France: You're Under Arrest For Working Too Hard

As the labor police crack down, companies may move out

France thinks its executives work too hard. On Apr. 12, Bernard Rocquemont, former chief executive of radar manufacturer Thomson-RCM, was threatened in court with a $16,700 fine and imprisonment because a group of managers he supervised was found to have worked more than the legal weekly maximum. The same day, a French tribunal fined six directors of retailing giant Carrefour $4,166 each for refusing to turn over records of managers' working hours.

The crackdown on management overtime by France's special labor police could get even worse next year. In 1998, Prime Minister Lionel Jospin's government passed a law slashing the workweek to 35 hours from 39 beginning Jan. 1, 2000. Intended to create jobs for factory workers, the law could now be applied to everyone, including middle managers, software developers, engineers, and other skilled workers. If implemented broadly, it could severely undermine France's competitiveness (table).

French and foreign companies alike are distraught about the new law. More than 70% of France's 14.7 million private-sector jobs are knowledge-based or in services. Manufacturers can try to offset a shorter workweek with greater production flexibility. But software writers, biotech companies, and other research-based businesses would see their productivity wither under a rigid application of the new law. "Measuring the amount of time in the office is totally outdated," fumes Ernest-Antoine Selliere, president of the French employers' association and a champion of entrepreneurship in France.

How stringently the 35-hour workweek is enforced depends on the National Assembly, which in July will begin considering a second law that details how the first will be applied. Although most executives would like to negotiate for case-by-case flexibility, they will have to take action if the enforcement legislation is tough. "In the worst case, we can stop hiring in France," says Philippe Eyries, CEO of $30 million French software startup Cyrano, which is based in Paris with research operations in France and North America.

The American Chamber of Commerce has repeatedly warned French government officials about the impact the law could have on future investment. As France's No. 1 investor, the U.S. created more than 8,000 jobs last year--a godsend in a country where the 11%-plus unemployment rate recently began ticking up again. Some 1.6 million jobs in France depend directly on U.S. companies. Ultimately, that reliance could carry the day. "I have the impression they are listening," says Stephen B. Pierce, managing director of the American Chamber of Commerce in Paris.

WANTED: FLEXIBILITY. But Jospin may make an ideological concession to the far left to hold together a woolly government coalition of Socialists, Communists and Greens. In general, things have gotten worse for entrepreneurs in France since Jospin took office, with rising taxes and foot-dragging on stock options. French press reports estimate capital flight since December, 1996, at $100 billion.

What Corporate France wants most is flexibility in compensating managers for overtime. Employers' associations are lobbying Labor and Social Affairs Minister Martine Aubry, author of the law, to allow companies first to exempt a certain number of top managers entirely and then to negotiate adaptable agreements on overtime compensation.

For instance, compensation for a 45-hour workweek would be 23 additional days of vacation. Companies could cancel 10 days off that are not legal holidays, such as "bridge" days on long weekends, and turn them into days off in payment of overtime. That would shrink the extra vacation to 13 days. Some of these could be allocated to training, or banked toward early retirement. "This law is going to need a lot of adaptation to avoid an impact on growth," says Selliere. That's one way Jospin could tame the monster he has created.

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