How to Determine the Applicable Collective Bargaining Agreement for Multiple Activities?

Determining the applicable collective bargaining agreement (convention collective) is a central issue in labor law. It governs the legal framework applicable to employees: salary scales, working hours, notice periods, severance pay, insurance, and classifications. When a company engages in multiple activities, the question becomes significantly more complex. Article L.2261-2 of the French Labour Code establishes the principle of the main activity, but its practical application has led to abundant litigation. DAIRIA Avocats guides you through the relevant rules and case law.

The Principle: The Collective Bargaining Agreement of the Main Activity

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

The collective bargaining agreement then applies to all employees of the company, regardless of their individual roles. For example, an accountant employed in a construction company is governed by the construction collective agreement, not by a hypothetical agreement for accountants. The activity of the company prevails, not that of the employee.

Criteria for Determining the Main Activity

The Turnover Criterion for Commercial Companies

For companies engaged in commercial activities, the main activity is determined by the highest turnover. This criterion has consistently been upheld by the case law of the Cour de cassation. For instance, a company that generates 60% of its turnover in the sale of materials and 40% in installation falls under the construction materials sales collective agreement (Cass. soc., April 23, 2003, n° 01-41.196).

This criterion must be assessed over a sufficiently significant period to accurately reflect the actual activity of the company. A single trading period cannot alter the applicable convention if the main activity is generally different. The Cour de cassation has ruled that it is essential to examine the actual and customary activity of the company, not a temporary or exceptional situation (Cass. soc., November 10, 2009, n° 08-40.088).

The Workforce Criterion for Industrial Companies

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

The distinction between commercial and industrial companies depends on the nature of the predominant activity. A company that transforms raw materials into finished products is industrial; a company that purchases goods to sell them as-is is commercial. When a company combines both characteristics, case law tends to apply the workforce 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 during the company registration is a simple presumption and has only indicative value. The Cour de cassation regularly reminds us that the APE code does not bind the parties or the judge, and it is the actual activity 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 its actual main activity cannot invoke this code to apply a different convention. Conversely, an employee can demonstrate that the employer’s actual activity falls under a different conventional scope than that suggested by the APE code.

Particular Situations

Distinct Establishments Engaging in Different Activities

When a company has multiple distinct establishments operating in markedly different activities, the question arises whether each establishment can be subject to a different collective bargaining agreement. Case law accepts this possibility provided that the establishments constitute genuine autonomous centers of activity, with a distinct and separate business from those of the other establishments.

The Cour de cassation has ruled that a company operating both a hotel and a restaurant in separate premises, with separate management and personnel, can apply the hospitality convention to one and the restaurant convention to the other (Cass. soc., May 18, 2011, n° 09-72.543). In contrast, mere internal services do not constitute distinct establishments in the sense of the collective agreement.

The criteria established by case law for characterizing a distinct establishment are:

A separate geographical location (although this alone is not sufficient);
A specific and autonomous activity, distinct from the main activity at headquarters;
Independent management, with a degree of autonomy in direction;
A dedicated workforce for the activity of the establishment.

Business Transfer and Change of Agreement

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

Transferred employees then benefit from a temporary survival regime of their former agreement for a maximum duration of 15 months (3 months’ notice + 12 months), unless a substitution agreement is concluded in a shorter timeframe. At the end of this period, the convention of the receiving company applies, subject to the maintenance of the remuneration received during the last 12 months.

Voluntary Change of Activity

When a company gradually alters its activity to the point that its main activity changes, the applicable collective bargaining agreement evolves accordingly. This change is not contingent upon a modification of the APE code: it is the reality of the activity that prevails.

The change of collective bargaining agreement following a change in the main activity constitutes a challenge under Article L.2261-14 of the Labour Code. Employees then benefit from the protective regime of temporary survival of the previous agreement, and the employer must initiate negotiations to conclude an adaptation or substitution agreement.

The Cour de cassation scrutinizes the reality of the change in activity. A purely artificial change, motivated solely by the desire to reduce collective benefits, would constitute fraud (Cass. soc., November 19, 2014, n° 13-21.609).

