How to Determine the Applicable Collective Agreement for Multiple Activities?

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

The Principle: The Collective Agreement for the Primary Activity

Article L.2261-2 of the French Labour Code states that “the applicable collective agreement is that which applies to the primary activity carried out by the employer.” This principle is of general application: whether it is an extended agreement or not, it is the actual primary activity of the company that determines the applicable collective text.

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

Criteria for Determining the Primary Activity

The Revenue Criterion for Commercial Businesses

For commercial businesses, the primary activity is determined by the revenue generated. This criterion is consistently upheld by the case law of the Court of Cassation. Thus, a company that generates 60% of its revenue from the trading of materials and 40% from installation falls under the collective agreement for trading construction materials (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. A single fiscal year cannot modify the applicable agreement if the primary activity is typically different. The Court of Cassation has determined that it is important to examine the actual and habitual activity of the company, not a one-off or exceptional situation (Cass. soc., November 10, 2009, n° 08-40.088).

The Employee Count Criterion for Industrial Enterprises

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

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

The Secondary Nature of the APE/NAF Code

The APE code (Activité Principale Exercée) assigned by INSEE upon company registration constitutes a mere presumption and only has indicative value. The Court of Cassation regularly reminds that the APE code does not bind the parties or the judge, and that it is the activity actually carried out that determines the applicable convention (Cass. soc., March 10, 2010, n° 08-44.950).

An employer whose APE code does not correspond to their actual primary activity cannot invoke this code to apply a different agreement. Conversely, an employee can demonstrate that the actual activity of the employer falls under a different collective scope than that suggested by the APE code.

Specific Situations

Distinct Establishments Carrying Out Different Activities

When a company has multiple distinct establishments engaged in clearly differentiated activities, the question arises as to whether each establishment can be governed by a different collective agreement. Case law accepts this possibility provided that the establishments are true autonomous centers of activity, with a distinct and separate activity from that of other establishments.

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

The criteria used by case law to characterize distinct establishments are:

A separate geographic location (although this is not sufficient on its own);
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 activity of the establishment.

Transfer of Business and Change of Collective Agreement

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

Transferred employees then benefit from a provisional survival regime of their former collective agreement for a maximum of 15 months (3 months’ notice + 12 months), unless a substitution agreement is concluded within a shorter time frame. At the end of this period, the agreement of the receiving company applies, subject to maintaining the remuneration received during the preceding 12 months.

Voluntary Change of Activity

When a company progressively changes its activity to the point that its primary activity changes, the applicable collective agreement evolves accordingly. This change is not subordinated to a modification of the APE code: it is the reality of the activity that prevails.

The change of collective agreement following a change in primary activity constitutes a questioning under Article L.2261-14 of the French Labour Code. Employees then benefit from the protective regime of the provisional survival of the old agreement and the employer must initiate negotiations to conclude an adaptation or substitution agreement.

The Court of Cassation checks the actual character of the change in activity. A purely artificial change, motivated solely by the desire to reduce conventional advantages, would constitute fraud (Cass. soc., November 19, 2014, n° 13-21.609).

Consequences of Erroneous Application of the Collective Agreement

For the Employer

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

Salary back payments: if the applicable agreement actually provides for higher minimum wage levels, employees may claim the differences for the past three years (three-year statute of limitations under Article L.3245-1 of the French Labour Code);
URSSAF reassessment: the application of an incorrect agreement can lead to errors in social contributions, particularly concerning welfare and complementary health insurance;
Labor Tribunal disputes: employees may approach the labor court to obtain the application of the correct agreement and the corresponding benefits;
Nullity of contractual clauses: clauses in the employment contract referring to an inapplicable agreement are unenforceable against the employee.

For Employees

The error in the collective agreement can be favorable or unfavorable to the employee. If the employer has mistakenly applied a more favorable agreement, the question arises as to whether they can withdraw this advantage. Case law distinguishes based on whether the application results from a usage, a unilateral commitment, or a simple error. In the case of usage, the employer must follow the denunciation procedure (informing employee representatives, individual notifications to employees, and respecting a notice period).

Practical Method for Determination

Step 1: Identify the Actual Activity of the Company

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

Step 2: Quantify Activities in Cases of Plurality

When the company engages in multiple activities, it is necessary to determine which is primary by applying the appropriate criterion: revenue for commercial activities, employee count for industrial activities. The analysis must be based on a representative period (generally the last two or three fiscal years).

Step 3: Verify the Scope of the Agreement

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

Step 4: Consult an Expert in Case of Doubt

In case of persistent doubt, it is highly recommended to seek the expertise of a specialized labor law attorney. DAIRIA Avocats 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 reminds that the primary activity is assessed at the level of the company as a whole, not at the level of a service or category of personnel;
Cass. soc., March 8, 2023, n° 21-19.475: confirmation that the APE code is merely a simple presumption, which can be overturned by proof of the activity actually exercised;
Cass. soc., November 15, 2023, n° 22-14.832: in cases of multiple inseparable activities, the judge must seek which activity best characterizes the object of the company.

FAQ: Collective Agreement and Multiple Activities

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

You must apply the relevant criterion based on the type of business: revenue for commercial businesses, employee count for industrial businesses. If both activities are perfectly equal, case law tends to favor the activity that best characterizes the main object of the company, considering 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 actual and primary activity that prevails. If you notice a discrepancy, you must apply the agreement corresponding to your effective activity and request the modification of your APE code from INSEE.

Can a different collective agreement be voluntarily applied?

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

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

The agreement of the absorbed company is questioned. Transferred employees retain the benefit of their former agreement for a maximum of 15 months (3 months’ notice + 12 months of survival). During this period, the employer must negotiate a substitution agreement. Failing this, the agreement of the absorbing company applies, with a guarantee of maintaining the annual remuneration received over the past 12 months.

Can each establishment of my company have its own agreement?

Yes, provided that each establishment engages in an autonomous and distinct activity. Case law requires that the establishment is a true independent activity center, with its own management, staff, and activity. Simple internal departments are not sufficient.

Can an employee contest the agreement applied by their employer?

Yes. The employee can approach the labor court to establish that the agreement actually applicable is different from that applied by the employer. They can obtain salary back payments and conventional benefits for three years, in addition to damages for the harm suffered.