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

Determining the applicable collective bargaining agreement (convention collective) is a central issue in French employment law. It governs the legal regime applicable to employees: salary scales, working time, notice periods, severance pay, supplementary welfare cover (prévoyance), and job classifications. Where 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 Agreement of the Main Activity

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

The collective 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 sector agreement, and not under some hypothetical agreement for chartered accountants. It is the company’s activity that prevails, not that of the employee.

Criteria for Determining the Main Activity

The Turnover Criterion for Commercial Companies

For commercial companies, the main activity is determined by the highest turnover. This is the criterion consistently applied in the case law of the French Supreme Court (Cour de cassation). Thus, a company generating 60% of its turnover from the trading of materials and 40% from installation falls under the collective agreement for the trading of construction materials (Cass. soc., 23 April 2003, No. 01-41.196).

This criterion is assessed over a period long enough to reflect the company’s actual activity. A single isolated financial year cannot alter the applicable agreement if the main activity is usually different. The Cour de cassation has held that regard must be had to the company’s actual and habitual activity, and not to a one-off or exceptional situation (Cass. soc., 10 November 2009, No. 08-40.088).

The Headcount Criterion for Industrial Companies

For industrial companies, the applicable criterion is the largest number of employees assigned to one or other 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 they are is commercial. Where a company combines both characteristics, case law tends to apply the headcount criterion if the manufacturing 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 when the company is registered is merely a presumption and has only indicative value. The Cour de cassation regularly recalls 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 correspond to 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 collective bargaining scope other 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 agreement. Case law accepts this possibility provided that the establishments constitute genuine autonomous centres of activity, with their own activity distinct from that of the other establishments.

The Cour de cassation has held that a company operating both a hotel and a restaurant in separate premises, with separate management and staff, could apply the hospitality agreement to one and the restaurant agreement to the other (Cass. soc., 18 May 2011, No. 09-72.543). By contrast, mere internal departments do not constitute separate establishments within the meaning of the collective agreement.

The criteria used 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;
Its own management, with relative independence in its direction;
Dedicated staff assigned to the establishment’s activity.

Transfer of Undertaking and Change of Agreement

In the event of a transfer of undertaking within the meaning of Article L.1224-1 of the French Labour Code (merger, sale, spin-off), the main activity of the absorbing entity may differ from that of the transferred entity. This situation triggers a calling into question (mise en cause) of the collective 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 of 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 the maintenance of the remuneration received over the last 12 months.

Voluntary Change of Activity

Where a company gradually changes its activity to the point that its main activity changes, the applicable collective agreement changes accordingly. This change is not conditional on a change of the APE code: it is the reality of the activity that prevails.

A change of collective agreement resulting from a change of main activity constitutes a calling into question (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 desire to reduce collectively bargained benefits, would constitute fraud (Cass. soc., 19 November 2014, No. 13-21.609).

Consequences of Applying the Wrong Collective Agreement

For the Employer

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

Salary back-pay: if the agreement actually applicable provides for higher minimum wages, employees may claim the difference for 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, in particular for supplementary welfare cover (prévoyance) and supplementary health insurance;
Labour court litigation: employees may bring proceedings before the labour court (conseil de prud’hommes) to obtain application of the correct agreement and payment of the corresponding benefits;
Nullity of contractual clauses: clauses in the employment contract referring to an inapplicable agreement cannot be relied upon against the employee.

For the Employees

An error as to the collective agreement may be favourable or unfavourable to the employee. If the employer has by mistake applied a more favourable agreement, the question arises whether it can withdraw that 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 the staff representatives, informing employees individually, and observing a notice period).

Practical Method of Determination

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 corporate purpose in the articles of association, the description of the activity in the commercial 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 Where There Are Several

Where the company carries out several activities, the main one must be determined 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: Check the Scope of the Agreement

Once the main activity has been identified, it must be verified that the intended agreement actually covers that activity within its professional and territorial scope. The scope is defined in the opening clauses of each collective agreement. Certain activities may fall into a “collective bargaining gap” if no agreement specifically covers the sector.

Step 4: Consult an Expert in Case of Doubt

In the event 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 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 recalls that the main activity is assessed at the level of the company as a whole, and not at the level of a particular 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 overturned by evidence of the activity actually carried out;
Cass. soc., 15 November 2023, No. 22-14.832: where there are several inseparable activities, the court must determine which activity best characterises the company’s purpose.

FAQ: Collective Agreements and Multiple Activities

My company has two activities of comparable size. How is this resolved?

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 main purpose of the company, by analysing its history, its positioning and its outlook.

My APE code does not correspond to my actual activity. Must 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 a change of your APE code from INSEE.

Can a company voluntarily apply a different collective agreement?

An employer may decide to apply voluntarily an agreement more favourable than the one that would normally apply. However, such 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 in accordance with the rules governing the denunciation of customs.

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

The agreement of the absorbed company is called into question (mise en cause). The 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 absorbing company’s agreement applies, with a guarantee that the annual remuneration received over the last 12 months is maintained.

Can each establishment of my company have its own agreement?

Yes, provided that each establishment carries out an autonomous and distinct activity. Case law requires that the establishment constitutes 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 the employer?

Yes. An employee may bring proceedings before the labour court (conseil de prud’hommes) to have it established that the agreement actually applicable is different from the one applied by the employer. The employee may obtain salary and collectively bargained benefits back-pay over three years, in addition to damages for the harm suffered.