Consequences of Incorrect Application of the Collective Bargaining Agreement

For the Employer

Applying an incorrect collective bargaining agreement exposes the employer to multiple risks:

Wage claims: If the actually applicable convention provides for higher salary minima, employees may demand the differences for the past three years (three-year limitation of Article L.3245-1 of the Labour Code);
URSSAF Audit: The application of a wrong convention may lead to errors in social contributions, particularly regarding insurance and supplementary health;
Labor Court Litigation: Employees may take their claims to the labor court to secure the correct application of the convention and the corresponding benefits;
Nullity of contractual clauses: Clauses in the employment contract referring to an inapplicable convention are unenforceable against the employee.

For Employees

The error of the collective bargaining agreement can be either favorable or unfavorable to the employee. If the employer mistakenly applied a more favorable agreement, the question arises whether the employer can retract that advantage. Case law distinguishes based on whether the application results from a custom, a unilateral commitment, or a mere error. In the case of a custom, the employer must follow the denunciation procedure (informing staff representatives, individually informing employees, respecting a notice period).

Practical Method for Determination

Step 1: Identify the Actual Activity of the Company

It is essential to analyze the concrete 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 just one of many indicators.

Step 2: Quantify Activities in the Case of Plurality

When a company engages in multiple activities, it is necessary to determine which is principal by applying the appropriate criterion: turnover for commercial activities, workforce for industrial activities. The analysis should cover a representative period (typically the last two or three fiscal years).

Step 3: Verify the Scope of Application of the Convention

Once the main activity is identified, it is necessary to verify that the contemplated agreement indeed covers this activity within its professional and territorial scope. The scope of application is defined in the early clauses of each collective bargaining agreement. Some activities may fall into a “conventional vacuum” if no agreement specifically covers the sector.

Step 4: Consult an Expert in Case of Doubt

In the event of a lingering doubt, it is highly recommended to solicit the expertise of a lawyer specialized in labor law. DAIRIA Avocats has extensive expertise in determining applicable collective bargaining agreements and can conduct a complete audit of your company’s conventional 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:

Cass. soc., April 5, 2023, n° 21-24.671: the Court reiterates that the main activity is assessed at the company level as a whole, not at the level of a department or employee category;
Cass. soc., March 8, 2023, n° 21-19.475: confirmation that the APE code constitutes only a simple presumption, which can be refuted by evidence of the actually performed activity;
Cass. soc., November 15, 2023, n° 22-14.832: in cases of multiple inseparable activities, the judge must determine which activity best characterizes the company’s purpose.

FAQ: Collective Bargaining Agreement and Multiple Activities

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

The relevant criterion should be applied based on the nature of the company: turnover for commercial enterprises, and workforce for industrial enterprises. If the two activities are perfectly equal, case law tends to favor the activity that best characterizes the company’s primary objective, considering its history, positioning, and prospects.

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

Yes. The APE code has only indicative value and does not determine the applicable agreement. The actual and primary activity takes precedence. If there is a discrepancy, you must apply the convention related to your actual activity and request the modification of your APE code from INSEE.

Can a different collective bargaining agreement be applied voluntarily?

An employer may choose to voluntarily apply a more favorable agreement than the one to which it would normally be subject. However, this voluntary application does not exempt the employer from respecting the mandatory provisions of the convention that actually applies. It also creates a commitment that the employer can only denounce according to the denunciation rules of traditional practices.

What happens during a merger if the two companies have different conventions?

The absorbed company’s agreement is challenged. Transferred employees retain the benefit of their previous convention for a maximum of 15 months (3 months’ notice + 12 months of survival). During this period, the employer must negotiate a substitution agreement. If this does not occur, the receiving company’s convention applies, with the guarantee of maintaining the annual salary earned during the last 12 months.

Can each establishment of my company have its own convention?

Yes, provided that each establishment operates a distinct and autonomous activity. Case law requires that the establishment constitutes a genuine independent center of activity, with its own management, workforce, and activity. Simple internal departments are not sufficient.

Can an employee contest the convention applied by their employer?

Yes. An employee can take the matter to the labor court to establish that the convention actually applicable is different from that applied by the employer. They can seek wage and conventional benefits claims for up to three years, as well as damages for the harm suffered.