Délégation Unédic AGS The Wage Guarantee Scheme: a central component in the receivership processes in France Origin and missions Organizational structure Scope Implementation of the wage guarantee
Foreword This document describes the missions and activities of Délégation Unédic AGS (DUA), and the scope and conditions of implementation of the wage guarantee in the receiverships under French law. Contents Introduction to the Délégation Unédic AGS 1973 - Creation of the wage guarantee scheme The French Law of 27 December 1973 that introduced the wage guarantee scheme The philosophy behind the French guarantee scheme Creation of the Association pour la Gestion du régime de garantie des créances des Salariés (Association for the Management of the Employee Payment Guarantee Scheme) or AGS p. 4 Compulsory employers contributions p. 4 Delegation of guarantee scheme operational management to Unédic p. 3 p. 3 p. 3 p. 4 1996 - Creation of the Délégation Unédic AGS The 1 September 1996 reform The role of the Délégation Unédic AGS in receiverships The organization of the Délégation Unédic AGS p. 4 p. 4 p. 4 p. 6 Implementation of the guarantee Scope of the wage guarantee scheme Compulsory AGS contributions for employers The beneficiaries of the AGS guarantee The key entitlements granted by the law Effective application of the AGS guarantee Involvement of the guarantee scheme Advances Recovery DisputesG p. 8 p. 8 p. 8 p. 8 p. 9 p. 10 p. 10 p. 16 p. 18 Glossary The terms shown in "colour" in the text are defined in the glossary of terms. p. 19
Introduction to the Délégation Unédic AGS 1973 - Creation of the wage guarantee scheme The French Law of 27 December 1973 that introduced the wage guarantee scheme French Law 73-1194 of 27 December 1973 introduced provisions for meeting the amounts payable under contract of employments in the event of court settlement orders or following employer liquidation. This law was introduced to provide protection for employees following company failures, where such protection had previously been hampered by: the length of time taken by bankruptcy proceedings; the existence of priority claims; the upper limits imposed by whatever funds remained available. The philosophy behind the French guarantee scheme The French system for compensating employees whose employer is in receivership is based on the principle of intercompany solidarity between employers. Its organization and management apply the rules of private law. It is essential that guarantee scheme expenditure is balanced, which in turn requires that the AGS contribution rate adapts to economic conditions and focuses on recovering the advance payments to which the AGS is entitled under labor law. Similarly, the guarantee applies regardless of the future prospects of the company in difficulty and regardless of that company s assets. Nevertheless, the law grants the guarantee scheme the right to refuse to guarantee all or part of the sums claimed for individual employees. AGS involvement is triggered by the submission of a list of wage claims by the judicial representative appointed in each case. The guarantee fund then advances the sums due to employees via the judicial representative. Employees are covered even where employers are not up to date with AGS contributions. 3
Creation of the Association pour la Gestion du régime de garantie des créances des Salariés (Association for the Management of the Employee Payment Guarantee Scheme) or AGS Under the French Law of 27 December 1973, an employers association called the AGS was created by the French National Employers Association (CNPF, now renamed as MEDEF), the Confederation of Small and Medium-Sized Enterprises (CGPME) and the Confédération Nationale de la Mutualité de la Coopération du Crédit Agricole (CNMCCA). Compulsory employers contributions Based on a system of mutual support between businesses, this association is funded by compulsory payroll-based contributions. The contribution rate is set and reviewed by the AGS Board. Delegation of guarantee scheme operational management to Unédic The following missions are delegated under a management agreement: collecting and crediting employers contributions ; supplying judicial representatives with the funds required to settle wage claims ; recovering the sums advanced; defending the legal interests of the scheme ; keeping accounts of all transactions. 1996 - Creation of the Délégation Unédic AGS (DUA) The 1 September 1996 reform In 1996, the technical and financial management of the AGS was delegated to a branch of Unédic dedicated to this purpose: the Délégation Unédic AGS. The role of the DUA in receiverships Working alongside AGS organizations, the Délégation Unédic AGS undertakes the 3 key missions of managing advances, recovery and disputes, as well as the following: Providing judicial representatives with the funds required to settle employees claims; Recovering the sums advanced on the basis of monitoring protection proceedings, receivership proceedings and the liquidation of company assets; Defending the legal interests of the guarantee scheme; Compiling accounts for all transactions. Since the 1th January 2011, the Central agency of social security bodies (L Agence centrale des organismes de Sécurité sociale, or Acoss) is in charge of collecting and crediting contributions from companies. 4
