How to Determine the Applicable Collective Bargaining Agreement in Cases of Multiple Activities?
Determining the applicable collective bargaining agreement (CC) is a central issue in employment law. It conditions the legal regime applicable to employees: salary scales, working hours, notice periods, termination indemnities, benefits, 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 primary activity, but its actual application gives rise to abundant litigation. DAIRIA Avocats guides you through the rules and case law on this matter.
The Principle: The Collective Bargaining Agreement of the Primary Activity
Article L.2261-2 of the French Labour Code states that “the applicable collective bargaining agreement is the one that pertains to the primary activity carried out by the employer”. This principle is of general application: whether it involves an extended or non-extended agreement, it is the actual primary activity of the company that determines the applicable collective text.
The collective bargaining agreement then applies to all employees of the company, regardless of their individual roles. For example, an accountant employed by a construction company falls under the construction agreement and not under a hypothetical agreement for accountants. It is the company’s activity that takes precedence, not the employee’s.
Criteria for Determining the Primary Activity
The Revenue Criterion for Commercial Enterprises
For commercial enterprises, the primary activity is determined by the highest revenue generated. This criterion is consistently upheld by the case law of the Cour de cassation. For instance, a company that generates 60% of its revenue from the sale of materials and 40% from installation is classified under the agreement for the sale of construction materials (Cass. soc., April 23, 2003, No. 01-41.196).
This criterion is assessed over a sufficiently significant period to reflect the real activity of the company. An isolated year cannot change the applicable agreement if the primary activity is typically different. The Cour de cassation has ruled that it is essential to consider the actual and usual activity of the company, not an isolated or exceptional situation (Cass. soc., November 10, 2009, No. 08-40.088).
The Employee Count Criterion for Industrial Enterprises
For industrial enterprises, the criterion used is the largest number of employees assigned to one or another 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 is based on the nature of the predominant 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 embodies both characteristics, case law tends to apply the employee count criterion if the production activity is predominant (Cass. soc., January 26, 2005, No. 02-46.405).
The Secondary Character of the APE/NAF Code
The APE code (Activité Principale Exercée) assigned by INSEE at the company registration constitutes a simple presumption and has only indicative value. The Cour de cassation regularly reminds that the APE code does not bind either the parties or the judge, and that it is the actual activity performed that determines the applicable agreement (Cass. soc., March 10, 2010, No. 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 agreement. Conversely, an employee can demonstrate that the employer’s actual activity falls under a different collective framework than that suggested by the APE code.
Specific Situations
Distinct Establishments Engaging in Different Activities
When a company operates multiple distinct establishments engaging in clearly differentiated activities, the issue arises as to whether each establishment can fall under a different collective bargaining agreement. Case law admits this possibility provided that the establishments constitute genuine autonomous centers of activity, with a distinct and separate activity from that of other establishments.
The Cour de cassation has ruled that a company operating both a hotel and a restaurant in distinct premises, with separate management and personnel, could apply the hotel agreement to one and the restaurant agreement to the other (Cass. soc., May 18, 2011, No. 09-72.543). However, mere internal services do not constitute distinct establishments according to collective agreement requirements.
The criteria established by case law for characterizing a distinct establishment include:
- A separate geographical location (though this alone is not sufficient);
- A specific and autonomous activity, distinct from the main activity at headquarters;
- Independent management, with relative autonomy in decision-making;
- A dedicated workforce for the establishment’s activity.
Transfer of Business and Change of Agreement
In the event of a business transfer as defined by Article L.1224-1 of the French Labour Code (merger, sale, demerger), the primary activity of the absorbing entity may differ from that of the transferred entity. This situation leads to a challenge 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 temporary survival regime of their old agreement for a maximum duration of 15 months (3 months of notice + 12 months), unless a substitution agreement is reached sooner. At the end of this period, the host company’s agreement applies, subject to maintaining the salary received over the last 12 months.
Voluntary Change of Activity
When a company gradually modifies its activity to the point that its primary 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 in collective bargaining agreement resulting from a change in primary activity constitutes a challenge in the sense of Article L.2261-14 of the French Labour Code. Employees then benefit from the protective regime of the temporary survival of the previous agreement, and the employer must engage in negotiations aimed at concluding an adaptation or substitution agreement.
The Cour de cassation scrutinizes the genuine nature of the change in activity. An artificial change motivated solely by the desire to reduce conventional benefits would constitute fraud (Cass. soc., November 19, 2014, No. 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 recovery: if the applicable agreement indeed provides for higher minimum salaries, employees may claim differences for the last three years (triannual limitations under Article L.3245-1 of the French Labour Code);
- URSSAF adjustment: applying the wrong agreement may lead to errors in social contributions, particularly in terms of benefits and supplemental health insurance;
- Labor court disputes: employees may bring matters before the labor court to obtain the application of the correct agreement and the corresponding benefits;
- Invalidity of contractual clauses: clauses in the employment contract referencing an inapplicable agreement are unenforceable against the employee.
For the Employees
The error regarding the applicable collective agreement may 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 custom, a unilateral commitment, or a simple error. In the case of a custom, the employer must follow the denunciation procedure (informing employee representatives, individual employee notification, and respecting a notice period).
Practical Method for Determination
Step 1: Identify the Company’s Actual Activity
It is essential to analyze concretely the activities carried out by the company based on objective elements: statutory social purpose, description of activity in the commercial register, commercial contracts, invoices, nature of services or products, etc. The APE code is merely one indication among many.
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 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 fiscal years).
Step 3: Verify the Scope of Application of the Agreement
Once the primary activity is identified, it must be verified that the contemplated agreement indeed covers this activity in its professional and territorial scope. The scope of application is defined in the opening clauses of each collective bargaining agreement. Certain activities may fall into a