Collective Bargaining Agreements and Business Transfers in France: How Employers Manage the ‘Mise en Cause’

A business transfer is a major economic event with direct consequences for the collective status of employees. Where the acquiring company applies a collective bargaining agreement different from that of the transferred entity, the collective status of the transferred employees is challenged (“mise en cause”). This mechanism, governed by Articles L.1224-1 and L.2261-14 of the French Labour Code, follows precise rules that every employer and every affected employee must understand. DAIRIA Avocats explains in detail the steps, timelines, and safeguards of this process.

The Legal Framework for Business Transfers

Article L.1224-1 of the French Labour Code: automatic transfer of employment contracts

Article L.1224-1 of the French Labour Code provides that “where a change occurs in the legal situation of the employer, in particular through succession, sale, merger, transformation of the business, or incorporation of the undertaking, all employment contracts in force on the date of the change continue between the new employer and the staff of the undertaking”.

This provision, transposing European Directive 2001/23/EC of 12 March 2001, guarantees the automatic continuation of individual employment contracts. All contractual elements are transferred: seniority, job classification, contractual remuneration, non-compete clauses, and so on. The employee retains all individual rights in full.

By contrast, the collective status (collective bargaining agreement, company-level agreements, established practices) does not benefit from the same automatic transfer regime. This is where the mise en cause (challenge) mechanism comes into play.

Article L.2261-14: the challenge to collective status

Article L.2261-14 of the French Labour Code provides that where the application of a collective agreement is challenged within a given undertaking, in particular as a result of a merger, sale, division, or change of activity, that agreement continues to produce effects for a set period.

The mise en cause differs from a denunciation (“dénonciation”, i.e. a formal termination of the agreement): it is automatic and results from the transfer alone, without either party having to express any particular intention. It is an effect that arises by operation of law from the change in the employer’s legal situation.

Conditions for the Mise en Cause

A transfer within the meaning of Article L.1224-1

The mise en cause first presupposes the existence of a business transfer falling within the scope of Article L.1224-1. Such a transfer may result from:

A merger-absorption between two companies;
A sale of a going concern (fonds de commerce) or of a business division;
A division (scission) of a company;
A transfer of an autonomous economic entity that retains its identity;
A change of principal activity resulting in attachment to a new collective bargaining scope.

The case law of the Cour de cassation (French Supreme Court) has clarified the notion of an autonomous economic entity: it is an organised group of persons and tangible or intangible assets enabling the pursuit of an economic activity with its own objective (Cass. soc., 7 July 1998, no. 96-21.451).

The application of different collective bargaining agreements

The mise en cause only occurs if the receiving company (or the company resulting from the operation) applies a different collective bargaining agreement from the one that governed the transferred employees. If both companies fall under the same agreement, the transfer has no impact on the collective status.

This condition requires a precise analysis of the occupational scope of application of the agreements concerned. Two agreements may bear different names yet have overlapping scopes, or, conversely, two companies in the same sector may fall under distinct agreements due to the structure of industry-level bargaining.

The Temporary Survival Regime of the Former Agreement

The survival period: 3-month notice + 12 months

Article L.2261-14 establishes a regime of temporary survival for the challenged agreement. In practical terms, the former agreement continues to produce its effects during:

A notice period of 3 months, which runs from the date the transfer is completed (and not from the date of signature of the sale protocol or merger deed);
A survival period of 12 months from the expiry of the notice period, for a maximum total of 15 months.

During this period, transferred employees benefit from the cumulative application of their former agreement and the new agreement of the receiving company. In practice, the principle of favour (“principe de faveur”) applies: for each benefit considered, the provision most favourable to the employee prevails.

It is important to note that this period is a maximum: if a substitution agreement is concluded before the 15-month period expires, it immediately replaces the provisions of the former agreement.

The scope of temporary survival

During the survival period, all the provisions of the former agreement continue to apply to the transferred employees: job classifications, salary scales, contractual bonuses, severance pay, notice periods, additional leave, provident (prévoyance) guarantees, and so on.

The Cour de cassation has nevertheless clarified that temporary survival does not extend to the institutional clauses of the agreement, i.e. those relating to employee representation, trade union rights, or the funding of joint bodies (paritarisme), which fall within the framework of the receiving company (Cass. soc., 16 March 1999, no. 96-45.514).

The Obligation to Negotiate a Substitution Agreement

Opening negotiations

As soon as the transfer is completed, the employer has an obligation to open negotiations with a view to concluding a substitution agreement (“accord de substitution”). This obligation results directly from Article L.2261-14, paragraph 3, of the French Labour Code. It applies regardless of the number of transferred employees.

Negotiations must be conducted with the representative trade union organisations in the receiving company. Where the company has no union delegates, the negotiation arrangements provided by the Labour Code for companies without union delegates apply (Articles L.2232-21 et seq.).

Case law penalises the failure to negotiate in good faith. An employer who simply waits for the survival period to expire without engaging in genuine negotiations breaches its legal obligation. Employees may then obtain damages for the harm resulting from this breach (Cass. soc., 13 March 2013, no. 11-22.285).

