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3 Ways Emmanuel Macron Wants to Loosen France’s Rigid Labor Market

August 31, 2017, 5:32 PM UTC

French President Emmanuel Macron on Thursday unveiled his eagerly-awaited plans for reforming France’s labor market, the latest attempt by France’s rulers to tackle a chronic unemployment problem.

Macron, who has seen his approval ratings slide alarmingly since his election in May, is trying to cut through a mass of regulations and protections that has built up over 200 years and made companies increasingly reluctant to hire. France’s jobless rate—at 9.8% in July—is more than double Germany’s, and one of the biggest reasons for its inability to close its budget deficit over the last decade. Such economic weaknesses go a long way to explaining Germany’s increasing ascendancy within the EU, and why it was Germany, rather than France, that dictated Eurozone policy during the euro debt crisis.

Read: Emmanuel Macron’s Plan to Save France—and the Euro

The plans outlined by Macron’s government on Thursday have three main aims:

1. Let companies negotiate directly with their own workers rather than be bound by sectoral agreement

2. Cap payouts for unfair termination suits

3. Speed up the work of labor tribunals

Specifically, the proposal will greatly expand the freedom of small businesses—which account for over 90% of French firms—to deal directly with workers, bypassing labor unions. In addition, the plans expand the scope for terminating employment contracts by mutual agreement, something that allows companies to cut staffing levels more quickly and smoothly. The government also plans to bar labor courts from stopping justifiable dismissals because of technical administrative errors. It will also halve the time employees have to file an appeal to one year from two.

Read: France to Ban Sale of Gas Vehicles by 2040

One point of interest for U.S. companies in France is that, under the new rules, labor courts will only have to consider the economics of a company’s operations in France when it wants to cut jobs there. Until now, the law had instructed courts to consider a company’s global health.

“This is a transformation of labour rules on an unprecedented scale,” Reuters quoted Labour Minister Muriel Penicaud as saying. Macron himself told the magazine Le Point in an interview that the rules would unleash French energy and restore more equality to a system that has cosseted those in work at the expense of the unemployed for years.

Read: France Prepares Another Swing at Closing Tax Loophole Used by Google

As a sop to the country’s powerful labor unions, the new rules will force companies to pay higher levels of severance pay. Such concessions, along with the clarity and freshness of Macron’s mandate to enact reforms, have divided opinion among France’s often hyperactive labor unions.

Laurent Berger, the leader of France’s biggest union, the Confédération Française Dêmocratique du Travail or CFDT, said he was disappointed by what he characterized as “a missed opportunity” but wouldn’t call on members to join a day of protests scheduled for Sept. 12 by the hard-left Confédération Général du Travail, the country’s No. 2 union. The Force Ouvrière, France’s third-largest union, had already said on Wednesday it won’t join the protests.