Determining the Applicable Collective Bargaining Agreement for Companies with Multiple Activities in France

Determining the applicable collective bargaining agreement (convention collective) is a central issue in French labour law. It governs the legal regime applicable to employees: salary scales, working time, notice periods, severance pay, contingency/welfare cover (prévoyance), and job classifications. When a company carries out several activities, the question becomes considerably more complex. Article L.2261-2 of the French Labour Code sets out the principle of the main activity, but its practical application generates abundant litigation. DAIRIA Avocats guides you through the applicable rules and case law.

The principle: the collective bargaining agreement of the main activity

Article L.2261-2 of the French Labour Code provides that “the applicable collective bargaining agreement is the one covering the main activity carried out by the employer.” This principle is of general application: whether the agreement is extended (étendue) or not, it is the company’s actual main activity that determines the applicable collective text.

The collective bargaining agreement then applies to all employees of the company, regardless of their individual role. An accountant employed by a construction company falls under the construction agreement, not under some 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 companies of a commercial nature, the main activity is determined by the highest turnover. This is the criterion consistently applied by the case law of the French Supreme Court (Cour de cassation). Thus, a company generating 60% of its turnover from the trade in materials and 40% from installation falls under the agreement for the trade in construction materials (Cass. soc., 23 April 2003, no. 01-41.196).

This criterion is assessed over a period sufficiently significant to reflect the company’s actual activity. An isolated financial year cannot alter the applicable agreement if the main activity is habitually different. The Cour de cassation has held that the actual and habitual activity of the company must be examined, rather than a one-off or exceptional situation (Cass. soc., 10 November 2009, no. 08-40.088).

The headcount criterion for industrial companies

For companies of an industrial nature, the criterion applied is the largest number of employees assigned to one or another of the activities. 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 company 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-is 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 constitutes a mere presumption and has only indicative value. The Cour de cassation regularly reiterates that the APE code binds neither the parties nor the court, 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 match 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 different agreement’s scope than the one suggested by the APE code.

Specific situations

Separate establishments carrying out different activities

Where a company has several separate establishments carrying out clearly differentiated activities, the question arises whether each establishment may fall under a different collective bargaining agreement. Case law allows this possibility provided the establishments constitute genuine autonomous centres of activity, with their own distinct activity separate 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 hospitality agreement to one and the catering agreement to the other (Cass. soc., 18 May 2011, no. 09-72.543). By contrast, mere internal services do not constitute separate establishments for the purposes of the collective bargaining agreement.

The criteria applied by case law to characterise a separate establishment are:

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

Business transfers and change of agreement

In the event of a business transfer 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 (automatic challenge/lapse) of the collective bargaining 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 provisional survival regime for their former agreement for a maximum period of 15 months (3 months’ notice + 12 months), unless a substitution agreement (accord de substitution) is concluded within a shorter period. At the end of this period, the host company’s agreement applies, subject to maintenance of the remuneration received during the previous 12 months.

Voluntary change of activity

Where a company gradually changes its activity to the point that its main activity changes, the applicable collective bargaining 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 bargaining 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 provisional 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 intention to reduce collectively agreed benefits, would constitute fraud (Cass. soc., 19 November 2014, no. 13-21.609).

Consequences of applying the wrong collective bargaining agreement

For the employer

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

Salary back-payments: if the agreement actually applicable provides for higher minimum wages, employees may claim the difference over 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, notably regarding contingency/welfare cover and supplementary health insurance;
Labour court litigation: employees may refer the matter to the labour tribunal (conseil de prud’hommes) to obtain application of the correct agreement and payment of the corresponding benefits;
Nullity of contractual clauses: employment contract clauses referring to an inapplicable agreement cannot be enforced against the employee.

For employees

An error in the collective bargaining agreement may be favourable or unfavourable to the employee. If the employer has mistakenly applied a more favourable agreement, the question arises whether it can withdraw this benefit. Case law distinguishes according to whether the application results from a custom (usage), a unilateral undertaking (engagement unilatéral), or a mere error. In the case of a custom, the employer must follow the denunciation procedure (informing employee representatives, individual notice to employees, and observance of a notice period).

Practical method for determining the applicable agreement

Step 1: Identify the company’s actual activity

The activities actually carried out by the company must be analysed concretely, based on objective factors: the statutory corporate purpose, the description of the activity in the trade 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 is necessary to verify that the agreement under consideration does indeed cover this activity within its professional and territorial scope. The scope of application is defined in the opening clauses of each collective bargaining agreement. Certain activities may fall within a “collective bargaining gap” (vide conventionnel) if no agreement specifically covers the sector.

Step 4: Consult an expert in case of doubt

In case of persistent doubt, 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 bargaining 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 reiterates that the main activity is assessed at the level of the company as a whole, and not at the level of a department or category of staff;
Cass. soc., 8 March 2023, no. 21-19.475: confirmation that the APE code constitutes only a rebuttable presumption, which may be reversed by proof of the activity actually carried out;
Cass. soc., 15 November 2023, no. 22-14.832: in the event of a plurality of inseparable activities, the court must determine which activity best characterises the company’s purpose.

FAQ: Collective bargaining agreements and multiple activities

My company has two activities of comparable size. How do we decide?

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, its positioning and its outlook.

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

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

Can an agreement be voluntarily applied even if it is a different one?

An employer may decide to voluntarily apply an agreement more favourable than the one it would normally fall under. However, this voluntary application does not exempt it from complying with the mandatory provisions of the agreement actually applicable. It also creates an undertaking that can only be withdrawn according to the rules for denouncing customs (usages).

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

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

Can each establishment of my company have its own agreement?

Yes, provided each establishment carries out an autonomous and distinct activity. Case law requires that the establishment constitute a genuine independent centre of activity, with its own management, staff and activity. Mere internal departments are not sufficient.

Can an employee challenge the agreement applied by their employer?

Yes. An employee may refer the matter to the labour tribunal (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-payment of salary and collectively agreed benefits over three years, in addition to damages for the harm suffered.