France

    1.1 In what circumstances does the employee transfer law apply?

    The employee transfer law applies where ‘there is a change in the legal status of the employer, for example through inheritance, sale, transformation of the business, or creation of a company’. The effect of it is that the contracts of employment in force at the time of the transfer will continue to operate with the transferee. According to case law of the Supreme Court contracts of employment 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.

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    Author: Capstan Avocats

    Date: September 2016

    1.2 Does the employee transfer law apply to (a) a sale of a business or (b) outsourcing?

    (a) Sale of a business

    The employment transfer law applies mainly to sales, rentals, leases, mergers and acquisitions. It applies to the sale of assets (such as premises, equipment, customers, staff and goodwill) if it appears that those assets constitute an autonomous economic entity whose identity and activity continue.

    (b) Outsourcing

    The employment transfer law could apply to an outsourcing if the outsourced activity constitutes an autonomous economic entity.

    It could also apply pursuant to a collective agreement. For example, under the collective agreement of the catering sector, if there is a change of service provider, the employee transfer rules apply if the purpose of the contract is the same as before and it concerns the same premises.

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    Author: Capstan Avocats

    Date: September 2016

    1.3 In outline, what are the implications of the employee transfer law?

    If the employee transfer rules apply:

    • employees assigned to the undertaking transfer from the transferor to the transferee on their existing (pre-transfer) terms of employment;
    • collective agreements generally continue to apply until either a new agreement is concluded or for a maximum of 15 months after the transfer;
    • the transferor is required to provide information on the transfer to employee representatives and to consult them;
    • if an employee is dismissed for a reason connected to the transfer, the dismissal is automatically unfair, although a new law has slightly relaxed this rule, subject to conditions.
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    Author: Capstan Avocats

    Date: September 2016

    2.1 Who transfers?

    The protection covers all the transferor’s employees with a contract of employment in force at the date of transfer, including those who have been suspended (e.g. sickness leave). It does not matter whether they are fixed-term or permanent contracts.

    In case of a partial transfer of activity, only the employees who are assigned to the transferred activity will transfer. The contract of employment can be split when employees carry out activities partially within the branch of activity to be transferred.  The split does not need to be 50/50, but could be, for example, 40% of an employee’s time on the transferring activity. However, there is no guidance on how to assess the assignment of the employee to one sector of activity in the business or another.

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    Author: Capstan Avocats

    Date: September 2016

    2.2 Can employees object to transferring?

    Where the employee transfer law applies, the transfer of the employment contract is automatic and obligatory for both the transferee and employees. Employees cannot block the change of employer.

    In the past, the courts had considered that an employee’s refusal to transfer was equivalent to a resignation. However, according to recent developments, resignations must be clear and unequivocal decisions by the employee and it is therefore unlikely that a refusal to transfer would now be considered to be a resignation. A refusal could therefore constitute grounds for dismissal for disciplinary reasons.

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    Author: Capstan Avocats

    Date: September 2016

    2.3 What happens to terms of employment contracts?

    Upon transfer, the transferee takes over all the elements of the individual employment contracts including length of service, amount and calculation of pay, position and place of work.

    Contracts that have been terminated prior to the transfer are not transferred (except concerning the performance of notice periods). However, certain rights and obligations regarding previously dismissed employees may be transferred, including:

    • non-compete agreements;
    • the right of an employee made redundant to priority for rehiring; and
    • an employee representative’s right to reinstatement in the event that the dismissal is found to be void.
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    Author: Capstan Avocats

    Date: September 2016

    2.4 What about other employee benefits?

    Employees will continue to enjoy all benefits to which they were entitled based the transferor’s established practice or commitments. However, the transferee can challenge the transferred benefits by following a specific procedure and respecting the period for notifying a change in benefits (usually three months).

    Employees also continue to benefit from profit sharing agreements. Where it is impossible for the transferee to implement an existing agreement, and if it has no agreement of its own, it must negotiate with employees. It need not reach an agreement but it must negotiate in good faith.

    Past employment with the transferor will count as ‘continuous employment’ with the transferee.

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    Author: Capstan Avocats

    Date: September 2016

    2.5 What happens to pension rights?

    There is a two tier mandatory pension system comprising the social security system and the complementary system.

