Determining the Applicable Collective Agreement in Cases of Multiple Activities

Determining the applicable collective agreement is a central issue in labor law. It conditions the legal framework applicable to employees: salary scales, working hours, notice periods, severance pay, welfare, and classifications. When a company operates multiple activities, the question becomes considerably more complex. Article L.2261-2 of the French Labor Code establishes the principle of the primary activity, but its concrete application leads to abundant litigation. DAIRIA Lawyers guides you through the rules and case law in this area.

The Principle: The Collective Agreement of the Primary Activity

Article L.2261-2 of the Labor Code states that “the applicable collective agreement is the one that corresponds to the primary activity of the employer”. This principle applies generally: whether it is an extended agreement or not, it is the real primary activity of the company that determines the applicable collective agreement.

The collective agreement then applies to all employees of the company, regardless of their individual roles. An accountant employed at a construction company falls under the construction convention, rather than a hypothetical convention for accountants. It is the company’s activity that takes precedence, not that of the employee.

Criteria for Determining the Primary Activity

Revenue Criterion for Commercial Enterprises

For commercial enterprises, the primary activity is determined by the highest revenue. This criterion has been consistently upheld by the case law of the Court of Cassation. Thus, a company that derives 60% of its revenue from trading materials and 40% from installation falls under the construction materials trading convention (Cass. soc., April 23, 2003, n° 01-41.196).

This criterion is assessed over a sufficiently significant period to reflect the actual activity of the company. An isolated financial year cannot alter the applicable agreement if the primary activity is usually different. The Court of Cassation has ruled that the actual and habitual activity of the company should be examined, and not a situational or exceptional case (Cass. soc., November 10, 2009, n° 08-40.088).

Employee Count Criterion for Industrial Enterprises

For industrial enterprises, the criterion used is the largest number of employees assigned to one of the activities. This criterion is justified by the fact that, in industry, revenue does not necessarily reflect the relative importance of different activities in terms of working conditions.

The distinction between commercial and industrial enterprises depends on the nature of the dominant activity. A company that transforms raw materials into finished products is industrial; a company that buys for resale in the same state is commercial. When a company has both characteristics, case law tends to apply the employee count criterion if production activity is predominant (Cass. soc., January 26, 2005, n° 02-46.405).

Secondary Nature of the APE/NAF Code

The APE code (Activité Principale Exercée) assigned by INSEE upon the company’s registration is merely a presumption and holds only indicative value. The Court of Cassation regularly reminds that the APE code does not bind either party or the judge, and it is the actual activity carried out that determines the applicable agreement (Cass. soc., March 10, 2010, n° 08-44.950).

An employer whose APE code does not correspond to their actual primary activity cannot rely on this code to apply a different convention. Conversely, an employee can demonstrate that the employer’s actual activity falls within a different conventional scope than that suggested by the APE code.

Specific Situations

Distinct Establishments Conducting Different Activities

When a company has multiple distinct establishments conducting clearly differentiated activities, the question arises as to whether each establishment can fall under a different collective agreement. Case law accepts this possibility, provided that the establishments constitute genuine autonomous activity centers, with their own activity distinct from those of other establishments.

The Court of Cassation has ruled that a company operating both a hotel and a restaurant in separate premises, with distinct management and personnel, could apply the hotel convention to one and the restaurant convention to the other (Cass. soc., May 18, 2011, n° 09-72.543). However, mere internal services do not constitute distinct establishments under the collective agreement.

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

A separate geographical location (although this is not sufficient in itself);
A specific and autonomous activity, distinct from the principal activity of the headquarters;
Independent management, with relative autonomy in direction;
A dedicated workforce for the establishment’s activity.

Business Transfer and Change of Agreement

In the case of a business transfer as defined by Article L.1224-1 of the Labor Code (merger, sale, division), the primary activity of the absorbing entity may differ from that of the transferred entity. This situation leads to a challenge of the previously applicable collective agreement to the transferred employees, in accordance with Article L.2261-14 of the Labor Code.

Transferred employees temporarily benefit from the previous agreement’s regime for a maximum of 15 months (3 months notice + 12 months), unless a substitution agreement is concluded within a shorter time period. After this period, the absorbing company’s collective agreement applies, subject to the maintenance of remuneration received during the last 12 months.

Voluntary Change of Activity

When a company progressively modifies its activity such that its primary activity changes, the applicable collective agreement evolves accordingly. This change is not conditional upon a modification of the APE code: it is the reality of the activity that takes precedence.

The change in the collective agreement resulting from a change in primary activity constitutes a challenge under Article L.2261-14 of the Labor Code. Employees then benefit from the protective regime of the temporary survival of the former agreement, and the employer must initiate negotiations for the conclusion of an adaptation or substitution agreement.

