Collective Bargaining Agreements in French Business Transfers: Managing 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 called into question (mise en cause — automatic lapse of the applicable agreement). 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, deadlines and safeguards of this process.

The Legal Framework of 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 employer’s legal situation, 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 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 elements of the contract are transferred: seniority, job classification, contractual remuneration, non-compete clause, and so on. The employee retains all of his or her individual rights.

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

Article L.2261-14: the calling into question of collective status

Article L.2261-14 of the French Labour Code provides that where the application of a collective agreement is called into question in a given undertaking, in particular as a result of a merger, transfer, demerger or change of activity, that agreement continues to have effect for a specified period.

The mise en cause differs from denunciation (dénonciation — voluntary termination of an agreement): it is automatic and results from the transfer alone, without any party having to express a specific intention. It is an effect that operates by 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 requires 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 of a line of activity;
A demerger of an undertaking;
A transfer of an autonomous economic entity retaining 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 agreements

The mise en cause only occurs 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 status.

This condition requires a precise analysis of the occupational scope 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 owing to the structure of branch-level bargaining.

The Temporary Survival Regime of the Former Agreement

The survival period: 3-month notice + 12 months

Article L.2261-14 organises a regime of temporary survival of the agreement called into question. In practical terms, the former agreement continues to have effect for:

A 3-month notice period, running from the date the transfer is completed (and not from the date of signature of the transfer protocol or merger deed);
A 12-month survival period running from the expiry of the notice period, giving a maximum total of 15 months.

During this period, transferred employees benefit from the cumulative application of their former agreement and the host company’s new agreement. In practice, the principe de faveur (most-favourable-provision principle) 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 months expire, it immediately replaces the provisions of the former agreement.

The scope of the 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, welfare (prévoyance) guarantees, and so on.

The Cour de cassation has nonetheless held that the 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, which fall within the framework of the host 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 employees transferred.

Negotiations must be conducted with the representative trade unions in the host company. If the host 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 merely 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 failure (Cass. soc., 13 March 2013, no. 11-22.285).

The content of the substitution agreement

The substitution agreement is intended to organise the collective transition for 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 salary alignment);
Define the reclassification arrangements for employees within the new agreement’s scale;
Organise the portability of welfare 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-policy provisions and the terms of the host company’s collective bargaining agreement.

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 is completed, as soon as the transaction is contemplated. Such anticipation is particularly recommended in the context of planned mergers or transfers of lines of activity, as it secures the transition and limits uncertainty for employees.

The adaptation agreement may be concluded between the acquiring employer and the transferring company’s trade unions, or between the management of the two companies and the representative trade unions.

The Situation at the End of the Survival Period

Where no substitution agreement is concluded

If no substitution agreement has been concluded upon expiry of the 15-month period, the former agreement definitively ceases to apply. The transferred employees are then subject solely to the host company’s collective bargaining agreement.

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 whereby the annual amount, for 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 through 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. 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 arrangements.

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

Anticipation: A Strategic Imperative

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

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

Planning the social timetable 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 of early negotiations for an adaptation agreement;
At the time of the transfer: individual notification of employees regarding the change of agreement; opening of substitution negotiations;
During the survival period: active and good-faith negotiations; regular communication with employees and employee representatives;
At the end of the survival period: application of the host agreement; payment of the remuneration top-up where necessary.

The role of the employment lawyer

Managing the mise en cause of a collective agreement during a business transfer requires precise 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 calling into question (mise en cause) of a collective agreement?

The mise en cause is the automatic lapse of a collective agreement resulting from an external event, such as a business transfer, merger or change of activity. It differs from 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 of 15 months (3 months’ notice + 12 months’ survival). During this period, employees combine the benefits of the former and the new agreement, with the most-favourable-provision principle applying benefit by benefit.

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 an award of damages to the employees.

What happens if no substitution agreement is reached?

Upon 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, provided it complies with public-policy provisions and the minima of the host company’s collective bargaining agreement. The substitution agreement is an ordinary collective agreement that is not required to reproduce prior benefits. It may organise a gradual phasing-out.

Can the mise en cause be anticipated before the transfer is completed?

Yes. It is possible to negotiate an adaptation agreement before the transfer takes effect. This anticipation is strongly recommended as it secures the transaction and reduces the period of uncertainty for employees. DAIRIA Avocats can assist you with this social-planning process.