How French employers react to labor regs

Great article in Bloomberg Businessweek titled "Why France Has So Many 49-Employee Companies."  The answer is that once a company has 50 employees, it "must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons."  In effect this means that it becomes very difficult, if not impossible, to have a reduction in force once the worker councils are in place.

As small companies expand, they either start outsourcing activities or set up new companies to avoid these regulations.  As a result, France has 2.4 times as many companies with 49 employees as it does with 50.  Another classic case of how regulations that were intended to protect jobs end up having the opposite effect.