The content of the substitution agreement

The substitution agreement is intended to organise the transition of collective status for the transferred employees. It may:

Adapt certain provisions of the former agreement to the new collective framework;
Provide for transitional measures (temporary retention of certain benefits, gradual alignment of remuneration);
Define the reclassification arrangements for employees within the grid of the new agreement;
Organise the portability of provident and supplementary health insurance guarantees.

The substitution agreement is not required to reproduce all the benefits of the former agreement. It may provide for a less favourable regime on certain points, provided it complies with public-order provisions and the terms of the collective bargaining agreement of the receiving company.

The adaptation agreement: an anticipatory variant

Article L.2261-14 also refers to the possibility of concluding an adaptation agreement (“accord d’adaptation”). This may be negotiated and concluded even before the transfer takes place, as soon as the operation is contemplated. Such anticipation is particularly recommended in the context of planned mergers or sales of business divisions, as it secures the transition and limits uncertainty for employees.

The adaptation agreement may be concluded between the acquiring employer and the trade union organisations of the transferring company, or between the management of both companies and the representative trade union organisations.

The Situation at the End of the Survival Period

In the absence of a substitution agreement

If no substitution agreement has been concluded by the expiry of the 15-month period, the former agreement definitively ceases to apply. Transferred employees are then subject solely to the collective bargaining agreement of the receiving company.

However, the Law of 8 August 2016 (the “Loi Travail”) introduced an important remuneration guarantee. Article L.2261-14, paragraph 4, provides that the employees concerned benefit from a remuneration guarantee whose annual amount, for a working time equivalent to that provided in their employment contract, may not be lower than the remuneration paid over the last 12 months. This guarantee is ensured by the payment of a salary top-up where necessary.

The Cour de cassation has clarified the scope of this guarantee. The reference remuneration includes the base salary, recurring mandatory bonuses, and benefits in kind provided by the former agreement. By contrast, exceptional or discretionary bonuses are not included in the calculation (Cass. soc., 24 January 2024, no. 22-18.419).

Where a substitution agreement is concluded

Where a substitution agreement is concluded within the 15-month period, it immediately replaces the provisions of the former agreement. Transferred employees are then governed by the combination of the receiving company’s collective bargaining agreement and the substitution agreement, which may provide for specific transitional provisions.

The substitution agreement is an ordinary collective agreement, subject to the usual validity conditions (signature by trade union organisations representing at least 50% of votes, or 30% with no majority opposition). It may be concluded for a fixed or indefinite term.

Anticipation: A Strategic Imperative

Before any transfer operation, it is essential to carry out a comprehensive social audit of the collective status of the employees concerned. This audit must identify:

The collective agreements applicable within each entity;
The differences in treatment between the employees of the two companies;
The unilateral commitments and established practices in force;
The transition costs (remuneration maintenance, harmonisation of provident schemes, reclassification);
The potential litigation risks.

Planning the social timetable is crucial:

Before the transfer: information and consultation of the Social and Economic Committee (CSE) on the transfer project and its social consequences; where appropriate, opening anticipatory negotiations for an adaptation agreement;
At the time of the transfer: individual information to employees regarding the change of agreement; opening of substitution negotiations;
During the survival period: active and good-faith negotiations; regular information to employees and employee representatives;
At the end of the survival period: application of the receiving company’s agreement; payment of the remuneration top-up where necessary.

The role of the employment lawyer

Managing the challenge (mise en cause) of a collective bargaining agreement during a business transfer requires sharp legal expertise. DAIRIA Avocats supports companies at every stage: preliminary audit, drafting of protocols, negotiation of substitution agreements, securing the transition, and handling any litigation that may arise.

FAQ: Mise en Cause and Business Transfers

What is the challenge (mise en cause) of a collective bargaining agreement?

The mise en cause is the automatic lapse of a collective bargaining agreement resulting from an external event, such as a business transfer, merger, or change of activity. It differs from a denunciation, which is a voluntary act. The mise en cause opens a temporary survival period of up to 15 months.

Do transferred employees immediately lose their collective benefits?

No. The former agreement continues to apply for a maximum period of 15 months (3 months’ notice + 12 months’ survival). During this period, employees combine the benefits of the former and the new agreements, with the principle of favour applying on a benefit-by-benefit basis.

Is the employer required to negotiate a substitution agreement?

Yes. Article L.2261-14 of the French Labour Code requires the employer to open good-faith negotiations with a view to concluding a substitution agreement. Failure to negotiate may be penalised by the award of damages to employees.

What happens if no substitution agreement is reached?

At the expiry of the 15-month period, the former agreement ceases to apply. Employees become subject to the receiving company’s agreement but benefit from a remuneration guarantee: their annual remuneration may not be lower than that received over the 12 months preceding the mise en cause.

Can the substitution agreement provide for less favourable conditions than the former agreement?

Yes, subject to compliance with public-order provisions and the minimum standards of the receiving company’s collective bargaining agreement. The substitution agreement is an ordinary agreement that is not required to reproduce prior benefits. It may organise a gradual phasing-in.

Can the mise en cause be anticipated before the transfer takes place?

Yes. It is possible to negotiate an adaptation agreement before the actual transfer. Such anticipation is strongly recommended, as it secures the operation and reduces the period of uncertainty for employees. DAIRIA Avocats supports you in this social planning process.