French Government Introduces Measures Permitting Greater Flexibility in Employment Contracts

As you have probably read in the press, there have been widespread protests in France against a new employment law that permits employers to apply a two-year trial period to the hiring of new employees who are younger than 26 years old. In fact, the French government has introduced two related measures to allow for greater flexibility in employment contracts by permitting employers under certain circumstances to hire employees for an initial trial period of up to two years during which the legal restrictions on termination are significantly reduced or eliminated.

The first of these laws, the New Employment Contract (contrat nouvelle embauche or CNE), which was enacted in August 2005, permits employers who employ fewer than 20 employees in France to apply a two-year trial period to the hiring of new employees. The second law, called the First Employment Contract (contrat première embauche or CPE), which would expand the application of the two-year trial period to all employers, regardless of size, with respect to the hiring of individuals who are younger than 26 years old, was signed by President Jacques Chirac on March 31, 2006. However, because the CPE has been met with widespread protest from unions and student groups, which perceive the law as eroding employment rights, the government has promised to introduce legislation to address some of the CPE’s more controversial aspects, such as the length of the trial period. The government has asked employers to not enter into CPE contracts until the modifications are made.

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