UNDER THE SPOTLIGHT

CHANGES IN THE POSTAL SYSTEM IN FRANCE
On September 29th, the unions of La Poste, the French post office system, organized a public vote concerning the government’s project to privatize it. More than two million people voted at the more than 10,000 polling booths, situated in front of post offices or in city halls.

This large movement to mobilize a vote against the privatization of La Poste was due to a change in the French constitution that was passed in July 2008. It allows referendums to be held and organized by the government if 20% of the French parliament and 10% of the French voters request it, but this law has actually never been fully implemented since the government has yet to issue the obligatory guidelines. Faced with a constitutional, yet unusable right to action, the unions and the opposition political parties took it upon themselves to organize the poll. The government then claimed that such an action meant absolutely nothing since the vote was organized privately and therefore offered none of the guarantees that come with a formal national vote.

Aside from this interesting debate about the legality of such an initiative, the results illustrate how much French people value the efficiency of their postal system. Several newspaper polls indicated that 59 % of the people wanted the government to organize this election and that an even larger majority of 63 % were against the privatization of the postal system.

There are several elements here that should be highlighted in order to better understand the situation.

1. As far back as I can remember, the post office in France has always offered banking services and these services continue to be very popular. Today, La Poste has about 10 million banking clients and offers a wide range of services, from the common checking account with a debit card to mutual funds, as well as just about all the insurance policies one needs. This business is growing and making money.


2. The post offices have been fully renovated one after another in Paris and in other major cities, and the plan is to upgrade all of them in France. So far it appears that long lines have disappeared and automated self-service now allows you to send a letter or parcel without any help.


3. Since the banking side makes more money than the postal side loses, La Poste is already a profitable business even though it is a public service and part of the French administration.

As expected, the unions have also organized strikes to fight this “commercialization” project and so the mail delivery has been quite erratic lately. This time the outcome of the confrontation is not certain. Many journalists and analysts compare the situation with what happened in July 1996 with France Telecom, the state-owned telephone company. Its successful transformation into a privately owned company in a very competitive market was only possible with a radical change in management. The change meant that the civil servants who used to work for the government had to adapt to the continuous changes the company went through. The result has been 25 suicides among the employees of the company within the last two years. This fact is having a major impact on the determination of the unions of the post office to refuse the same privatization.

LOCAL TAXES IN FRANCE AND TAXE PROFESSIONNELLE
During the fall, the two main local taxes are due, taxe d’habitation and taxe foncière. The first one is paid by everyone who lives in an apartment or house and is either an owner or a tenant. Its calculation is quite complex, but to keep the matter simple, non-fiscal residents of France pay the full tax, while French fiscal residents get an initial 10% reduction with the rest prorated according to the level of their income.

The taxe foncière is paid by the owner of the property and there is no reduction in price for anyone. The advice I give, especially to non-residents, is to have these taxes paid by automatic payment from their bank account. It can either be monthly or a one-time payment on the due date.

At the same time, businesses of all sizes, except the auto-entrepreneurs, pay their equivalent tax, taxe professionnelle. The amount of this tax is based on an equation that takes into account the surface area occupied by the business, the number of people working there, and the profits earned.

These three taxes are the main source of revenue for the local government, mainly the city. This means that a town that has a lot of businesses can have a very low taxe d’habitation and taxe foncière since the tax paid by the businesses provides a large portion of the budget. Likewise, the more businesses there are in the town, the lower the individual taxation, and the more attractive it is for a new businesses to settle there.

As is often the case, one can see this as being either unfair competition, or as the natural reward for good management. In any case, in an effort to lower the tax burden on businesses, the current French government is working on permanently removing the tax on businesses. This is only a good idea if the spending by the local government decreases accordingly, which is not at all what is going to happen. In fact, the fiscal burden will shift to individuals and there will be a drastic increase in the cost of the two taxes, taxe d’habitation and taxe foncière. This will severely penalize people living in cities with substantial public services (such as libraries, sports centers, etc.). On one hand, it is fair to state that if you use a lot of services or even just have the opportunity to use them, there should be a fair cost associated with it. On the other hand, the financial burden for so many services is substantial in a city like Paris. Since it has many businesses, the majority of the budget comes from the business tax, taxe professionnelle, yet business are rarely users of the services they are paying for.

Today a foreigner who buys an apartment in Paris quickly realizes that the fiscal burden coming from those two taxes, taxe d’habitation and taxe foncière, is a non-issue compared to the cost of maintaining a piece of real estate, yet these two taxes will become an issue if the business tax is eliminated. If the government project goes through the way it has been explained to us these last few months, it will have a substantial impact on the overall cost of ownership.

