How to Manage the Questioning of a Collective Agreement During a Business Transfer

The transfer of a business is a significant event in economic life that directly impacts the collective status of employees. When the acquiring company applies a different collective agreement than that of the transferred entity, the collective status of the employees taken over is questioned. This mechanism, governed by Articles L.1224-1 and L.2261-14 of the French Labour Code, follows specific rules that every employer and affected employee must understand. DAIRIA Avocats explains in detail the steps, deadlines, and guarantees of this process.

The Legal Framework of Business Transfer

Article L.1224-1 of the Labour Code: Automatic Transfer of Contracts

Article L.1224-1 of the Labour Code states that “when a change occurs in the legal situation of the employer, particularly due to succession, sale, merger, transformation of the assets, incorporation of the business, all employment contracts in force on the day of the change remain in effect between the new employer and the staff of the business”.

This text, implementing European Directive 2001/23/EC of March 12, 2001, guarantees the automatic maintenance of individual employment contracts. All elements of the contract are transferred: seniority, qualifications, contractual remuneration, non-compete clauses, etc. The employee retains all their individual rights.

In contrast, the collective status (collective agreement, company agreements, customs) does not benefit from the same regime of automatic transfer. This is where the mechanism of questioning comes into play.

Article L.2261-14: Questioning of the Collective Status

Article L.2261-14 of the Labour Code stipulates that when the application of a collective agreement or an agreement is questioned in a specific business due to a merger, sale, division, or change of activity, this collective agreement or agreement continues to have effect for a determined duration.

The questioning differs from denunciation: it is automatic and results solely from the transfer, without either party having to express a particular intent. It is an effect of full right resulting from the change in the legal situation of the employer.

Conditions for Questioning

A Transfer Under Article L.1224-1

The questioning first requires the existence of a business transfer falling within the scope of Article L.1224-1. This transfer may arise from:

• A merger-acquisition between two companies;
• A sale of business assets or business branch;
• A division of a company;
• A transfer of an autonomous economic entity maintaining its identity;
• A change in main activity leading to attachment to a new collective framework.

The case law of the Cour de cassation has clarified the notion of an autonomous economic entity: it is an organized group of people and physical or intangible elements allowing the exercise of an economic activity pursuing its own objective (Cass. soc., July 7, 1998, n° 96-21.451).

Application of Different Collective Agreements

The questioning occurs only if the host company (or the company resulting from the operation) applies a different collective agreement from the one that governed the transferred employees. If both companies are governed by the same agreement, the transfer has no impact on the collective status.

This condition necessitates a precise analysis of the professional scope of the agreements in question. It is possible that two agreements have different names but cover overlapping areas, or conversely, that two companies in the same sector fall under different agreements due to the structure of branch negotiations.

The Provisional Survival Regime of the Old Agreement

Survival Period: 3 Months Notice + 12 Months

Article L.2261-14 establishes a provisional survival regime for the questioned agreement. In practice, the old agreement continues to take effect for:

• A notice period of 3 months, starting from the date of the transfer (and not from the date of signing the transfer protocol or merger treaty);
• A survival period of 12 months from the expiration of the notice, totaling a maximum of 15 months.

During this period, the transferred employees benefit from the cumulative application of their old agreement and the new agreement of the host company. In practice, the principle of favor applies: for each advantage considered, the most favorable provision for the employee prevails.

It is important to note that this period constitutes a maximum: if a substitution agreement is concluded before the expiration of the 15 months, it immediately replaces provisions of the old agreement.

Content of the Provisional Survival

During the survival period, all stipulations of the old agreement continue to apply to the transferred employees: classifications, salary scales, contractual bonuses, dismissal indemnities, notice periods, additional leave, insurance guarantees, etc.

However, the Cour de cassation has specified that the provisional survival does not extend to institutional clauses of the agreement, that is, those relating to employee representation, union rights, or funding of joint agreements, which fall under the framework of the host company (Cass. soc., March 16, 1999, n° 96-45.514).

Obligation to Negotiate a Substitution Agreement

Commitment to Negotiate

Upon the completion of the transfer, the employer has the obligation to initiate negotiations for a substitution agreement. This obligation stems directly from Article L.2261-14, paragraph 3, of the Labour Code. It applies regardless of the number of transferred employees.

Negotiations must be conducted with the representative unions in the host company. If it has no union representatives, the negotiation provisions outlined in the Labour Code for companies without union delegates apply (Articles L.2232-21 and following).

Case law penalizes the lack of good-faith negotiation. An employer who merely waits for the expiration of the survival period without engaging in meaningful negotiations fails to meet their legal obligation. Employees can then seek damages for the harm resulting from this failure (Cass. soc., March 13, 2013, n° 11-22.285).