    As regards the social security system, the transfer will have no impact at all. By contrast, with the complementary system, the transfer of an undertaking could require harmonisation of the transferor and transferee’s schemes. By law an employer can only join one complementary pension scheme for each of two main categories of employees: one fund for managerial and one for non-managerial employees. The employer must also apply the same contribution rate to all employees in the same category.

    Company-run additional pension schemes may also be an issue in cases of transfer. The way the transferee is required to handle the transferor’s pension scheme (if any) will depend on how it was implemented: i.e. was it a collective agreement or a unilateral commitment of the transferor?

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    Author: Capstan Avocats

    Date: September 2016

    2.6 What liabilities transfer?

    Unless the change of employer takes place either in the context of insolvency proceedings or without any agreement between the transferor and transferee, the transferee will become liable for all obligations of the transferor at the date of the transfer.

    There is joint liability regarding debts owed to the employee before the transfer date. Employees can make claims for any amounts which became due before the transfer against the transferor, but can also choose to make those claims against the transferee as their new employer. In that situation, the transferor must reimburse the transferee for any sums it pays (unless the costs of those debts were taken into account in the transfer agreement).

    Note that the above does not apply to criminal liability.

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    Author: Capstan Avocats

    Date: September 2016

    2.7 Do collective agreements transfer?

    If the transferee operates in the same business sector as the transferor there will be no change to the collective agreement, as it applies to all companies in the same sector.

    If the main activity changes (e.g. in the case of a merger, where the transferred activity becomes a small part of the business of the transferee, which generally operates in a different sector) the collective agreement will continue to apply after the transfer until a new agreement is concluded, or in the absence of a new agreement, for a maximum of 15 months. If no new agreement has been concluded after 15 months, the employees will only retain the remuneration in force under the original agreement.

    During the transition, the transferring employees will be covered by the collective agreements of both the transferor and the transferee and may benefit from the most favourable rights and advantages.

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    Author: Capstan Avocats

    Date: September 2016

    2.8 How does the transferee obtain information on transferring employees?

    There are no mandatory information requirements. Information on transferring employees will generally be obtained by the transferee from the transferor, e.g. in a negotiated agreement.

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    Author: Capstan Avocats

    Date: September 2016

    3.1 Can employers make changes to employment contracts?

    The employment contracts of the employees assigned to the transferred entity automatically continue with the transferee by operation of law.

    After a transfer, transferees commonly would like to harmonise the terms of transferring employees with those of their existing workforce. In this case, as the changes are for to organisational reasons the new employer must apply a specific procedure. It must inform the employees of the proposed changes by registered letter. From receipt, the employees have one month to inform the employer if they wish to oppose the changes. If they do not oppose within this time limit, they are deemed to have accepted the changes.

    Note that the employer must obtain the express consent of the employee representatives (e.g. works council members, employee delegates and trade union representatives) and if they refuse, can only dismiss them if it obtains prior express authorisation to do so from the local labour authorities.

    If they oppose, the transferee may either abandon the proposed change or dismiss the employees. However, employers need to be aware that the desire to harmonise the terms of the contracts of itself is not sufficient to justify the dismissal in law. Therefore, if an employer decides to dismiss an employee on this basis, the dismissal is likely to be deemed unfair.

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    Author: Capstan Avocats

    Date: September 2016

    3.2 When can employers safely dismiss employees before or after a transfer?

    Under the public policy rule regarding continuation of the employment contract, the transferor cannot dismiss employees before the transfer is effective, and the transferee cannot refuse to employ the employees at the date of transfer.

    Case law provides that redundancies carried out before a transfer will be ‘without effect’. An affected employee can choose either to require the transferee to continue the unlawfully terminated contract, or claim damages from the transferor. Awards for unfair dismissal are not capped but, with some exceptions,  there is a minimum of six months’ salary.  

    An agreement made between the parties cannot be used to authorise redundancies before a transfer. However, a new law provides that in companies or groups with at least 1,000 employees, redundancies prior to a transfer are possible for jobs the transferee will not continue, on condition, principally, that the transfer is intended to avoid the closure of one or more sites, and that the transferor applies the rules on social plans and site closures.

