Applicable Collective Bargaining Agreement in France When a Company Has Multiple Activities

Determining the applicable collective bargaining agreement (convention collective — the sector-wide agreement governing employment terms) is a central issue in French labour law. It sets the legal framework applicable to employees: salary scales, working time, notice periods, severance pay, provident/insurance schemes 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 lays down 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 Agreement of the Main Activity

Article L.2261-2 of the French Labour Code provides that “the applicable collective agreement is the one governing the main activity carried out by the employer”. This principle is of general application: whether or not the agreement has been extended (i.e. made binding by ministerial order), it is the company’s actual main activity that determines the applicable collective text.

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

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 falls under the collective agreement for the trade in construction materials (Cass. soc., 23 April 2003, no. 01-41.196).

This criterion is assessed over a period long enough to reflect the company’s actual activity. An isolated financial year cannot change the applicable agreement if the main activity is usually different. The Cour de cassation has held that one must examine the company’s actual and habitual activity, and not 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 applicable criterion is the largest number of employees assigned to one or the other activity. 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 Role 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 is merely a presumption and has only indicative value. The Cour de cassation regularly recalls that the APE code binds neither the parties nor the judge, 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 scope different from that suggested by the APE code.

Specific Situations

Distinct Establishments Carrying Out Different Activities

Where a company has several distinct establishments carrying out clearly differentiated activities, the question arises whether each establishment may fall under a different collective agreement. Case law accepts this possibility, provided that the establishments constitute genuine autonomous activity centres, 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 on separate premises, with separate management and staff, could apply the hotel 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 distinct establishments within the meaning of the collective agreement.

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

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

Transfer of Undertaking and Change of Agreement

In the event of a transfer of undertaking within the meaning of Article L.1224-1 of the French Labour Code (merger, sale, spin-off), the main activity of the acquiring entity may differ from that of the transferred entity. This situation triggers a mise en cause (lapsing/calling into question) of the collective 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 a temporary survival of their former agreement for a maximum period of 15 months (3-month notice period + 12 months), unless a substitution agreement is concluded within a shorter period. At the end of this period, the host 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 agreement changes accordingly. This change is not conditional on a modification of the APE code: it is the reality of the activity that prevails.

A change of collective 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 the temporary 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 whether the change of activity is genuine. A purely artificial change, motivated solely by the desire to reduce collectively-bargained benefits, would constitute fraud (Cass. soc., 19 November 2014, no. 13-21.609).

Consequences of Applying the Wrong Collective Agreement

For the Employer

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

Back pay claims: if the agreement actually applicable provides for higher minimum wages, employees may claim the differences for the last three years (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 provident schemes and supplementary health cover;
Labour court litigation: employees may bring proceedings before the conseil de prud’hommes (labour court) to obtain application of the correct agreement and payment of the corresponding benefits;
Nullity of contractual clauses: clauses of the employment contract referring to an inapplicable agreement are unenforceable against the employee.

For Employees

The wrong choice of collective agreement may be favourable or unfavourable to the employee. Where the employer has mistakenly applied a more favourable agreement, the question arises whether it may 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).

The Practical Method for Determination

Step 1: Identify the Company’s Actual Activity

The activities carried out by the company must be analysed concretely, 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: Verify the Scope of the Agreement

Once the main activity has been identified, it must be verified that the intended agreement does indeed cover this activity within its professional and territorial scope. The scope is defined in the opening clauses of each collective agreement. Some activities may fall into a “collective vacuum” 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 specialised in employment law. DAIRIA Avocats has in-depth expertise in determining applicable collective 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 significant recent decisions:

The Court recalls 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 is only a rebuttable presumption, which may be overturned by proof of the activity actually carried out;
Cass. soc., 15 November 2023, no. 22-14.832: where there is a plurality of inseparable activities, the judge must determine which activity best characterises the company’s purpose.

FAQ: Collective Agreements and Multiple Activities

My company has two activities of comparable size. How is the matter decided?

The relevant criterion must be applied 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 match my actual activity. Must I change my agreement?

Yes. The APE code has only indicative value and does not determine the applicable agreement. It is the actual main activity that prevails. If you find a discrepancy, you must apply the agreement corresponding to your effective activity, and request the modification of your APE code from INSEE.

Can a different collective agreement be applied voluntarily?

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

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

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

Can each of my company’s establishments 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 activity centre, 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 proceedings before the conseil de prud’hommes to have it established that the agreement actually applicable differs from the one applied by the employer. They may obtain back pay and collectively-bargained benefits over three years, in addition to damages for the loss suffered.