Succession and transfer of businesses in France
| Autor | Francis Kessler - Niloufar Gholami - Bavil |
| Páginas | 11-26 |
Ver nota 1
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French law has been inspired very early by the succession and transfer of businesses with the Act of 19 July 1928 which introduced what has become in 2008, article L.1224-1 in the French Labor Code (previous article L. 122-12) according to which all employment contracts existing on the date of the transfer continue between the new employer and the company's staff. This article thus permits to deviate from the contract's relative effect principle resulting from article 1165 of the French Civil Code.
It is noteworthy to mention that in French law, an employee cannot object to a transfer, and the only other realistic option is resignation. However, terminations directly before, during, or immediately after a transfer is highly scrutinized and more likely than not deemed null and void.
Next, article L.1224-2 of the French Labor Code (hereinafter Labor Code) dating back to a law of 28 June 1983, implements the principle laid down in the Council Directive 2001/23/CE concerning the transferor's obligations in a situation of transfer which are described next.
However, certain Directive's provisions (such as article 7 §6 concerning the information of the transferor's employees when there is no staff representatives in the company) are not transposed in French law and are not binding for the employee since the Directive is not precise and unconditional and cannot be invoked during a dispute since the French state did not take, within the time limits allowed by the directive the necessary measures of transposition. This is why the French judges interpret the provisions concerning the transfer of businesses considering the Directive 2001/23/CE.
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The complexity of the definition and the delimitation of the notion of -transfer of business- raises many practical questions and leads to massive case law.
The provisions of the Council Directive 2001/23/CE are implemented in French law by articles L.1224-1 and L.1224-2 of the Labor Code.
The obligation under article 7 paragraph 6 of Directive 2001/23/EC has not been implemented into French law so employment contracts are automatically transferred through the application of article L. 1224-1 of the Labor Code, which does not provide for an obligation of information by the employer (Court of Cassation, Social Chamber, 17 December 2013).
Article L. 2323-19 of the Labor Code requires in any case of transfer both the transferor and the transferee to inform and consult their respective Works Council (if any) in respect of the proposed transfer. The Works Council must be provided with complete information (at least three days before its meeting) concerning the date of the transfer, the reasons for the transfer, the identity of the transferee, a description of its respective group activities and the possible consequences of the project on the employees. -Consultation- means that the works council members will be asked to give their opinion on the prospective project. The opinion issued by the Works Council is not binding on the transferor's decision to transfer the business.
Indeed, according to article L.1224-1 of the Labor Code:
-In the event of a change in the employer’s legal situation, notably, as a result of inheritance, sale, or merger of the undertaking, a change in its legal form or its incorporation, all employment contracts in force on the date of this change in the employer’s legal situation continue between the new employer and the undertaking’s staff-.
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This article provides a non-exhaustive list of the forms that a transfer of businesses may take, such as sale, inheritance, transformation of a business, or even sale of a company.
It should be noted that it does not apply in cases of creation of an economic interest grouping (-GIE-), of a European partnership (-GEIE-) and the taking over of an undertaking in financial difficulties by its former employees.
According to Court of Cassation, employment contracts will automatically be transferred if the operation involves the transfer of an autonomous economic entity which retains its identity and where the activity is continued or renewed.
Courts look at the circumstances as a whole to determine whether there is a transfer of an economic entity. A transfer is deemed to have taken place when the transferee take possession of the property and rights comprising the entity, even if the transfer documents have not been signed at the date. A lease of the business (-location-gérance-) can constitute the transfer of business under article L.1224-1 of the Labor Code. If the organization of the activity remains the same, a transfer can take place by means of a series of outsourcing or franchising deals.
An autonomous economic entity is defined as -an organized grouping of individuals and tangible or intangible assets that enables the continued running of an economic activity with its own objective- (Court of Cassation, Social Chamber, 7 July 7, Bull. civ. V, n°. 363).
Therefore, the following is necessary and sufficient in order for article L.1224-1 of the Labor Code to apply:
- Existence of assets and presence of employees dedicated to the performance of an economic activity;
- Continuation of this activity by a new entity, without any modification made to its -identity-.
It is well-established that these conditions are cumulative and as a consequence, taking over assets remains an element without which article L.1224-1 of the Labor Code cannot apply:
-Merely having another company continue the same activity does not suffice for there to be a recognized transfer of an autonomous economic entity- (Court of Cassation, Social Chamber, 26 June 2008, n° 07-41.294).
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In situations where article L.1224-1 of the Labor Code applies, the transfer of the employment contracts to the new employer concerns all the employees assigned to the transferred economic entity and who hold an employment contract in force with the transferor on the date of the transfer. The fact that the term of the contract is fixed or unfixed does not matter.
Article L.1224-1 of the Labor Code is considered to be part of public law. Therefore, the employment contract's transfer is obligatory both for the transferee and for the employees who cannot block the change of employer.
Contrary to the position taken by the European Court of Justice (ECJ, 24 January 2002, Case n°51/00, Temco), Court of Cassation considers that the employee does not have the right to object to the transfer. In the past, it considered that the refusal by the employee of a transfer under L.1224-1 had to be treated has a resignation (Court of Cassation, 5 November 1987, Bull. Civ. V, n° 616).
The only exception was where the transfer involved an essential change to the employment contract, in which case the employee could legitimately refuse the amendment of the employment contract imposed by the transferee and...
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