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Contrat nouvelle embauche (abbreviated to CNE, New Employment Contract aka New Recruitment Contract or sometimes New-job contract in English) is a French employment contract, proposed by prime minister Dominique de Villepin (UMP) and that came into force by ordinance on August 2, 2005 (that is, the measure was enacted by the Prime Minister, after he was authorized by Parliament to take legislative measures that would stimulate employment).

Unlike the later First Employment Contract (CPE) that was eventually repealed in 2006 soon after being enacted, following from major protests, the CNE is in force and currently used as a job contract, but is facing strong opposition by trade unions and opponents.

Background[link]

The CNE was created by the French government as part of the "Emergency Employment Plan" ^[1] of June 2005 to fight France's high level of unemployment.

This plan aimed at creating jobs by bringing flexibility to small companies and business, as many employers blame their inability to hire on the rigid French labour law. One of the most frequent claim from employers and employers union (MEDEF) has been lack of flexibility to lay-off.^[2]

Clauses[link]

Small companies[link]

The CNE is applicable only to new long-term employees of any age, in small firms with no more than 20 employees.

First two years contract termination clause[link]

This job contract allows employers to fire at will during the first two years of employment, after which legal justification is required. This flexibility clause was a major break in the protective conditions usually applying to long term job contracts in France. Under usual long term job contract, any employer needs to provide a justification to fire an employee.^[3]

If the employer terminates the contracts during the first two years, he has to do it with an advance notice of two weeks to one month.

On the other hand, the employee can chose to terminate the contract with immediate effect (no advance notice required) during those first two years.

After the first two years, the contract is exactly similar to the existing long-term contract, with specific protective measures for the employee.

The CNE also limits to 12 months the period during which the fired employee can contest it before labor law courts (in ordinary indeterminate contracts, the period is of 30 years).

Burden of proof in case of litigation[link]

Under normal long term contract case in labour, employer will always bear the "burden of proof" though being the defendant: even if the plaintiff is the fired employee (accusing the employer), the employer has to prove he was entitled to fire; this has been called the reversal of burden of proof, and is based on the legal justification provided to fire the employee.

This 1973 law was voted under Pierre Messmer's Prime ministry during Valéry Giscard d'Estaing's presidency (Pierre Mesmer had succeed to Jacques Chaban-Delmas who, following May 1968, had a "new society project" aiming to "modernize" France, which included social measures — although Giscard d'Estaing and these two ministers supported economic liberalism).

Although at first the CNE plainly stated that "no motive" had to be given during the first two years, Conseil d'Etat ruling in October 2005^[4] had the effect of imposing such a motive in case of a litigation and case before labor law courts.
In case plaintiffs (employee) brings allegation that he/she has been fired due to specific discrimination (discrimination based on religion, political opinion, physical disability, age, sexual orientation), the Conseil d'Etat ruled for reversal of burden of proof to the employer's side.^[4]

For other claims, the burden of proof remains on the employee side.^[4]
This issue is important as avoiding risk of facing court procedures and costs for the employer is the key issue behind the CNE.

During the similar CPE contracts discussions, opponents (unions, opposition leaders) have strongly expressed reversal of burden of proof to the employer is necessary in all employment cases ^[5][6][7]

Support[link]

Improvement of employment market through flexibility[link]

According to prime minister Dominique de Villepin, improving flexibility to fire would help small companies to be less reluctant to hire new employees. The idea is not new. For years, employers and economists have been asking for more flexibility to companies, and many consider the globalization makes the current highly protective labour law unaffordable. "The issue of flexibility must be addressed, and quickly" said both the leader of CGPME, France's association of SMEs, and Laurence Parisot, the leader of MEDEF, France's major employer's union.^[8] Both MEDEF and CGPME actually expected the government to push for even stronger reforms.

The "two years" period brings a major flexibility in the way small companies employers will be able to consider hiring without the fear of probation period deadline of usual long term contracts, after which firing becomes too heavy and costly. Particularly, the "no justification" clause for the two-year period is the key issue as employers won't fear to face the labour courts, where "employers often also argue that the tribunal is heavily prejudiced in favour of the employee".^[9]

The CNE is also in line with the International Monetary Fund (IMF) advice to "introduce flexibility in the French labour market". The IMF commented that CNE was a "first step" towards reform ^[10]

After the First Employment Contract was aborted, a survey showed that 57% of bosses of very small companies feared that the CNE might be scrapped.^[11]

Figures showing improved flexibility reduced unemployment[link]

The Prime Minister claimed that the CNE was a "necessary measure" to tackle unemployment as "one third of those recruited would not have found jobs [without the CNE]".^[12]

Supporters highlight that close to 500,000 CNE have been signed according to Dominique de Villepin in May 2006, showing employers of small companies favor the contract.

