By Michel Rose
CALAIS, France (Reuters) - A Monet painting inspired the field of red poppies embroidered onto the delicate lace at Gerard Dezoteux's 126-year-old lace factory in Calais, northern France.
The samples at Desseilles Laces, supplier to lingerie brands such as La Perla, Ralph Lauren and Victoria's Secret, may never make the shop floor as the company is on the brink of collapse.
Competition from Asian rivals has squeezed the region's lace industry so Dezoteux cut jobs to save money. But a court overturned the decision, a costly blow that may force the company to shut and business groups say is another case of outdated labor laws making it hard to operate in France.
"This was my own masterpiece," Dezoteux said, holding up the red fabric on the factory floor where "tullists" still adjust threads by hand on clattering machines that are even older than the factory.
"It could now end up in a museum. What a total waste."
There were over 300 lace factories in Calais at the turn of the 20th century, and the town has a museum celebrating the industry.
There will only be two left if Desseilles closes as a result of the December court order to rehire five of the workers it laid off in 2013, pay two-and-a-half years of salary arrears, plus an amount of compensation that has yet to be set.
Dezoteux estimated it could cost at least 750,000 euros ($850,000) overall, more than the company's loss for the whole of 2015 and about 10 percent of its turnover.
"It's just absurd," Dezoteux, who took over the company in 2011 with two partners. "This is the final straw for us."
The redundancy scheme had been approved by labor inspectors, the labor ministry and another tribunal so the decision highlighted the legal uncertainty created by unwieldy labor laws that the Socialist government is trying to slim down to make France a more business-friendly place.
In a rare move, the government's local administration has joined Desseilles in appealing the court's decision.
This conflict played out on the national stage this week when Prime Minister Manuel Valls unveiled a labor reform bill but was forced to water it down amid a Socialist party revolt and protests from unions.
One of the measures that was dropped - a cap on compensation packages labor courts can award unfairly dismissed workers - would have helped businesses in similar court cases to Desseilles Laces.
Business leaders and many economists say the unpredictable cost of laying off workers puts companies off doing business in France.
"This court decision is the death knell for this company," Frederic Motte, local head of the Medef business group, told local TV channel GrandLille.TV.
"With one administrative decision we are going to kill historical know-how, scare off investors and weaken the whole supply chain."
It also discourages hiring, a factor which has helped keep France's unemployment at over 7 percent since 1983 and stopped it falling below 10 percent recently despite a recovery that has brought down the jobless rate for its European neighbors.
Along with concern about compensation for laid off workers, companies worry about lack of clarity about the conditions for firing workers for economic reasons. This leaves room for magistrates' interpretation.
If approved, the government's labor reform bill would go some way to addressing this by saying a drop in sales for at least four quarters or two consecutive quarters of losses are legitimate conditions for layoffs.
But any changes would be too late for the Calais lacemaker.
Uncertainty about the company's future labor costs while it appeals the court's ruling has already put off a Chinese investor interested in injecting new funds, Dezoteux said.
Its workers could lose their jobs as soon as next week if no buyer is found, pushing the unemployment rate in the wider region around Calais, already the highest in France at 12.5 percent, that little bit higher.
The court's decision has also soured relations among the 74 workers at Desseilles, with some angry at those who fought to be reinstated.
"These people only think about themselves," said Brigitte Coterez, 59, a designer who has worked in the company for more than 30 years. "I am near the end, but what about the young people, those who have children?"
Eating lunch next to the company's huge looms, the reinstated workers say they should not pay the price for business mistakes by the management.
"It's not our fault if orders dried up," said Sandy Bomble, one of their number. "Lacemakers in nearby Caudry are doing better, so that means management made strategic mistakes."
Dezoteux says those rivals work in a different sector making lace for dresses and not lingerie, and that re-tooling to cater for that market would require investments he could not afford.
"I told the workers: 'if you think you can do a better job, I'll sell you the company for one euro'," Dezoteux said.
"But they didn't take up the offer."
(Editing by Anna Willard)