The Court of Cassation scrutinizes the reality of the activity change. A purely artificial change, motivated solely by the desire to reduce conventional benefits, would be considered fraudulent (Cass. soc., November 19, 2014, n° 13-21.609).

Consequences of Incorrect Application of the Collective Agreement

For the Employer

The application of an incorrect collective agreement exposes the employer to multiple risks:

Salary back payments: if the applicable convention prescribes higher minimum wages, employees can claim the differences over the last three years (three-year limitation under Article L.3245-1 of the Labor Code);
URSSAF corrections: applying an incorrect convention can lead to errors in social contributions, particularly concerning welfare and supplementary health insurance;
Labor court disputes: employees may bring their case before the labor court to obtain the correct application of the collective agreement and the corresponding benefits;
Nullity of contractual clauses: contract clauses referring to an inapplicable convention are unenforceable against the employee.

For the Employees

An error in the collective agreement can be either favorable or unfavorable to the employee. If the employer has mistakenly applied a more favorable agreement, the question arises as to whether they can retract this advantage. Case law distinguishes between whether the application results from usage, a unilateral commitment, or a mere error. In the case of usage, the employer must follow the denunciation procedure (information of employee representatives, individual employee notification, and respect for a notice period).

Practical Method for Determination

Step 1: Identify the Company’s Real Activity

It is necessary to concretely analyze the activities performed by the company, based on objective elements: statutory corporate purpose, activity description in the trade register, commercial contracts, invoices, nature of services or products, etc. The APE code is only one indicator among others.

Step 2: Quantify Activities in Cases of Multiplicity

When the company carries out multiple activities, it is necessary to determine which is primary by applying the correct criterion: revenue for commercial activities, employee count for industrial activities. The analysis should focus on a representative period (generally the last two or three financial years).

Step 3: Verify the Scope of the Agreement

Once the primary activity is identified, it is essential to verify that the considered convention indeed covers this activity in its professional and territorial scope. The scope is defined in the initial clauses of each collective agreement. Some activities may fall into a “conventional void” if no convention specifically covers the sector.

Step 4: Consult an Expert in Case of Doubt

In the case of ongoing doubt, it is strongly recommended to seek the expertise of a lawyer specialized in labor law. DAIRIA Lawyers has extensive expertise in determining applicable collective agreements and can conduct a comprehensive audit of your company’s conventional situation.

Recent Case Law and Developments

The case law of the Court of Cassation continues to refine the criteria for determining the primary activity. Among the significant recent decisions:

Cass. soc., April 5, 2023, n° 21-24.671: the Court reiterates that the primary activity is assessed at the level of the entire company, not at the level of a department or labor category;
Cass. soc., March 8, 2023, n° 21-19.475: confirmation that the APE code is merely a simple presumption, subject to being overturned by proof of the activity actually performed;
Cass. soc., November 15, 2023, n° 22-14.832: in cases of inseparable multiple activities, the judge must determine which activity best characterizes the company’s object.

FAQ: Collective Agreement and Multiple Activities

My company has two activities of comparable size. How can I determine which one applies?

You must apply the relevant criterion based on the nature of the company: revenue for commercial enterprises, employee count for industrial enterprises. If both activities are perfectly equal, case law tends to favor the activity that best characterizes the company’s primary purpose by analyzing its history, positioning, and prospects.

My APE code does not correspond to my actual activity. Should I change my agreement?

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

Can a different collective agreement be voluntarily applied?

An employer can decide to voluntarily apply a more favorable agreement than the one they normally fall under. However, this voluntary application does not exempt them from complying with the mandatory provisions of the convention that actually applies. It also creates a commitment that can only be retracted according to the denunciation rules for usages.

What happens during a merger if both companies have different agreements?

The collective agreement of the absorbed company is challenged. Transferred employees retain the benefit of their previous agreement for a maximum of 15 months (3 months notice + 12 months survival). During this period, the employer must negotiate a substitution agreement. Failing which, the agreement of the absorbing company applies, with a guarantee of maintaining annual remuneration received in the last 12 months.

Can each establishment in my company have its own agreement?

Yes, provided that each establishment conducts an autonomous and distinct activity. Case law requires that the establishment constitutes a true independent activity center, with its own management, personnel, and activity. Merely internal departments are not sufficient.

Can an employee contest the agreement applied by their employer?

Yes. An employee can bring their case before the labor court to assert that the applicable convention is different from the one applied by the employer. They can claim salary back payments and conventional advantages over three years, in addition to damages for the suffered prejudice.