Transfers of business in France

A high level outline of the employment implications of a business transfers in France.

Introduction

The European Acquired Rights Directive (the Directive) is implemented in France through Article L1224-1 of the Employment Code.

Scope of the law

It only applies when an “autonomous economic entity” (ie a kind of standalone activity (with its own management, tools, equipment, possibly clients, etc)) is transferred and continued after the transfer.

Effect of transfer on contracts of employment

Employment contracts continue under exactly the same terms and conditions (same benefits, remuneration, entitlements and length of service etc).  

Right of objection

None of the parties (employee, transferor, transferee) can opt out of the transfer.

Occupational pension schemes

No impact on pension schemes, as these are provided by the state. 

Recognition and collective agreements

Collective agreements of the transferred entity continue to apply during maximum 15 months, unless they are renegotiated before. If not, the employees transferred only keep the benefit of the remuneration they perceived prior to the transfer, including entitlements provided by collective agreements.

Employee representatives

Employment contracts: Automatic transfer, except in case of partial transfer of a company or an establishment where the authorisation of the Work Inspector must be obtained to ensure the absence of discrimination.

Mandates: Complex rules apply and differ depending on the nature of the representative body affected and on whether the entity transferred retains its legal autonomy after the transfer.

Changing terms and conditions following a transfer

If the transferee wants to modify the employment contract (eg change of remuneration, duties, working hours), the employee’s express consent is required. This is not the case where there is a simple change to working conditions.

Dismissal because of transfer

Fraud: Employment contracts can be terminated before a transfer but only, to avoid claims of fraud, for a strong real and important reason (eg real need to reorganise the company before selling it).

In case of fraud, employees can either ask for damages for unfair dismissal or for their reinstatement within the company (including payment of their salaries from the date of reinstatement back to the dismissal).

Transferor and transferee may be held jointly liable for unfair dismissal.

Other dismissals can occur before or after the transfer based on a “real and serious reason” for dismissal:

  • for personal reasons (eg poor performance, disciplinary)
  • for economic reasons, (removal of position, economic difficulties, necessity to safeguard the competitiveness, etc) but very difficult to have a valid economic ground, in particular in international groups (difficulties appreciated at group level, globally.)

Transferor’s obligations to inform transferee

No obligation for transferor to inform transferee of liability in relation to employees but this is usually provided for in the transfer agreement. 

Informing and consulting the employee representatives

No obligation to consult with the employees themselves.

Obligation to inform (ie provide sufficient information) and consult (ie obtain a formal opinion) with the employee representatives (if any) in respect of the proposed transfer,  before making an “irremediable” or “irreversible” decision, ie before any binding document is signed. 

Consultation process can take from a few days to several weeks (but maximum time periods are provided, after which the opinion is deemed to have been obtained).

Risk of fines for failure to consult (up to €3,750 (for the legal representative) and up to €18,750 (for the company)). One year of imprisonment is also possible but unlikely in practice.

Notifying employees about the change of employer

No general legal requirement to notify the employees individually but usually this is done through an information letter.

In small and medium sized companies, obligation to inform the employees of their right to make an offer to purchase the business prior to the sale.

Contracting out

It is impossible to contract out of the obligations under article L1224-1.

Registration

Except for the partial transfer of employee representatives (see above), there is no specific legal registration/administrative obligation directly linked to the transfer. In practice, a transferee will inform various administrative bodies of its new employees. 

Further detail on business transfers in France is available here.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.