For the same reason, this will have a great impact on the price of maintaining an apartment equipped for short-term rentals since the owner pays both taxes. These tenants/guests never pay the taxe d’habitation, only the long-term tenants with a French lease do. For people who are interested in investing in real estate, this aspect should be carefully reviewed. For those who are already owners of short-term rentals, I suggest that you run a scenario where the combination of these two taxes doubles or even triples and see if the rental income can cover such an increase. The cost of these taxes has increased on average 9% in 2009 and the prediction from city hall is that for the 2010 budget, these taxes will continue to rise, but hopefully not as much. Lower amounts collected from businesses during the economic crisis means that the difference is being passed on to the private individual in the form of higher taxes, i.e., taxe d’habitation and taxe foncière. Here is a basic reminder on how these taxes are established and calculated. For both taxes, the tenant as well as the owner is assessed their tax on January 1st but the taxes are paid in the fall. The only way not to pay the taxe d’habitation is to have the apartment totally empty, meaning totally bare, or to have it up for sale in its current condition.

One last piece of advice: considering the situation with the French postal service now and for the months to come, if you do not receive your tax statement during December, be pro-active and ask where it went and how you can straighten the situation out and pay the tax you owe.

Best regards,

Q & A

THE NEW IMMIGRATION VISA DOES NOT REQUIRE THE ISSUANCE OF A CARTE DE SEJOUR

QUESTION
I am an American married to a French national and we just moved back to France. Apparently, for the first year, I no longer need a carte de séjour but only the long stay visa, which I applied for and received before coming here. I believe that I am allowed to work in France, but I am unsure if I need to do something in addition to the visa before accepting a job. The problem is that I have been offered a teaching job and I do not know if I can accept it or not.

ANSWER
The new law was intended to simplify people’s lives, but not surprisingly, changing the system has caused confusion. Under the reform legislation seven years ago, the spouse of a French citizen whose legal status in France came from being married or PACSed was given the automatic right to work as an employee. This was clearly stated on the front side of a carte de séjour mention VIE PRIVEE.

Previously, the right to work as an employee was granted by the M.O.E, which issued a separate dark blue card. It precisely defined the level of the right awarded and also designated the employer when needed. The fact that under the new system the exact nature of the right to work is no longer mentioned on an official card can be very confusing when you change employers, and even more when you change professions.

In order to make things simpler the government has decided that the immigration visa will also serve as the first immigration card. I fully agree that not having to spend four to five hours at the préfecture for each visit is a great improvement. On the visa it mentions the fact that it acts as the initial ID card and therefore the first carte de séjour is no longer issued. On the visa stamp there is now even less space to put the immigration information, and the right to work is not mentioned at all anymore.

You need to study the new regulations and find out for yourself what rights are attached to each type of immigration visa. For most of them, there is another document indicating the nature and the scope of the right to work. In order to have employee status, the foreigner must have a work contract signed and sealed by the administration, i.e., from the La Main d’Oeuvre Etrangère, which authorizes your right to work. In short, you must have this extra piece of paper that really proves your claim. Without having to understand the six types of new visa/carte de séjour, employers can easily be convinced that the foreigner applying for the job has the right to work for them in all the cases except for the visa/carte de séjour mention VIE PRIVEE. This is important because employers are criminally liable if the person works without the proper legal document. It is therefore fully understandable that employers are hesitant to take risks. Unless you can prove to the employer that you have the right you claim to have, they may assume that you are in effect lying.

Concerning your situation, the visa/carte de séjour Vie Privée that you now hold implies that you have the right to work, and no authority needs to issue you any specific paper to be employed in France. Unfortunately there is absolutely no simple way to prove to your potential employer that you do not need further documentation. I suggest that you find a way to address the issue with your employer the best way you can and if it does not work out then you will need professional help, someone who will quote the current law and hopefully convince them of this. This is truly a perfect illustration of a simplification that should help people but in fact backfires, making life very frustrating for the holder of this new visa carte de séjour mention VIE PRIVEE.

CAN AN EMPLOYER CHANGE THE FINANCIAL CONDITION OF A DISMISSAL LONG AFTER THE TERMINATION OF THE CONTRACT?

QUESTION
For nearly two years, I used the services of a Filipino woman in Paris and then we terminated our professional relationship about six months ago. She is now asking for about twice the amount of money I originally gave her as severance pay, i.e., four months worth of wages! At the same time, I also rented and paid for a small room “chambre de bonne” for her, in Paris for four months. She now considers it worthless since she felt that she could not use it because of its poor condition and because she felt the neighborhood was too dangerous.

Does she have the right to change her mind more than six months after the last day of work?


Does the fact that she is illegally working in France change anything in this situation?

ANSWER
Let me answer your second question first. French labor laws apply to everyone working in France, even if they do not have the right to do so and even if they face expulsion. Indeed, this law applies to both the employee and employer and one cannot use the wrongdoing of the other to waive his or her liability. Now from a practical point of view, numerous undocumented workers never ask the court or the administration to enforce the labor law since they are certain to see their right to stay in France challenged, and therefore run a high risk of being expelled to their home country. So YES, it makes a considerable difference in your situation since a “normal French employee” would be quick to file in court, but an undocumented worker never files in court on his or her own. There are a few cases that do make it to court, but only because a union is handling the case, or if the employer was caught for other reasons and the labor issue is just one aspect of a broader case.

In your situation, the French labor law would not necessarily view this person as simply changing her mind and asking for more. They look at the entire agreement to ascertain the minimum rights of each party concerned. This means that if your former employee recalculates what she was owed based on French law and there is a difference in her favor, then she can claim it since your agreement with her is less binding than the law.

