Applicable Collective Bargaining Agreement in France: Determining the Right One for Multi-Activity Companies

Determining the applicable collective bargaining agreement (convention collective) is a central issue in French employment law. It governs the legal framework applicable to employees: pay scales, working time, notice periods, severance pay, supplementary welfare cover (prévoyance) and job classifications. Where a company carries out several activities, the question becomes considerably more complex. Article L.2261-2 of the French Labour Code sets out the principle of the main activity, but its practical application gives rise to abundant litigation. DAIRIA Avocats guides you through the applicable rules and case law.

The Principle: The Collective Bargaining Agreement of the Main Activity

Article L.2261-2 of the French Labour Code provides that “the applicable collective bargaining agreement is the one covering the main activity carried out by the employer.” This principle is of general application: whether the agreement is extended (étendue) or not, it is the company’s actual main activity that determines the applicable collective text.

The collective bargaining agreement then applies to all of the company’s employees, whatever their individual role. An accountant employed in a construction company is covered by the construction agreement, not by some hypothetical agreement for chartered accountants. It is the company’s activity that prevails, not that of the employee.

Criteria for Determining the Main Activity

The Turnover Criterion for Commercial Companies

For commercial companies, the main activity is determined by the highest turnover. This is the criterion consistently applied by the case law of the Cour de cassation (French Supreme Court). Thus, a company generating 60% of its turnover from the sale of building materials and 40% from installation work is covered by the agreement for the building materials trade (Cass. soc., 23 April 2003, no. 01-41.196).

This criterion is assessed over a period sufficiently significant to reflect the company’s actual activity. An isolated financial year cannot alter the applicable agreement if the main activity is usually different. The Cour de cassation has held that the actual and habitual activity of the company must be examined, rather than a one-off or exceptional situation (Cass. soc., 10 November 2009, no. 08-40.088).

The Headcount Criterion for Industrial Companies

For industrial companies, the criterion applied is that of the largest number of employees assigned to one or other of the activities. This criterion is justified by the fact that, in industry, turnover does not necessarily reflect the relative importance of the various activities in terms of working conditions.

The distinction between a commercial and an industrial company rests on the nature of the dominant activity. A company that transforms raw materials into finished products is industrial; a company that buys goods to resell them as they are is commercial. Where a company combines both characteristics, case law tends to apply the headcount criterion if the production activity is predominant (Cass. soc., 26 January 2005, no. 02-46.405).

The Secondary Nature of the APE/NAF Code

The APE code (Activité Principale Exercée – main activity carried out) assigned by INSEE (the French national statistics institute) when the company is registered constitutes a mere presumption and is only of indicative value. The Cour de cassation regularly reiterates that the APE code binds neither the parties nor the court, and that it is the activity actually carried out that determines the applicable agreement (Cass. soc., 10 March 2010, no. 08-44.950).

An employer whose APE code does not correspond to its actual main activity cannot rely on that code to apply a different agreement. Conversely, an employee may demonstrate that the employer’s actual activity falls within a collective bargaining scope other than the one suggested by the APE code.

Specific Situations

Separate Establishments Carrying Out Different Activities

Where a company has several separate establishments carrying out clearly differentiated activities, the question arises as to whether each establishment may be covered by a different collective bargaining agreement. Case law accepts this possibility provided that the establishments constitute genuine autonomous centres of activity, with their own activity distinct from that of the other establishments.

The Cour de cassation has held that a company operating both a hotel and a restaurant in separate premises, with separate management and staff, could apply the hotel industry agreement to one and the restaurant agreement to the other (Cass. soc., 18 May 2011, no. 09-72.543). By contrast, mere internal services do not constitute separate establishments within the meaning of the collective bargaining agreement.

The criteria used by case law to characterise a separate establishment are:

A separate geographical location (although this is not sufficient in itself);
A specific and autonomous activity, distinct from the head office’s main activity;
Own management, with relative independence in its direction;
Dedicated staff assigned to the establishment’s activity.

Business Transfer and Change of Agreement

In the event of a business transfer within the meaning of Article L.1224-1 of the French Labour Code (merger, sale, spin-off), the main activity of the absorbing entity may differ from that of the transferred entity. This situation triggers a mise en cause (challenge/lapse) of the collective bargaining agreement previously applicable to the transferred employees, in accordance with Article L.2261-14 of the French Labour Code.

The transferred employees then benefit from provisional survival of their former agreement for a maximum period of 15 months (3 months’ notice + 12 months), unless a substitution agreement is concluded within a shorter period. At the end of that period, the receiving company’s agreement applies, subject to the maintenance of the remuneration received over the last 12 months.

Voluntary Change of Activity

Where a company gradually changes its activity to the point that its main activity changes, the applicable collective bargaining agreement evolves accordingly. This change is not conditional on a change of APE code: it is the reality of the activity that prevails.

A change of collective bargaining agreement resulting from a change of main activity constitutes a mise en cause within the meaning of Article L.2261-14 of the French Labour Code. Employees then benefit from the protective regime of provisional survival of the former agreement, and the employer must open negotiations with a view to concluding an adaptation or substitution agreement.

