redistribution of Company Profits

Act No 2023-1107 of 29 November 2023 strengthened and generalised value-sharing schemes to involve employees more closely in their company’s performance and promote better profit redistribution. It sets out new obligations, especially for companies with 11 to 49 employees. As of 1 January 2025, companies with net taxable profits of at least 1% of sales for three consecutive financial years must introduce at least one value-sharing scheme for the following financial year. Several options are available: set up a profit-sharing or incentive scheme, organise matching contributions to an employee savings plan, or pay a value-sharing bonus, a so-called PPV. The latter, now paid up to twice a year, can be invested in an employee savings plan, and benefits from social and tax exemptions under certain conditions. Some companies will also benefit from a simplified profit-sharing experiment until November 2028.

Contemplated Impact of Transposition of EU Directive on Corporate Sustainability Reporting (CSRD)

As of 2025, the CSRD EU Directive transposed by the French Order of 6 December 2023, will require some companies to publish a sustainability report. From 2025, this obligation will affect companies listed on a European regulated market and satisfying specific conditions (500 employees and a balance sheet of more than EUR25 million or sales of more than EUR50 million) and will subsequently be extended to all companies exceeding two out of the three thresholds (a balance sheet of more than EUR25 million, net sales of more than EUR50 million, and more than 250 employees). To carry out this sustainability report, a new Works Council consultation procedure is provided for in the French Labour Code as of 1 January 2025. Henceforth, Works Council will have to be consulted on sustainability information (relating to the impact of the company’s activity on environmental, social and governance issues, and how these issues impact the development of its business, results, and situation). As part of the Works Council’s annual consultation on the company’s economic and financial situation, employers are required to provide staff representatives with the sustainability report they have already drawn up, if the company is subject to this requirement.

Unemployment Insurance and Employment of Seniors

Alongside numerous legal frameworks, social partners also played a key role in the 2024 normative framework, with the conclusion of two major nationwide agreements signed on 14 November 2024. These agreements were reached in a political climate marked by complex debates on unemployment insurance reform concerning unemployment insurance (approved by the government on 19 December 2024) and the employment of senior employees. These measures should reduce costs for companies while encouraging seniors’ employment, with a reduction in the employer’s unemployment insurance contribution from May 2025 and the introduction of a new employment contract for seniors, the so-called contrat de valorisation de l’expérience.

Many Significant Developments in French Case Law

2024 was a fruitful year for case law, with decisions reshaping several key HR management practices, proving that French courts are constantly refining grey areas.

In December 2023, in a major case law reversal, the French Supreme Court ruled that evidence obtained or produced unfairly does not necessarily have to be excluded from proceedings. Such evidence may now be admitted in court if, after weighing up the rights at stake, it proves to be essential and proportionate to the aim pursued. Although this reversal represents a major advance for evidence rights, the judge’s scrutiny of the evidence still makes its admissibility questionable. This decision thus requires employers to exercise the utmost vigilance when dealing with employees. Numerous decisions issued in 2024 outlined and consolidated this new rule’s application in various situations.

In July 2024, in a set of several decisions, the Court clarified the admissibility of new claims made during the proceedings or upon appeal, and the effect of interrupting the statute of limitations resulting from the referral of these new claims to the labour court. Before 2016, any new claim made during proceedings was rejected if it had not been introduced from the outset. Since then, however, the possibility of submitting new claims during proceedings, particularly on appeal, has been made more flexible, provided they are directly related to the initial claims. The Court has now clarified that the submission of a new claim interrupts the statute of limitations, thereby suspending the limitation period until the final decision, strengthening employees’ rights, enabling them to seek new remedies without running the risk of being time-barred.