The Délégation Unédic AGS is central to the receivership process Company in difficulty Trade court Court of first instance (commercial chamber) Initial judgment: protection receivership judicial liquidation (appointment) Judicial representative Request for advance in case of unpaid wages Immediate payment of funds Wage guarantee scheme Délégation Unédic AGS (DUA) Provision of funds (advances against subsequent reimbursement by the company) Beneficiaries of the guarantee Employee beneficiaries Centre de Gestion et d'etude AGS (CGEA) 5
Organizational structure of the Délégation Unédic AGS The Délégation Unédic AGS devotes all its resources to the wage guarantee scheme and its beneficiaries. As a participant in the receivership process, it acts on the basis of achieving four fixed objectives: to adapt to all legal, social and economic developments; to optimize the processes involved in handling cases and providing information to all those involved; to improve the quality of service provided to beneficiaries; to maintain the financial balance of the guarantee scheme. Centralizing these missions within the same entity under a single management structure encourages the harmonization of procedures, the standardization of processes and the coordination of actions and relationships with all those involved in the receivership process. The Délégation nationale Internal missions: Coordination, to ensure uniform management at every level of the organization; Monitoring, by means of budgetary management and tracking the outcome of AGS missions; Technical advice and support with legal issues and the setting of AGS strategy; Liaison with AGS bodies. External missions: Cooperation with national partners; Dialog with public authorities; Promotion of awareness amongst all those involved in the receivership process; Informing through the publication of legal documents and the distribution of exclusive statistical data. The Délégations régionales They have the following missions in relation to the AGS Management and Study Centers (CGEAs): Coordination of the CGEAs for which they are responsible; Circulation of regulations and standards governing the way cases are handled; Legal support for complex cases; Internal monitoring of quality in the way cases are handled; Analysis of regional jurisprudence and issue of justified instructions; Regular discussion with judicial representatives, jurisdictions, legal advisors and other parties with an interest in regional business and employment issues. The AGS Management and Study Centers (CGEAs) The mission of the CGEAs is the operational fulfillment of the three missions of managing advances, recovery and disputes through: Providing the funds required by judicial representatives to settle wage claims; Defending the legal interests of the wage guarantee scheme; Maximizing reimbursement of the sums advanced; Representing the AGS in its contact with judicial representatives, lawyers, third parties and jurisdiction registries. 6
Organizational structure of the Délégation Unédic AGS 1 Délégation nationale 5 Délégations régionales 13 Management and Study Centers (CGEAs) 240 employees Délégation nationale Délégation régionale Centre-Ouest Affiliated CGEAs Orléans Rennes Rouen Délégation régionale Sud-Ouest Affiliated CGEAs Bordeaux Toulouse La Réunion (Département) Délégation régionale Sud-Est Affiliated CGEAs Annecy Chalon-sur-Saône Marseille Délégation régionale Nord-Est Affiliated CGEAs Amiens Lille Nancy Délégation régionale Île-de-France Affiliated CGEAs Île-de-France Ouest Île-de-France Est Overseas Territories in the Americas Martinique Guadeloupe Guyane St-Pierre et Miquelon 7