The Cour de cassation reviews the genuine nature of the change of activity. A purely artificial change, motivated solely by the desire to reduce contractual benefits, would constitute fraud (Cass. soc., 19 November 2014, no. 13-21.609).

Consequences of Applying the Wrong Collective Bargaining Agreement

For the Employer

Applying the wrong collective bargaining agreement exposes the employer to multiple risks:

Back pay claims: if the agreement actually applicable provides for higher minimum wages, employees may claim the difference over the last three years (the three-year limitation period under Article L.3245-1 of the French Labour Code);
URSSAF reassessment: applying the wrong agreement may lead to errors in social security contributions, particularly regarding supplementary welfare and health insurance cover;
Labour court litigation: employees may bring the matter before the conseil de prud’hommes (labour tribunal) to obtain the application of the correct agreement and payment of the corresponding benefits;
Nullity of contractual clauses: clauses in the employment contract referring to an inapplicable agreement cannot be enforced against the employee.

For Employees

Applying the wrong collective bargaining agreement may be favourable or unfavourable to the employee. If the employer has mistakenly applied a more favourable agreement, the question arises as to whether it can withdraw that benefit. Case law distinguishes according to whether the application results from a custom (usage), a unilateral commitment or a mere error. In the case of a custom, the employer must follow the denunciation procedure (informing the employee representatives, individually informing the employees, and observing a notice period).

Practical Method for Determination

Step 1: Identify the Company’s Actual Activity

The activities actually carried out by the company must be analysed in concrete terms, based on objective factors: the corporate purpose in the articles of association, the description of the activity in the commercial register, commercial contracts, invoices, the nature of the services or products, etc. The APE code is only one indicator among others.

Step 2: Quantify the Activities in the Event of Plurality

Where the company carries out several activities, it is necessary to determine which is the main one by applying the correct criterion: turnover for commercial activities, headcount for industrial activities. The analysis must cover a representative period (generally the last two or three financial years).

Step 3: Check the Scope of the Agreement

Once the main activity has been identified, it is necessary to verify that the agreement under consideration does indeed cover that activity within its occupational and territorial scope. The scope is defined in the opening clauses of each collective bargaining agreement. Certain activities may fall into a “collective bargaining gap” if no agreement specifically covers the sector.

Step 4: Consult an Expert in Case of Doubt

Where doubt persists, it is strongly recommended to seek the expertise of a lawyer specialising in employment law. DAIRIA Avocats has in-depth expertise in determining applicable collective bargaining agreements and can carry out a full audit of your company’s collective bargaining situation.

Recent Case Law and Developments

The case law of the Cour de cassation continues to refine the criteria for determining the main activity. Among the recent significant decisions:

The Court reiterates that the main activity is assessed at the level of the company as a whole, and not at the level of a department or a category of staff;
Cass. soc., 8 March 2023, no. 21-19.475: confirmation that the APE code constitutes only a simple presumption, which may be rebutted by evidence of the activity actually carried out;
Cass. soc., 15 November 2023, no. 22-14.832: in the case of inseparable multiple activities, the court must determine which activity best characterises the company’s purpose.

FAQ: Collective Bargaining Agreements and Multiple Activities

My company has two activities of comparable size. How do I decide?

You must apply the relevant criterion according to the nature of the company: turnover for commercial companies, headcount for industrial companies. If the two activities are perfectly equal, case law tends to favour the activity that best characterises the company’s main purpose, by analysing its history, positioning and prospects.

My APE code does not correspond to my actual activity. Do I have to change agreements?

Yes. The APE code is only of indicative value and does not determine the applicable agreement. The actual main activity prevails. If you identify a discrepancy, you must apply the agreement corresponding to your actual activity, and request an amendment of your APE code from INSEE.

Can a company voluntarily apply a different collective bargaining agreement?

An employer may decide to voluntarily apply an agreement more favourable than the one normally applicable to it. However, this voluntary application does not exempt it from complying with the mandatory provisions of the agreement actually applicable. It also creates a commitment that it will only be able to terminate in accordance with the rules for denouncing customs.

What happens on a merger if the two companies have different agreements?

The agreement of the absorbed company is challenged (mise en cause). The transferred employees retain the benefit of their former agreement for a maximum of 15 months (3 months’ notice + 12 months’ survival). During this period, the employer must negotiate a substitution agreement. Failing this, the absorbing company’s agreement applies, with a guarantee of maintenance of the annual remuneration received over the last 12 months.

Can each establishment of my company have its own agreement?

Yes, provided that each establishment carries out an autonomous and distinct activity. Case law requires the establishment to constitute a genuine independent centre of activity, with its own management, staff and activity. Mere internal departments are not sufficient.

Can an employee challenge the agreement applied by their employer?

Yes. The employee may bring the matter before the conseil de prud’hommes to have it established that the agreement actually applicable is different from the one applied by the employer. They may obtain back pay and collective benefits over three years, in addition to damages for the harm suffered.