The so-called "reduced activity for job retention" (ARME) mechanism, also known as the specific long-term partial activity mechanism, aims to maintain the employees of companies facing a long-term decrease in activity that is not sufficient to jeopardize the companies’ sustainability. In short, companies using this mechanism may reduce their employees’ working time up to a predefined ceiling and receive state allowances to finance indemnities paid to the employees to compensate for the resulting decrease in the salary.
Decree n° 2020-926, dated July 28, 2020, published two days after on the Official Journal of the French Republic, finally sets out all aspects of this new mechanism that can be implemented by companies until June 30, 2022.
Implementation through the signature of a collective agreement and the drafting of an unilateral plan:
To use this mechanism, companies must be covered by a collective agreement signed at unit, company, group, or branch level. When only covered by a collective agreement signed at branch level (subject to a prior extension by the French Labour Ministry), companies will also have to draft a unilateral plan that complies with the provisions of the collective agreement signed at the branch level and that contains specific company commitments subject to the information/consultation of staff representatives.
This agreement (or unilateral plan) must include in its preamble a diagnosis of the economic situation and the business prospects of the unit, company, group or branch.
It also determines:
- The start date and duration of the mechanism.
- The concerned activities and employees.
- The maximum reduction of working hours below the legal working time (which cannot, as a general rule, exceed 40 percent);
- The company’s commitments in terms of employment and vocational training.
- Procedures for informing the trade unions that signed the agreement and the staff representatives about the implementation of the mechanism.
The agreement may also contain other provisions (which are optional), such as the efforts made by the corporate officers and shareholders in proportion to those made by the employees.
Requirement for authorization by French authorities:
The collective agreement signed at unit, company, or group level, as well as the unilateral plan, must be approved by the French authorities. Following receipt of the agreement or plan, the authorities have a 15-day period (or a 21-day period as far as the unilateral plan is concerned) to scrutinize the submissions. If the French authorities do not respond within these timeframes, the agreement or plan is considered as being approved.
No further collective agreements (or unilateral plans) may be submitted to the French authorities for approval after June 30, 2022.
Approval given by the French authorities shall be valid for six months and renewable, up to a limit of 24 months, whether consecutive or not, over a reference period of 36 consecutive months.
At the expiry of each period of authorization, the company must submit to the French authorities various documents relating to the monitoring of the mechanism, including:
- A report on the fulfilment of the company’s commitments in terms of employment and vocational training.
- An updated diagnosis of the economic situation of the unit, company, or group.
Compensation paid by the company to its employees placed under the specific partial activity mechanism:
Employees receive an hourly indemnity equal to 70 percent of their gross remuneration up to 4.5 times their minimum gross wage on the basis of the legal weekly working time or lower if applicable.
State allowances paid to the company:
The company receives an hourly allowance equal to:
- 60 percent of the employee’s gross remuneration, up to 4.5 times the minimum gross wage as far as the agreements submitted to the French authorities before October 1, 2020 are concerned.
- 56 percent as far as the agreements submitted after October 1, 2020 are concerned.
This allowance is, in any event, equal to EUR 7.23 per hour, though this floor is not applicable to apprentices or employees under “professionalization contracts.”
We ought to mention that if companies fail to comply with their commitments, the French authorities can decide to cease payment of such allowances.
In addition, if, for economic reasons, an employee is:
- Placed in specific partial activity during the period of application of the mechanism, the company may be required to reimburse the allowances received for this employee.
- Not placed in specific partial activity but falls within the scope of the employer's commitments to maintain employment, the company may be required to reimburse a sum equal to the ratio between the total amount of state allowances received under the mechanism and the number of employees placed in specific partial activity.
Such reimbursement may be requested only if it is not incompatible with the economic and financial situation of the unit, company, or group.
Client Alert 20-482a