Content of the Substitution Agreement

The substitution agreement aims to organize the transitional framework for transferred employees. It may:

• Adapt certain provisions of the old agreement to the new collective framework;
• Provide for transitional measures (temporary maintenance of certain advantages, gradual smoothing of salaries);
• Define the reclassification modalities of employees within the new agreement’s framework;
• Organize the portability of insurance guarantees and supplementary health benefits.

The substitution agreement is not required to reproduce all of the advantages of the old agreement. It may provide a less favorable regime on certain points, provided it complies with public policy provisions and the stipulations of the host company’s collective agreement.

The Adaptation Agreement: An Anticipated Variant

Article L.2261-14 also mentions the possibility of concluding an adaptation agreement. This may be negotiated and concluded even before the transfer occurs, as soon as the operation is contemplated. This anticipation is particularly recommended in the context of planned mergers or branch sales, as it secures the transition and minimizes uncertainties for employees.

The adaptation agreement may be concluded between the acquiring employer and the unions of the transferring company or between the management of both companies and the representative unions.

Situation at the End of the Survival Period

In the Absence of a Substitution Agreement

If no substitution agreement has been concluded at the end of the 15-month period, the old agreement ceases definitively to apply. Transferred employees are then subject only to the host company’s collective agreement.

However, the law of August 8, 2016 (Labour Law) introduced an important wage guarantee. Article L.2261-14, paragraph 4, provides that affected employees benefit from a wage guarantee whose annual amount, for a workload equivalent to that provided by their employment contract, cannot be less than the remuneration paid over the last 12 months. This guarantee is ensured by the payment of a salary supplement if necessary.

The Cour de cassation has clarified the scope of this guarantee. The reference remuneration includes base salary, recurring mandatory bonuses, and benefits in kind provided by the old agreement. However, exceptional or discretionary bonuses do not count in the calculation (Cass. soc., January 24, 2024, n° 22-18.419).

In Case of Conclusion of a Substitution Agreement

When a substitution agreement is concluded within the 15-month period, it immediately replaces the provisions of the old agreement. Transferred employees are then governed by the combination of the host company’s collective agreement and the substitution agreement, which may provide for specific transitional provisions.

The substitution agreement is a collective agreement under common law, subject to the usual validity conditions (signature by trade unions representing at least 50% of votes, or 30% without majority opposition). It may be concluded for a determinate or indeterminate duration.

Anticipation: A Strategic Imperative

Social Audit Prior to Transfer

Before any transfer operation, it is essential to conduct a complete social audit regarding the collective status of the impacted employees. This audit must identify:

• The collective agreements and agreements applicable in each entity;
• The treatment disparities between employees of the two companies;
• The unilateral commitments and established practices in force;
• The transition costs (maintenance of salaries, harmonization of insurance schemes, reclassification);
• The potential litigation risks.

The Social Timeline of the Operation

Planning the social timeline is crucial:

• Before the transfer: information-consultation of the CSE regarding the transfer project and its social consequences; if necessary, initiate early negotiations for an adaptation agreement;
• At the time of transfer: individual employee information about the change of agreements; commence negotiations for substitution;
• During the survival period: active and good faith negotiations; regular information provided to employees and personnel representatives;
• At the end of the survival period: application of the host agreement, payment of a salary supplement if necessary.

The Role of the Employment Law Attorney

Managing the questioning of a collective agreement during a business transfer requires sharp legal expertise. DAIRIA Avocats supports businesses at every stage: preliminary audit, drafting protocols, negotiating substitution agreements, securing transitions, and managing potential disputes.

FAQ: Questioning and Business Transfer

What is the questioning of a collective agreement?

The questioning is the automatic termination of a collective agreement resulting from an external event, such as a business transfer, merger, or change of activity. It differs from denunciation, which is a voluntary act. The questioning opens a maximum provisional survival period of 15 months.

Do transferred employees immediately lose their conventional advantages?

No. The old agreement continues to apply for a maximum period of 15 months (3 months notice + 12 months survival). During this period, employees accumulate advantages from both the old and the new agreements, with the principle of favor applying advantage by advantage.

Is the employer obligated to negotiate a substitution agreement?

Yes. Article L.2261-14 of the Labour Code obligates the employer to engage in good faith negotiations for a substitution agreement. The failure to negotiate may be penalized with the granting of damages to employees.

What happens if no substitution agreement is reached?

At the end of the 15-month period, the old agreement ceases to apply. Employees are then subject to the host company’s agreement but benefit from a wage guarantee: their annual remuneration cannot be less than that received during the last 12 months preceding the questioning.

Can the substitution agreement set less favorable conditions than the old agreement?

Yes, as long as it respects public policy provisions and the minima of the host company’s collective agreement. The substitution agreement is a common law agreement that is not required to reproduce previous advantages. It may organize a gradual smoothing.

Is it possible to anticipate questioning before the transfer occurs?

Yes. It is possible to negotiate an adaptation agreement before the actual transfer. This anticipation is highly recommended as it secures the operation and reduces the uncertainty period for employees. DAIRIA Avocats assists you in this social planning process.