French labor unions and business leaders struck a deal on Friday to overhaul swaths of France’s notoriously rigid labor market, moving to tame some of the most confounding rules in the 3,200-page labor code as the country tries to increase its competitiveness and curb unemployment.
The changes would include giving employers more flexibility to reduce working hours in times of economic distress without incurring union strikes. High levels of compensation that courts can award to laid-off workers would be trimmed. The five-year period that former employees now have to contest layoffs would be reduced, a shift that Medef, France’s employers’ union, said would “reduce the fear of hiring” by businesses.
President François Hollande has said the changes are needed to burnish France’s international allure as a place to do business, and the accord capped weeks of sparring among the five top labor unions and Medef.
The labor measures would help address what Louis Gallois, Mr. Hollande’s investment commissioner, has called a “two-speed” labor market in France. Under that system, employees on long-term contracts enjoy extensive, costly job protections and benefits, while temporary workers, whose ranks have surged to a third of the French labor force, have minimal job security and relatively few benefits.