Implementation of the guarantee Scope of the wage guarantee scheme The scope of the wage guarantee scheme is defined by Article L. 3253-6 of the French Employment Code. Compulsory AGS contributions for employers All private sector employers are subject to the employee wage guarantee scheme : Retailers (individuals or legal entities normally involved in retailing as part of their business); Craftsmen; Farmers; Professionals (since 1 January 2006); Legal entities subject to private law; Temporary employment agencies, which are subject to a special contribution rate; Businesses where the majority shareholding is held by the State. Categories of employers not liable for AGS contributions legal entities subject to public law; condominium associations; employers of household staff. The beneficiaries of the AGS guarantee Employees : All persons bound to an employer by a link of legal subordination are treated as potential beneficiaries of the AGS guarantee scheme, regardless of the form of contract of employment involved. Employees of foreign companies operating in France (transnational bankruptcies of European companies): Under the provisions Article 8 bis of Directive 2002/74 of 23 September 2002 relating to the protection of employees in the event of the insolvency of their employer, transposed into French law by the Law of 30 January 2008, employees working in an EU Member State for an employer based in another Member State will be covered by the guarantee organization of the country in which they work. The key entitlements granted by the law Remuneration of all kinds due to employees and apprentices; Compensation payable as a result of contract of employment termination; Profit-sharing and employee bonus schemes, where the sums due are payable; The provisions of welfare schemes where these are granted by law or under agreements. 8
Effective application of the AGS guarantee Effective application of the AGS guarantee is subject to the instigation of protection proceedings, receivership proceedings or legal settlement and submission to the CGEA (via the judicial representative) of statements showing the wage entitlements payable to employees. Commercial Court Official Receiver Initial judgment triggering legal action Commencement of an action for: Protection (not insolvent) Receivership (insolvent) Judicial liquidation (insolvent) Company in difficulty Appointment Official receiver Judicial representative (To verify wage liabilities) Forwarding statements of wages claimed for employee beneficiaries Judicial administrator (To assist in company management) Immediate payment of funds Forwarding information concerning staff employed under employment contracts Provision of the funds intended for the employee beneficiaries Employee beneficiaries AGS Guarantee Délégation Unédic AGS (CGEA) 9
Involvement of the guarantee scheme The Délégation Unédic AGS (DUA) fulfils three basic missions as part of the employee claim guarantee scheme: Advances Providing the funds required by judicial representatives to settle wage claims Recovery Recovering the funds advanced on the basis of monitoring of protection proceedings, receivership proceedings and the liquidation of company assets within the context of judicial liquidations. Disputes Defending the legal interests of the scheme in all jurisdictions: employment tribunals, appeal courts, the Supreme Court of Appeal, commercial courts and official receivers. It monitors the publication of new laws, decrees and judicial decisions in order to implement all of these within the context of the guarantee. Advances The advance request process When proceedings for protection, receivership or liquidation are commenced, the debtor s creditors must declare their claims. Employees are exempted from this procedure. The judicial representative appointed at the outset of the receivership process checks employees claims and lists the amounts due in a statement of claims, which is then forwarded to the official receiver for approval. Where the company does not have the funds required, the judicial representative requests engagement of the wage guarantee scheme by submitting the statements previously prepared and forwarded to the AGS Management and Study Center (CGEA). It is then the responsibility of the judicial representative to pay these sums immediately to the employees concerned. If the judicial representative has completed his/her involvement, the clerk of the court or the court officer responsible submits an additional report to the CGEA, and acts as intermediary for the employees concerned. The maximum limits of the AGS guarantee Articles L. 3253-17 and D. 3253-5 of the French Employment Code establish the principle of a maximum limit on the sums advanced by the AGS. In 2012, the maximum limit of the AGS guarantee, including all sums claimed, is 72 744 euros. Where a contract was terminated prior to the date of the initial judgment, the applicable maximum limit is set to reflect the period covered by the contract. 10
The missions of the Délégation Unédic AGS Advances To guarantee the fastest-possible payment of the amounts due Disputes To safeguard the interests of the guarantee scheme when a claim is rejected Recovery To contribute to balancing the guarantee scheme The DUA process for making advances in respect of wage claims Délégation Unédic AGS via its AGS Management and Study Centers (CGEA) step no. 1 Forwarding statements of wages claimed following verification by the judicial representative step no. 2 Issue of direct bank transfer in full settlement (advances on wage claims) Judgement enforced by Judicial Representative, or clerk of the court or a court officer for supervision step no. 3 Immediate payment of funds Employee beneficiaries 11