But above all, the main positive result according to supporters is the net creation of jobs, meaning jobs that would not have existed without the law. Supporters claim that such results legitimate the idea that improved flexibility given to employers contributes to reduce unemployment.

Calculations and estimates of jobs created because of CNE existence vary according to sources, from 80,000 jobs created per year (INSEE National Institute of Statistics extrapolations), to 29% of all CNE (Ifop,^[13] December 2005).

Les Échos study of June 2006^[14] is the latest available study and the first one based on actual figures. According to this study, 440,000 CNE contracts had been signed between August 2005 and April 2006, 10% (44,000) of which would not have existed under already existing job contracts, which is highly significant since the number of jobs created for the year 2005 in private sector only reaches 50,000. The study also shows that additional 20% would have been delayed without the CNE, proving employers' reluctancy to hire under "normal" long term contracts.

Employees also benefit from additional flexibility[link]

A consequence of the two-year probation is the additional flexibility also given to employees under CNE contract, who are free to change employers during two years without the usual one to three months advance notice of long term contracts.
The "Les Echos" study of June 2006 ^[14] shows that more CNE contracts have been terminated by the employee (45%) than by the employer (38%).

Opposition[link]

The CNE law was discreetly passed in August 2005, without as much social action as the CPE, as it applies to small companies where unions have no representatives. However, the repeal of the CNE was a main goal of the October 4, 2005 large demonstrations. But after cancellation of the First Employment Contract in April 2006, unions have increased pressure on this contract and request its cancellation considering it will create "precarity" for employees, endangering job security.

Opponents of the law argue that this new "flexibility" is in fact a negation of labour laws which the workers' movement had managed to impose after decades of struggles. They argue that it may be very difficult to counter the inversion of the burden of the proof brought by the new contract, for example when the employee was fired because of psychological pressions (e.g. sexual harassment). Furthermore, they underline that contrary to a CDI indeterminate contract which helps employees convince banks to accord them credits or to find accommodation (one must take into account, especially in Paris, the difficulties to find a flat, since many financial guarantees are requested and the prices are very expensive), CNE makes it very difficult to find accommodation or bank credits (since bankers or owners are wary of the possibility that the employee might be fired and thus not be able to pay what he owes them). Such claim, however, has clearly been denied by banks in the practice of granting loans.^[15]

Following the February 20, 2006 judgment (see below), the CGT trade-union declared that "the magistrate has put in evidence the embezzlement of the CNE and the abusive character of the rupture": "it is the principle itself of the CNE which allows such illegitimate use: by suppressing the guaranties which protect against abusive firing, the CNE favorize all arbitrary bosses' behavior".^[16]

On April 28, 2006, a local labour court (conseil des prud'hommes) considered that the two-years period of "fire at will" (without any legal motive) was "unreasonnable", and contrary to the convention n°158 of the International Labour Organization (ratified by France) which states that an employee "can't be fire without any legitimate motive" and "before offering him the possibility to defend himself".^[17]

Impact[link]

Since in April 2006, current estimations about the number of contracted people under CNE since its implementation varied between 320 000 (ACOSS governmental numbers ^[18]) to 400 000 (Les Echos economical newspaper's numbers ^[19]). According to the IFOP, a poll company led by Laurence Parisot, the head of the MEDEF employers' union, 29% of the CNE jobs would not have existed without the CNE (which means between 106 000 to 133 000 jobs contracted under CNE wouldn't have been contracted otherwise for the first 7 months).^[13][20] This poll seems to be have been used to grounds Villepin's claim that "a third of the jobs" wouldn't have been created otherwise. But that contradicted the public institute INSEE (National Institute of Statistics)' estimation, according to which it would create at most 40 to 80 000 jobs for one entire year (about half of Villepin or the IFOP's numbers).^[18]

The highest figure was given by the Prime Minister de Villepin in May 2006, stating "almost 500,000 contracts" were signed.

Latest figures: in June 2006, Echos newspaper released a study about the CNE,^[14] the first one based on actual figures. According to those results:
- 440,000 CNE contracts had been signed from August 2005 to April 2006
- 10% (i.e. 44,000) of which were job that would have not been created without creation of the CNE.
- this 44,000 figures to be compared to the overall creation of (long term) jobs in France in the private sector for 2005, i.e.50,000. - over 11% of the contracts were cancelled (within the two year probation period).
- there are more CNE cancelled by the employee (45%) than CNE cancelled by the employer (38%).
According to "Les Echos", this means the CNE alone created almost as much jobs within 10 months as private companies did for the whole year of 2005 (around 50,000)!

