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Law n° 2020-734, dated June 17, 2020, “on various provisions relating to the health crisis, other urgent measures and Brexit” has introduced a new furlough mechanism designed to address the potential economic consequences caused by the COVID-19 pandemic over the coming months.

Authors: Séverine Martel Fernando Lima Teixeira Juliette Breuil Fanny Molla

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.