PARIS (Reuters) - The French government said on Thursday it would cap unfair dismissal payouts and give companies more flexibility to adapt pay and working hours to market conditions in a labor reform France's biggest union said was disappointing.
The reform, President Emmanuel Macron's first major policy step since his election in May, is also the first big test of his plans to reform the euro zone's second-biggest economy.
For decades governments of the left and right have tried to reform France's strict labor rules, but have always diluted them in the face of street protests.
The government said in a document presenting the reform that it will make it possible to adapt work time, remuneration and workplace mobility to market conditions based on agreements reached by simplified majority between employers and workers.
Workers compensation for dismissal judged in a labor court to be unfair would be set at three months of wages for two-years in the company with the amount rising progressively depending on how long a worker was with the firm, unions said.
However, normal severance pay would be increased from 20 percent of wages for each year in a company to 25 percent, Liberation reported.
The government consulted with unions for weeks as it drafted the reform, and only the hardline CGT union, the country's second biggest, said from the start that it would hold a protest, set for Sept. 12.
France's biggest union, the reformist CFDT, said that it would not call a strike against the reform but described the reform as a missed opportunity to improve labor relations.
(Reporting by Jean Baptiste Vey and Caroline Pailliez, writing by Leigh Thomas)