This practical aspect of the question radically changes the way you should handle the matter. So many things were probably wrong in the labor contract from the very beginning, such as, among other things, the minimum wage, the working hours, the paid vacation allowed, the payment of the social charges (the French equivalent to Social Security), the severance pay and so on, that it would be close to a mission impossible to straighten out everything. If you have not paid all these social charges already, doing so would be more costly for you than giving her the money she demands.

Since I have no idea what the four months pay that you gave her actually covered at the end of her contract, I cannot say if this is generous or not. Even if it covered one month of owed salary, in addition to three months of severance pay and paid vacation combined, this is more than what French law would demand of you.

An employee accrues a minimum of two and a half days of vacation per month worked, which means that she could have accrued a maximum of two months, or sixty days of wages.

For the first two years of employment, the employee is not entitled to any severance pay. After that the minimum is 10% of the monthly salary per year worked. This compensation is only owed if you, the employer, have taken the initiative to terminate the contract. If your employee resigned then there is no severance pay owed.

Concerning the financial aspect of the situation and based on the above mentioned labor laws, you appear to have given more than what the law requires. You also rented a room for her in her name. Why was this done and why was the price of the rental not given to her in lieu of an apartment? I have no idea, as this makes little sense unless the plans were that she needed a place to stay right after leaving your place and she could not find anyone to host her before she found another position. If she changed her mind then this does not change the amount of money it cost you to rent the apartment nor the terms of the agreement at the time. If you offered the rental to her and she never formally accepted it and was determined to not stay there, then this “gift” was indeed not worth much. So for the sake of argument, I would choose the most conservative approach here and say that the apartment rental was worth close to zero to her. This does not change the fact that it appears that you gave her somewhat more than what the law states.

One aspect that was not mentioned at all in your question was whether or not you gave your employee any legal documents at the end of the contract. In France, aside from the expected pay slip, there is the attestation de travail, the solde de tout compte for the employee’s usage and the attestation ASSEDIC, which needs to be given to the unemployment agency, the Pôle Emploi, so that the employee can claim unemployment benefits. The last pay slip would have detailed the amount of money for each item mentioned above and made it easier to check.

One last small comment concerning employers who use Chèque Emploi Service Universel (C.E.S.U.) to pay undocumented workers. With these checks the illegal worker has a much easier time proving their employee status but it is a significant constraint for the employer. At the same time, it enables the employer to pay all the related taxes and avoids the major risk of tax evasion by the employer which when discovered, makes situations like yours much simpler to solve.

CONFLICT IN A CO-OWNERSHIP – PICK THE RIGHT FIGHT

QUESTION
The situation mentioned in the September issue of your newsletter concerning the water leak in an empty apartment also happened to us. Some damage to the property below was the signal that we had a leak in the plumbing in our place, and since we live in Australia, we needed to find a way to let the plumber get in without us flying back to Paris. Everything has since been repaired and paid for by the insurance company. However, the rest of the co-owners do not like the fact that we run a short-term rental, so they decided that “they did not trust” the plumbing and electrical system in our apartment and have filed in court to have a professional called in. We did some minor changes and got the OK from the expert. Since the real (and ridiculous) aim of the co-owners is to prove that the apartment is uninhabitable and to prevent us from renting it, they insisted on yet another expert and so forth. If this was not such a disaster and misuse of the French legal system, it would be a comedy. The result is that we have been in court for seven years!


ANSWER
Your situation perfectly illustrates the strategy that one learns during the first year of law school, which is, “pick your fight.” Too often, people misunderstand what this means in a court of law. The individual who wants to sue is very often adamant about the wrongdoings he has been a victim of, and wants the wrongdoings acknowledged and wants some kind of compensation. The reality might be completely different: what bothers the plaintiff the most may not even be illegal and there may not be anything that they can do about it, but they take the other person to court anyway. And there is also the issue of proof. It could be obvious that the claim is valid but it is may be virtually impossible to prove, therefore getting a favorable decision can be extremely difficult. A good lawyer will find all the issues that can be easily proved and that carry the maximum liability possible. By doing this, the lawyer is improving the chances of getting a favorable ruling. In your case, the co-ownership decided that even though it was the short-term rental that bothered them the most, the outcome of a lawsuit based on this was too uncertain.

That said, I am not sure that suing based on the claim that your apartment is uninhabitable was such a good choice. In order to condemn an apartment in France on grounds of being a health hazard, the sanitary conditions must be atrocious, and leaky plumbing alone would not be enough. The short-term rental business demands that an apartment offers a quality of service similar to a hotel room and yet there are some very mediocre apartments in Paris that should be upgraded to offer a decent service. In your case, I cannot imagine that such a ludicrous claim can last seven years in court, although a very good lawyer could drag out a claim such as this by requesting one more expert and postponing every hearing. Since the co-ownership is paying for all this and the court experts are expensive, the co-owners must be so bothered by your short-term rental business that they are willing to spend this kind of money on a lawsuit to get rid of you.

I am not sure what would be the best decision, ignoring this lawsuit or selling the apartment so that the case is dropped.