The scope of the AGS guarantee Company protection legislation French Law 2005-845 of 26 July 2005 (Loi de sauvegarde des entreprises), which came into effect on January 1, 2006, substantially reformed French insolvency laws with the introduction of a procedure to protect companies that are not yet insolvent according to the French cessation des paiements insolvency test. This legislation was enhanced by the decree (ordonnance) of 18 December 2008, which has made the protection proceedings more attractive and accessible, and has substantially widened the gap between protection proceedings and receivership. The aim of the protection proceedings is to prevent company insolvency in order to rescue the business and protect jobs. Although the protection procedure is planned to become the common law procedure, proceedings for a judicial liquidation and receivership will still apply where the company concerned is insolvent. Technical provisions applying to protection proceedings Protection proceedings are a form of legal proceedings in their own right, and provide an initial level of legal administration for companies in financial difficulties. The commencement of protection proceedings at the request of the head of the company aims to assist in the process of restructuring the business in order to help the company resolve its difficulties. Protection proceedings may therefore be commenced only where the company is not insolvent. Technical provisions applying to the Company Protection legislation The protection judgment initiates a 6-month period of observation, which may be renewed on one occasion only. During this period, a number of situations may arise: The court imposes a protection plan: - Under the plan, the company continues to trade subject, where applicable, to the cessation, addition or disposal of one or more activities in accordance with the rules of the judicial liquidation proceedings - A court officer is appointed to supervise the payment of liabilities. The protection plan may be terminated for either of 2 reasons: - Failure to meet commitments: creditors must then recover their receivables. - Insolvency: a judicial liquidation is then granted. The protection proceedings may terminate without a plan being imposed. The protection proceedings may be converted into a judicial liquidation or receivership. 12
Diagram of the protection proceedings Protection proceedings Protection plan No insolvency Observation period (6 months, renewable once + at the request of the prosecutor) Possibility of partial asset disposals Application by head of company only Articles L. 620-1 to L. 627-4 of the French Commercial Code 13
The AGS guarantee in the context of the Loi de sauvegarde des entreprises The AGS guarantee and the specific provisions of protection proceedings In the context of protection proceedings, AGS involvement is confined to claims arising as a result of dismissals for economic reasons announced during the observation period or during the first month following imposition of the protection plan. Claims guaranteed during protection proceedings The claims guaranteed relate to redundancy compensation: notice period, compensation for paid holidays and redundancy pay. The guarantee applies up to the maximum limits of the AGS guarantee (see Article D. 3253-5 of the French Employment Code). Advances Entitlement to the AGS guarantee is not automatic, and the principle of subsidiarity is further strengthened by the obligation of the judicial representative to produce documentary evidence to show that sufficient funds are not available. Amounts outstanding at the time protection proceedings are commenced are not guaranteed by the AGS. Ranking of claims The guaranteed sums fall within the scope of article L. 622-17 of the code of commerce. The claims guaranteed and guarantee periods in the event of a judicial liquidation or receivership Judicial liquidation and receivership proceedings are retained within the context of the Loi de sauvegarde des entreprises. However, guarantee limits have been set according to the nature of the claim or the circumstances involved. Under the provisions of Article L. 3253-8 of the French Employment Code, the system may guarantee: paragraph 1, claims remaining payable by the employer to the employee under a contract of employment on the date the initial judgment is made paragraph 2, claims arising from termination of contracts of employment: - during the observation period, - in the month following the judgment imposing receivership, - within 15 days of a judgment for liquidation, - during a