    There are no particular restrictions on the dismissal of employees after the transfer other than those which are generally applicable. Dismissals can be carried out at any time after the transfer for either personal (e.g. misconduct or capability) reasons or economic reasons (i.e. economic difficulties, technological changes or the need to reorganise to safeguard the organisation’s competitiveness).

    Nevertheless, any dismissal purely by reason of the transfer would be considered unfair. The transfer of a business does not constitute a reason to terminate an employment contract.

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    Author: Capstan Avocats

    Date: September 2016

    4.1 Who must employers consult?

    Both the transferor and transferee must inform and consult the works council before deciding to transfer. If the transfer involves major changes regarding hygiene, safety and working conditions, the hygiene and safety committee must also be involved. There is no obligation to consult trade unions.

    If there is no works council but 50 or more employees, the employee delegates perform the duties of the works council. However, the employer must organise any works council elections.

    If the organisation has less than 50 employees this level of consultation is not required.

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    Author: Capstan Avocats

    Date: September 2016

    4.2	What information must they provide?

    The information provided must include the reasons for and description of the transfer, its consequences for the business and employees, details of the business and financial rationale and the legal and financial structure of the operation.

    If a works council considers the information insufficient, it may request further information and even take court action to obtain it if the employer does not respond adequately.

    There is no specific legal requirement to provide information to transferring employees (although certain collective bargaining agreements might require this). However, employers commonly send a brief letter advising employees of the change.

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    Author: Capstan Avocats

    Date: September 2016

    4.3	What does consultation involve?

    The transferor must obtain the works council’s opinion on the proposed transfer prior to any decision being made. This opinion can only be obtained once the works council has been provided with and had sufficient time to review all the necessary information on the transfer.

    Any opinion expressed by the works council will not be binding on either the transferor or transferee. The transferor must simply inform the works council of the decision taken, and of the reasons why its opinion or suggestions were not followed (if this is the case).

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    Author: Capstan Avocats

    Date: September 2016

    4.4	How long does consultation last?

    The maximum duration of the consultation (unless agreed otherwise with the unions or, in some cases, the works council) is one month, extended to two months if the works council appoints an expert to assist it, or three months if the health and safety committee must also be consulted.

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    Author: Capstan Avocats

    Date: September 2016

    4.5	What happens if an employer fails properly to inform or consult?

    Failure to consult the works council prior to making a decision to transfer an undertaking (or part of one) is a criminal offence which can result in a fine of up to EUR  7,500.

    The works council may also bring an action before the court in summary proceedings to have the transfer suspended until the consultation procedure has been properly carried out.

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    Author: Capstan Avocats

    Date: September 2016

    5.1	Identify up to three issues in this country of which employers should be aware?

    Transfer of an activity to or from a public service administration

    The employee transfer law may apply in the case of transfers to or from a public service administration (except to civil servants, ‘agents titulaires’). If the new employer is a private entity it must offer new contracts which maintain the essential clauses of the previous public contract.

    Transfer of union and employee representatives

    In the case of a partial transfer, the transfer of any employees with representative functions, including union representatives and works council members, is subject to prior validation by the labour administration.

    If the undertaking transferred retains its autonomy, the existing union and employee representative organisations will be maintained and the representatives will keep their functions. If the undertaking loses its autonomy, the representative functions terminate on transfer, but the former representatives remain protected against dismissal for a period (usually six months).

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    Author: Capstan Avocats

    Date: September 2016

    5.2	Would the employee transfer law apply on a cross-border transfer into or out of this country?

    The employee transfer law is considered to be part of public law. Therefore, if a transfer of an undertaking is made into France, the employees should be entitled to benefit from the rules explained above. However, it is necessary to look at the law of the other country involved.

    In the case of a cross-border transfer out of France, theoretically, employees originally employed in France should benefit from the French rules on transfer. Nevertheless, as the transfer will lead to a change of workplace, employees will be entitled to refuse to transfer their contracts of employment. If the transferor is unable to maintain the existing conditions, the dismissal of employees may be justified.

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    Author: Capstan Avocats

    Date: September 2016

    6.1	What are the main national laws protecting employees upon transfers of businesses?

    Articles L.1224-1, L.1224-2 and L.2261-14 and following of the Labour Code apply.

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    Author: Capstan Avocats

    Date: September 2016

     

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