Polls show two out of three French people are opposed to the First Employment Contract (CPE), which is designed to reduce youth unemployment but which opponents say will increase job insecurity among the young and fail to reduce joblessness.
The CPE would allow employers to hire people under 26 for a trial period of two years before offering them a permanent job.
What has angered students, young people and unions is that the CPE also allows employers to fire their new recruits at short notice and without justification.
"I would like to say very clearly that we will not allow it to be written in French law that workers can be laid off at a snap of the fingers," said Bernard Thibault, head of the CGT union, which organised many of yesterday's protests.
The government argues that the CPE will reduce youth unemployment by offering employers more flexibility, thereby encouraging them to hire young people. Critics warn that the new legislation could be misused by larger employers and will increase insecurity among French youth, widely seen as one of the root causes of last year's suburban riots.
More than 20 per cent of France's 18-25-year-olds are unemployed, double the national average of 9.6 per cent. Among the country's poorest communities youth employment stands at 40 per cent.