What happens to the employment contract of the employee who has been partially assigned to the transferred business?

Transfer of company and transfer of employment contract

Article L. 1224-1 of the French Labour Code provides that:
 
 "if a change in the legal circumstances of an employer occurs, as a result, inter alia, of succession, a sale, merger, transformation of the business or its incorporation, all of the employment contracts in force at the date of the change will continue to be valid between the new employer and the personnel."
 

The French courts have given the scope of this article a much wider interpretation, ruling that it applies where there is a "transfer of an economic entity, retaining its identity, whose business is pursued or taken over".

On the assumption of partial transfer of employment contract

A difficulty arises when an employee, assigned to two activities, sees his/her contract partly transferred, pursuant to partial transfer of the company.

Up until now, case law has considered that in this circumstance, the change of employer is deemed to have occurred pro rata to the work carried out in the part of the company that was transferred. The employment contract was thus split between the various employers at the end of the operation in question.

In practice, this gave rise to difficulties in the implementation of a split employment contract, with for example, an employee finding himself/herself employed on a part time basis by two companies with sometimes geographical distance creating problems for the carrying out of his/her duties as well as an adjustment in his/her working hours and the division of his/her work time, which could prove to be sensitive issues between former and new employers.

It is notably in this context that the Cour de Cassation (Supreme Court) rendered its decrees on 30 March 2010.

Provision of decrees dated 30 March 2010

In the first instance, the Cour de Cassation (Supreme Court) sought to alleviate division of the contract by referring to the essential business criteria in order to exclude partial maintaining of the employment contract.

Indeed the Court estimated that in so far as the employment contract essentially complied with the transferred business sector, it was the entirety of the contract that had been transferred to the new purchaser (n° 08.42-065).

Next, the Court considered that from the moment that a transfer of employment contract is accompanied by a modification other than that of change in employer, - which is the case for the partial transfer of the contract, - the employee has the right to oppose this new situation.

In this event, the new employer, who is unable to maintain former working conditions, should, in accordance with the terms of the Court’s decree, either make a new proposition to the employee, or bear the consequences of the employee refusing by engaging a dismissal procedure. Failure to do so would result in the employee being able to demand legal termination of his/her employment contact with his/her employer being liable for damages (n° 08.44-227).

Acknowledgment of severance, with the fault lying entirely with the new employer, could also be envisaged in this context.

 By: Hélène Raffin-Peyloz, http://reaction.taylorwessing.com/reaction/Newsletters/IntlEmployment/2010_May_03.html