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FRANCE: The country is preparing for an unprecedented wave of redundancies and bankruptcies

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«Cette crise sanitaire va entraîner une crise économique qui ne fait que commencer. Elle sera brutale», avait annoncé Édouard Philippe lors de son allocution, le 19 avril. GONZALO FUENTES/REUTERS

The companies most affected by the crisis will not withstand the shock. Thousands of social plans, with processions of job cuts, are feared at the beginning. By Manon Malhère and William Plummer

Even if the government injects tens of billions of euros each month to try to save the Tricolour economy, it cannot avoid the inevitable: the multiplication of redundancies and social plans in companies that will not withstand the strongest recession since the end of the Second World War. When France was confined in March, Emmanuel Macron announced that «no company» would be delivered «at the risk of bankruptcy».But here, in this phase of gradual deconfinement, the executive now prepares the minds to the contrary. «There will be bankruptcies and there will be layoffs in the coming months», thus warned the Minister of the Economy, Bruno Le Maire at the microphone of Europe 1, last week.

For the time being, the wave of redundancies has not yet overwhelmed the French economy.From 1 March to 17 May, only 53 job protection plans (PES) or social plans – mandatory in companies with 50 minimum employees, starting from 10 redundancies – were initiated, for 2853 job cuts. The number of people registered at Pôle emploi increased by 7.1% in March, but this is mainly due to the non-renewal of short contracts or postponements of hiring.

The solicited lawyers

So far, France seems spared the redundancies.And for good reason, the economy found itself for two months in a form of lethargy largely maintained by the state. The executive has injected more than one million companies with its €110 billion contingency plan, which includes the very expensive short-time unemployment scheme. These actions, which weigh heavily on public finances, made it possible to avoid «a massive wave of redundancies», advanced at the end of April the Minister of Labour, Muriel Pénicaud. But the hardest part is yet to come.Many people who have been arrested and whose remuneration has been subsidized by public money – one in three employees in the private sector! – now at risk of losing their jobs.

There will be layoffs, for sure. But today, we cannot know the extent of them
François Asselin, President of the CPME

All the indicators show a very sharp fall in production, very poor cash flow and repercussions on employment. I fear that mass layoffs will be inevitable,” said Raymond Soubie, President of the Alixio Human Resources Consultancy and former Nicolas Sarkozy Social Advisor at the Élysée. “There will be layoffs, that’s for sure. But today, we cannot know the extent of it», confirms François Asselin, President of the CPME. However, employers did not wait long to turn to lawyers. «From the beginning of the confinement, companies asked me to prepare social plans in the most affected sectors, such as the restaurant and hotel industry»,says Isabelle Mathieu, Associate Partner at Daem Partners.

The real blow could come in the coming weeks, after the gradual reduction of the veil of short-time work in sectors whose activity could restart. “The most difficult phase is ahead of us because we will have to get out of short-term unemployment. The State will continue to operate the system but without maintaining the current level of aid. The shock will therefore be very strong on the companies and on the employees», judge Raymond Soubie. Little by little, the employers affected by the crisis will have to financially insure the wages and expenses of the company without returning to a normal level of activity.

«Liquidity crises»

‘In this restart phase, companies could face real liquidity crises,’ warns Hector Arroyo, a restructuring partner at Baker Mckenzie.

At the time of the 2008 crisis, the safeguard plans had jumped and extended over nearly eighteen months. There were 1,052 in 2008 and 2,241 in 2009. This time, it is from the beginning of September that the death is expected. For companies already weakened, notably by the crisis of the «yellow vests» then by strikes against the reform of pensions, individual redundancies and social plans are difficult to circumvent. As proof, signs such as André, Naf Naf and Alinéa have already been placed in judicial redress. For its part, Renault is expected to hold a crisis meeting with the unions next Thursday. “As for the companies that have managed to maintain the bar thanks to State aid, they are waiting at least for the start of the new year before taking the decision to dismiss or not. They want to see if their activity will resume sufficiently and at what time», explains Deborah David, associate lawyer at De Gaulle Fleurance and partners.

The fact remains that the government, which has provided massive financial support, will certainly not rubber-stamp social plans. Quite the contrary. “Since the El Khomri law, economic redundancies are more flexible. However, companies that have received state aid may have to seriously justify their social plans,” warns lawyer Isabelle Mathieu. Aware of the risk, the Ministry of Labour is currently working on new arrangements upstream of PES to limit redundancies.

Pcas by prevention

For the time being, some companies are trying above all preventively to reorganise themselves to avoid heavy and costly redundancy procedures. And, ‘the Collective Performance Agreement (PCA) is the best tool to adapt to a cyclical crisis,’ says Deborah David. Provided for in the Penicaud ordinances, the Apcs signed to the majority of the unions offer the possibility to the companies to temporarily review the working conditions of the employees. With the APC, we can go down to the minimum wage but it never goes like that. Instead, we come to plane Rtts, increase the working time, or work a few holidays», explains Olivier Angotti, associate lawyer at FTMS.

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“The economic dialogue will be key on the efforts to be made to maintain employment and it will be fundamental to know the intentions of employers, warned Marylise Léon, the Deputy Secretary General of the CFDT. And Esps have to be the last resort. That’s what it says.

Source: Lefigaro/ By Manon Malhère and William Plummer