Collective Bargaining Agreements in Business Transfers: Employer’s Guide to the French “Mise en Cause”

A business transfer is a major economic event that has direct consequences on the collective status of employees. When the acquiring company applies a collective bargaining agreement different from that of the transferred entity, the collective bargaining 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, is subject to specific rules that every employer and affected employee must understand. DAIRIA Avocats explains in detail the steps, time limits, and safeguards of this process.

The Legal Framework of Business Transfers

Article L.1224-1 of the French Labour Code: the automatic transfer of 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 day of the change subsist between the new employer and the staff of the undertaking”.

This provision, which transposes European Directive 2001/23/EC of 12 March 2001, guarantees the automatic maintenance of individual employment contracts. All elements of the contract are transferred: length of service, job classification, contractual remuneration, non-compete clause, etc. The employee retains all of their individual rights.

By contrast, collective status (collective bargaining agreement, company-level agreements, custom and practice) 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 of collective bargaining 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, transfer, spin-off, or change of activity, that agreement continues to produce effects for a specified period.

The mise en cause (challenge) is distinct from a dénonciation (termination of an agreement by notice): it is automatic and results from the mere fact of the transfer, without any party having to express a particular intention. It is an effect that arises as a matter of law from the change in the employer’s legal situation.

The Conditions for a 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 by absorption between two companies;
A sale of a business (fonds de commerce) or a branch of activity;
A spin-off (scission) of an undertaking;
A transfer of an autonomous economic entity retaining its identity;
A change of principal activity leading to attachment to a new collective bargaining scope.

Case law of the Cour de cassation (French Supreme Court) has clarified the notion of an autonomous economic entity: it means an organised grouping 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 occurs only if the host company (or the company resulting from the transaction) 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 collective bargaining status.

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

The Regime of Temporary Survival of the Former Agreement

The survival period: 3-month notice + 12 months

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

A notice period of 3 months, running from the date the transfer is completed (and not from the date of signing the sale protocol or merger deed);
A survival period of 12 months from the expiry of the notice period, i.e. a maximum total of 15 months.

During this period, the transferred employees benefit from the cumulative application of their former agreement and the new agreement of the host company. In practice, the principle of favourability (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 expiry of the 15 months, it immediately replaces the provisions of the former agreement.

The content of the temporary survival

During the survival period, all the stipulations of the former agreement continue to apply to the transferred employees: classifications, salary scales, contractual bonuses, severance pay, notice periods, additional leave, welfare/death-and-disability (prévoyance) cover, etc.

The Cour de cassation has nevertheless specified 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 labour-management bodies (paritarisme), which fall within the framework of the host company.

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 within the host company. If the host company has no union delegates, the negotiation arrangements provided by the French Labour Code for companies without a union delegate apply (Articles L.2232-21 et seq.).

Case law penalises the failure to negotiate in good faith. An employer who merely waits for the survival period to expire without engaging in genuine negotiations breaches its legal obligation. Employees may then obtain damages for the loss 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 collective bargaining transition for the transferred employees. It may:

Adapt certain provisions of the former agreement to the new collective bargaining framework;
Provide for transitional measures (temporary maintenance of certain benefits, gradual phasing of remuneration);
Define the arrangements for reclassifying employees within the new agreement’s grid;
Organise the portability of welfare/death-and-disability and supplementary health insurance cover.

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 mandatory public-policy provisions (ordre public) and the stipulations of the host company’s collective bargaining agreement.

The adaptation agreement: an anticipated 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 is completed, as soon as the transaction is contemplated. Such anticipation is particularly recommended in the context of planned mergers or transfers of branches of activity, as it enables the transition to be secured and reduces 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 Expiry 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 ceases definitively to apply. The transferred employees are then subject solely to the host company’s collective bargaining agreement.

However, the Act 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, where necessary, by the payment of a salary supplement.

The Cour de cassation has clarified the scope of this guarantee. The reference remuneration includes 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., 12 December 1995, no. 92-41.349).

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. The transferred employees are then governed by the combination of the host 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 the votes, or 30% without majority opposition). It may be concluded for a fixed or indefinite term.

Anticipation: A Strategic Imperative

Before any transfer transaction, it is essential to conduct a comprehensive social audit of the collective status of the employees concerned. This audit should identify:

The collective agreements applicable within each entity;
The differences in treatment between the employees of the two companies;
Unilateral commitments and custom and practice in force;
The transition costs (maintenance of remuneration, harmonisation of welfare/death-and-disability schemes, reclassification);
Potential litigation risks.

Planning the social timeline is crucial:

Before the transfer: information and consultation of the CSE (Social and Economic Committee) on the transfer project and its social consequences; where appropriate, opening early negotiations for an adaptation agreement;
At the time of the transfer: individual information of employees about the change of agreement; opening substitution negotiations;
During the survival period: active and good-faith negotiations; regular information of employees and staff representatives;
At the end of the survival period: application of the host agreement; payment of the remuneration supplement where necessary.

The role of the employment lawyer

Managing the 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 managing any litigation.

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 extinction of a collective bargaining agreement resulting from an external event, such as a business transfer, merger, or change of activity. It is distinct from a dénonciation (termination by notice), 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 bargaining 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 cumulate the benefits of the former and the new agreement, with the principle of favourability applying benefit by benefit.

Is the employer obliged 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. A failure to negotiate may be penalised by an award of damages to the employees.

What happens if no substitution agreement is reached?

At the expiry of the 15-month period, the former agreement ceases to apply. Employees are then subject to the host 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, within the limits of compliance with mandatory public-policy provisions (ordre public) and the minimums of the host 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 is completed?

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