temporary business continuation period granted under a judicial liquidation, and during a fifteen-day period following such business continuation granted under a judicial liquidation paragraph 3, claims arising from the termination of employment contracts when the employees have been offered a personal redeployment programme (convention de reclassement personnalisée CRP) paragraph 4, sums falling due within the observation period in the event of a judicial liquidation, subject to a maximum limit equivalent to 1.5 months of employment. AGS as controller As a major creditor in the receivership process by virtue of the advances made to pay employee claims, the AGS asks to be appointed as controller wherever large amounts are involved. The controller has wide consultative powers, and issues a detailed advice on a number of major issues. In this way, the Délégation Unédic AGS contributes to saving jobs, and allows maximum relief for creditors by ensuring a solution that addresses the long-term interest of both. 14
How AGS involvement works (Advances) In protection proceedings No insolvency Observation period Wages Pas No de guarantee garantie No guarantee Articles L. 620-1 and subsequent of the French Commercial Code Redundancy pay No guarantee Guarantee In receivership proceedings Insolvency (< 45 days)) Observation period Wages Pas Guarantee de garantie No guarantee Articles L.631-1 and subsequent and L.632-1 to 4 of the French Commercial Code Redundancy pay Guarantee Guarantee In judicial liquidation proceedings Wages Insolvency (< 45 days)) Pas Guarantee de garantie Option for temporary continuation of business (3 months, renewables) Guarantee (up to 45 days L. 641.13) Redundancy pay Articles L.640-1 and subsequent of the French Commercial Code Guarantee Guarantee (redundancies within 15 days or during temporary continuation of business and during a fifteen-day period following such business continuation) 15
Recovery A guarantee based on making advances for subsequent repayment The principle of reimbursement is contained in Article L. 3253-16 of the French Employment Code. Having made advances against the claims of employees, AGS becomes a creditor of the defaulting company. The methods used to recover paid claims from the company differ, depending on their priority and the stage reached in the receivership process. The wage guarantee scheme is, however, a special creditor, since it benefits from the same legal privileges as those granted to employees. The wage guarantee scheme is therefore legally substituted for the privileged claims of employees. The types of claim against which the AGS may advance payments Claims covered by article L. 622-17 of the French Commercial Code and claims arising after the protection plan in case of application of the protection proceedings. Amounts due as part of the redundancy payment when redundancy is declared during the observation period of the protection proceedings or during the month following the protection plan statement. Special privilege claims article L.3253-16-2 of the French Employment Code These claims are legally substituted for the rights of employees and must be paid as a priority. Claims covered by article L. 622-17 and L. 641-13 of the French Commercial Code Amounts due during the observation period in the context of receivership, and wages up to a maximum limit of one and a half months of employment where there has been conversion to a judicial liquidation. The wage guarantee scheme has a prior claim for payment, and such claims must be paid after special privilege claims, but before all other claims. Privileged claims articles 2331-4 and 2375-2 of the Civil Code Claims guaranteed by means of a general claim on the fixed and moveable assets of the individual or legal entity are paid either in accordance with the plan or, in the case of judicial liquidation, in accordance with the ranking of privileged claims in respect of the asset disposed of. Unsecured claims Claims which are not covered by any particular guarantee and are paid either in accordance with the plan or, in the case of judicial liquidation, after the privileged claims. Reimbursement of claims Protection proceedings The AGS is ranked as having a guaranteed claim. This is a claim arising subsequent to the initial judgment in the protection proceedings and does not form part of the claims included in the protection plan. This claim is brought into being to meet the needs of the proceedings and is immediately enforceable (article L. 622-17 of the French Commercial Code). 16