INSEE and ACOSS[link]

The French National Institute for Statistics (INSEE) calculated a lesser result, considering the CNE will enable a net creation of 10 to 20,000 new jobs each trimestrial period (i.e. 40,000 to 80,000 new jobs per year) .

The impact of this new job contract has been questioned by Le Canard enchaîné, which quoted the INSEE's study and the ANPE's records, as well as by trade unions. Since the more recent First Employment Contract (CPE) has been rejected after months of protest, unions have also been trying to cancel the CNE. On the other hand, employers unions (Medef) consider it is major reform. However, the Canard Enchaîné pointed out that the governmental ACOSS numbers (400 000 contracts) had been extrapolated and were thus only estimations, which had been largely exaggerated. The ACOSS, in charge of these estimations, later reduced the total number by 20% (thus making a total of 320 000 contracts).^[18] According to the ANPE agency (in charge of unemployment and of finding new jobs), 600 CNE had been signed on August 19, 2005, a full two weeks after the beginning of the CNE.^[18] The Canard Enchaîné considers the number of net created jobs calculated by the INSEE (10 to 20 000 jobs each trimestrial period) makes it a "a drop in the ocean".^[18] Furthermore, several CNE were put in question before courts. Thus, confronted to multiple reversal of the firings because of "abuse of right", "the CGPME, organisation of small employers, gave as instructions to its members to justify from now on ruptures" (i.e. not to use the main feature of the CNE contract).^[21] Finally, an April 28, 2006 judgment requalified a CNE in a normal indeterminate contract (see below).

Court arbitrages[link]

The CNE has been several times questioned in courts. On October 17, 2005, the Conseil d'Etat, France' supreme court for administrative justice, declared the two years "fire-at-will" period to be "reasonable" and thus in concordance with convention n°158 of the International Labour Organization, which has been ratified by France and states that an employee "can't be fired without any legitimate motive" and "before offering him the possibility to defend himself". The Conseil d'Etat declared that if the firing is not justified, "this does not mean that it has no motive, nor that the judge, seized by the employee, shouldn't determine it [the motive of the rupture] nor control it".^[22] Other examples of unjustified firings would be to fire pregnant women or sick people, someone with unwanted religious or syndical opinions, someone who has been sexually or morally harassed; or also someone who is fired because he is a representant of the trade-union or on racist grounds, etc.^[23]

On February 20, 2006, labor law courts in Longjumeau (Essonne) sentenced for the first time an employer to pay back 17 500 Euros of dedommagement because of "abusive rupture of the trial period" and "rupture of the consolidation period" (the famous 2 years "fire-at-will" period). A 51 years-old employee working in the automobile industry had been hired on May 21, 2005 in a small firm (PME) with an ordinary indeterminate contract (CDI). On August 6, 2005, two days after the activity of the CNE law, he was fired, and then hired again by another PME, which was a succursal of the first one, for exactly the same job at the same place - but this time with a CNE. On August 30, 2005, according to the CNE rules, he was fired a second time. The CGT claimed the "CNE favorized arbitrary bosses' behavior".^[16]

On April 28, 2006, after the repeal of the CPE, the Longjumeau (Essonne) conseil des prud'hommes (labour law court) judged ^[24] the CNE contrary to international law, and therefore "unlegitimate" and "without any juridical value". The court considered that the two-years period of "fire at will" (without any legal motive) was "unreasonnable", and contrary to the convention n°158 of the International Labour Organization (ratified by France). The court was statuing on the case of Linda de Wee, which had been employed in CDD (determinate time contract) on July 1, 2005 as secretary. At the end of her six months' CDD, she was hired by the same employer on January 1, 2006 under a CNE contract. The court thus requalified the contract in an ordinary CDI (indeterminate time contract). Bernard Thibault, leader of the CGT trade union, expressed his hope that the juridical decision would be repeated, thus creating jurisprudence and signifying the end of this controversial contract.^[17][25]

On July 6, 2007, the Court of Appeal of PARIS ^[26] confirms the decision of first authority. The court considered also that the two-years period of "fire at will" (without any legal motive) was "unreasonnable", and contrary to the convention n°158 of the International Labour Organization.

Meanwhile, the International Labour Organization itself stated in the same way as the French jurisprudence in its decision dec-GB.300/20/6 taken in November 2007, on request of the Force Ouvrière Trade Union. The French government was invited therefore to ensure "that “contracts for new employment” can in no case be terminated in the absence of a valid reason".^[27]

See also[link]

• Job security
• Precarity
• 2006 youth protests in France
• First Employment Contract

References[link]

Further reading[link]

• (French) Law 2005-846 of July 26, 2005 authorizing the Prime Minister to take ordinances
• (French) Ordinance 2005-893 of August 2, 2005 creating the CNE