Employees’ Rights in Case of a Transfer of Undertaking
a. Scope of the automatic transfer
In France, an employee cannot object to a transfer of undertaking as the transfer is operated automatically. A refusal could constitute grounds for dismissal for disciplinary reasons. The automatic transfer concerns any kind of employment contract (fixed-term contracts, trial period contracts, suspended contracts for illness, etc.). Employees who enjoy a protected status (e.g. employee representatives) will also see their contracts automatically transferred, with their representative role intact; however, when the transfer concerns only part of a business (a partial activity transfer), their transfer should be authorised by the Labour Inspector.
The contracts will be transferred in their totality (seniority, remuneration, position, non-competition, etc.), as well as unilateral commitments and practices, such as payment of a 13th month premium. The applicable collective bargaining agreement will continue to apply for a maximum period of 15 months, in the event that the company to which the employee is transferred applies a different collective bargaining agreement.
b. Employees’ benefits and pension rights
Employees will continue to benefit from any existing profit sharing agreement unless the change in legal status of the employer makes the implementation impossible for the transferee. In that event, open negotiations should be conducted in good faith to reach a profit sharing agreement, with an obligation to reach an agreement (articles L.3313-4 and L.3323-8 of the French Labour Code).
Regarding pension rights, the transfer will have no impact on the social security system. However, the transfer of undertaking could require a harmonisation of the complementary system (managed by AGIRC/ARRCO pension funds). The rules of harmonisation depend on how the undertaking is transferred (merger, sale, etc.).
c. Information procedure
To date, there is no legal requirement in France to inform each employee before the transfer, but there is a legal requirement to inform and consult the Works Council. However, in practice, employees commonly receive a brief letter advising of the change of employer, in an attempt to achieve a seamless transition and to build unity with the new entity. It is noteworthy that certain bargaining agreements may require informing transferred employees. Hence, except where this is a requirement under a collective bargaining agreement, there is no legal sanction if the transferred employees are not informed.
* The relevant EU Directive requires employers to notify the employees of the transfer prior to their transfer when there are no workers’ representatives. However, this has not been transposed into French law. Hence, no legal sanction exists if this is not done (Cass. Soc. 18 November 2009, n° 08‑43397 and 08-43398). In July 2013, the French Government discussed, but did not pass, a bill requiring that the employee be informed of his transfer.