Claim rankings in protection proceedings Protection proceedings Observation period Protection Plan No insolvency 1 month No AGS Claim rankings in protection proceedings guarantee Art. L. 622-17 of the French Commercial Code Privileged claims No statement of claims Claims made after the protection plan Claims immediately enforceable Procedures for receivership and judicial liquidation The AGS is reimbursed in accordance with the outcome of the receivership process. In the event of receivership, the solution may be either a receivership plan providing for the reimbursement of all liabilities, or a plan for total or partial disposal alongside conversion to judicial liquidation - the disposal price will reflect the amount required to reimburse creditors in order of ranking. In the event of judicial liquidation, creditor payment depends on the disposal of the debtor s fixed and moveable assets, the proceeds from which are distributed in order of ranking. Since the AGS has a special privilege claim, it is entitled to priority payment of its claims. 17
Disputes Since its creation in 1996, the Délégation Unédic AGS (DUA) acts in nearly 40,000 employment tribunal proceedings annually to resolve employer/employee disputes In cases of receivership or judicial liquidation, the AGS appears before employment tribunals under 3 circumstances: Article L. 625-1 of the French Commercial Code The judicial representative contests all or part the employee s claim Article L. 625-3 of the French Commercial Code Conciliation proceedings in progress on the day of the judgment initiating receivership Article L. 625-4 of the French Commercial Code The AGS contests a claim contained in a statement of claims Forced AGS involvement AGS as defendant In protection proceedings The AGS appears before employment tribunals only in cases of litigation resulting from its refusal to take pay redundancy compensation following dismissal for economic reasons during the observation period or during the month following imposition of the protection plan. AGS involvement is therefore not automatic in protection proceedings. 18
Glossary Bodies and organizations Unédic: Created in 1958 by the social partners (employer and employee organizations), l'union nationale interprofessionnelle pour l'emploi dans l'industrie et le commerce runs the French Employment Insurance system alongside the Assédic offices and Garp (for the Paris region). Unédic represents the Assédic offices at national level, and is responsible for the financial management of the system Assédic: The missions of the Association pour l'emploi dans l'industrie et le commerce are based on the affiliation of contributing companies, the registration of job-seekers, collecting contributions and paying unemployment benefit. Anpe (l Agence nationale pour l emploi): The ANPE is a French public administrative establishment created in 1967 to centralise job offers and requests, compile statistics on the number of job seekers, and manage support centres designed to help the unemployed in their search for a job. ACOSS: The Central agency of social security bodies (L Agence centrale des organismes de Sécurité sociale, or Acoss) is the national fund of the Urssaf network. Acoss steers and runs the Urssaf network, is in charge of providing joint management for the cash flow of the various branches of the general plan and produces statistics and studies on a regular basis on the cyclical movements linked to jobs and payroll. Lexique Association: According to Article 1 of the French Law of 1 July 1901: "an association is an agreement under which two or more persons permanently pool their knowledge or business for a non-profit-making purpose." An association is a contract under private law. Beneficiary: Employees are considered beneficiaries when they are employed under a contract of employment, and are covered by the AGS guarantee. Court registry: The body responsible for recording the reports of documents relating to legal cases. It is staffed by specialist staff and qualified professionals. Head of the company: The legal representative of the company for the purposes of the receivership process. Insolvency: A company is insolvent when it can no longer honor its current liabilities on the basis of available assets. Judicial administrator: A professional officer of the court who is appointed by a court or company under receivership proceedings to prevent further financial difficulties for the company and assist the head of the company in developing solutions to facilitate company recovery. Judicial representative: A professional officer of the court who is appointed by a court or company under receivership proceedings to represent the interests of creditors. Where a company has ceased trading, the judicial representative replaces the head of the company to resolve issues prior to the final closure of the business.
Délégation Unédic AGS - Réf. : BT Ang - January 2012 - Semios Délégation Unédic AGS 50 boulevard Haussmann, 75009 Paris Tél : 01 55 50 23 00 Fax : 01 56 02 65 58 E.mail: ags-dn@delegation-ags.fr Web: www.ags-garantie-salaires.org