Managing the ‘Mise en Cause’ of a Collective Bargaining Agreement in a Business Transfer in France

A business transfer is a major economic event with direct consequences for the collective status of employees. Where the acquiring company applies a collective bargaining agreement different from that of the transferred entity, the collective status of the transferred employees is called into question (“mise en cause”). This mechanism, governed by Articles L.1224-1 and L.2261-14 of the French Labour Code, follows precise rules that every employer and every affected employee must master. DAIRIA Avocats explains in detail the steps, time limits and safeguards of this process.

The Legal Framework of Business Transfers

Article L.1224-1 of the French Labour Code: automatic transfer of employment contracts

Article L.1224-1 of the French Labour Code provides that “where a change occurs in the legal situation of the employer, in particular through succession, sale, merger, transformation of the business or incorporation of the undertaking, all employment contracts in force on the day of the change subsist between the new employer and the staff of the undertaking.”

This provision, which transposes European Directive 2001/23/EC of 12 March 2001, guarantees the automatic continuation of individual employment contracts. All elements of the contract are transferred: seniority, job classification, contractual remuneration, non-compete clause, and so on. The employee retains all of their individual rights.

By contrast, collective status (the collective bargaining agreement, company-level agreements, established practices) does not benefit from the same automatic transfer regime. This is where the mechanism of “mise en cause” (the automatic calling into question of collective status) comes into play.

Article L.2261-14: the calling into question of collective status

Article L.2261-14 of the French Labour Code provides that where the application of a collective agreement is called into question in a given undertaking, in particular as a result of a merger, transfer, spin-off or change of activity, that agreement continues to produce effects for a set period.

The “mise en cause” differs from termination by notice (“dénonciation”): it is automatic and results solely from the transfer, without either party having to express any particular intention. It is an effect that operates by law from the change in the employer’s legal situation.

Conditions for the ‘Mise en Cause’

A transfer within the meaning of Article L.1224-1

The “mise en cause” first presupposes the existence of a business transfer falling within the scope of Article L.1224-1. Such a transfer may result from:

A merger by absorption between two companies;
A sale of a business (fonds de commerce) or of a business line;
A spin-off of an undertaking;
A transfer of an autonomous economic entity that retains its identity;
A change in the main activity leading to attachment to a new collective bargaining scope.

The case law of the French Supreme Court (Cour de cassation) has clarified the notion of an autonomous economic entity: it is an organised set of persons and tangible or intangible elements enabling the pursuit of an economic activity with its own objective (Cass. soc., 7 July 1998, no. 96-21.451).

The application of different collective bargaining agreements

The “mise en cause” only occurs if the receiving undertaking (or the undertaking resulting from the operation) applies a different collective bargaining agreement from the one governing the transferred employees. If both undertakings fall under the same agreement, the transfer has no impact on collective status.

This condition requires a precise analysis of the occupational scope of the agreements concerned. It is possible for two agreements to bear different names but have overlapping scopes, or conversely for two undertakings in the same sector to fall under distinct agreements due to the structure of branch-level bargaining.

The Regime of Temporary Survival of the Former Agreement

The survival period: 3-month notice + 12 months

Article L.2261-14 organises a regime of temporary survival of the agreement called into question. In practice, the former agreement continues to produce its effects for:

A notice period of 3 months, running from the date the transfer is completed (and not from the date the transfer protocol or merger deed is signed);
A survival period of 12 months from the expiry of the notice period, i.e. a maximum total of 15 months.

During this period, the transferred employees benefit from the cumulative application of their former agreement and the new agreement of the receiving undertaking. In practice, the principle of favour (“principe de faveur”) applies: for each benefit considered, the provision most favourable to the employee prevails.

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

The scope of the temporary survival

During the survival period, all the provisions of the former agreement continue to apply to the transferred employees: classifications, salary scales, contractual bonuses, severance pay, notice periods, additional leave, welfare and death-and-disability cover, and so on.

The Cour de cassation has nonetheless clarified that the temporary survival does not extend to the institutional clauses of the agreement — namely those relating to employee representation, trade union rights or the funding of joint bodies — which fall within the framework of the receiving undertaking (Cass. soc., 16 March 1999, no. 96-45.514).

The Obligation to Negotiate a Substitution Agreement

Opening negotiations

As soon as the transfer is completed, the employer has an obligation to open negotiations with a view to concluding a substitution agreement (“accord de substitution”). This obligation derives directly from Article L.2261-14, paragraph 3, of the French Labour Code. It applies regardless of the number of employees transferred.

Negotiations must be conducted with the representative trade unions in the receiving undertaking. If the receiving undertaking has no union delegates, the negotiation arrangements provided by the Labour Code for undertakings without a union delegate apply (Articles L.2232-21 et seq.).

Case law penalises the failure to negotiate in good faith. An employer who simply waits for the survival period to expire without engaging in genuine negotiations breaches its legal obligation. Employees may then obtain damages for the loss resulting from that breach (Cass. soc., 13 March 2013, no. 11-22.285).

The content of the substitution agreement

The substitution agreement aims to organise the collective transition for the transferred employees. It may:

Adapt certain provisions of the former agreement to the new collective framework;
Provide for transitional measures (temporary maintenance of certain benefits, gradual smoothing of remuneration);
Define the reclassification arrangements for employees within the new agreement’s grid;
Organise the portability of welfare and supplementary health cover.

The substitution agreement is not required to reproduce all the benefits of the former agreement. It may provide for a less favourable regime on certain points, provided it complies with mandatory public-policy provisions and the terms of the receiving undertaking’s collective agreement.

The adaptation agreement: an anticipated variant

Article L.2261-14 also mentions the possibility of concluding an adaptation agreement (“accord d’adaptation”). This may be negotiated and concluded even before the transfer is completed, as soon as the operation is contemplated. Such anticipation is particularly recommended in the context of planned mergers or business-line sales, as it secures the transition and limits uncertainty for employees.

The adaptation agreement may be concluded between the acquiring employer and the trade unions of the transferring undertaking, or between the management of both undertakings and the representative trade unions.

The Situation on Expiry of the Survival Period

Where no substitution agreement is concluded

If no substitution agreement has been concluded upon expiry of the 15-month period, the former agreement definitively ceases to apply. The transferred employees are then subject solely to the collective bargaining agreement of the receiving undertaking.

However, the Law of 8 August 2016 (the “Loi Travail”) introduced an important remuneration guarantee. Article L.2261-14, paragraph 4, provides that the employees concerned benefit from a remuneration guarantee whose annual amount, for a working period equivalent to that provided in their employment contract, may not be lower than the remuneration paid over the last 12 months. This guarantee is ensured by paying a salary top-up where 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 former agreement. By contrast, exceptional or discretionary bonuses are not included in the calculation (Cass. soc., 24 January 2024, no. 22-18.419).

Where a substitution agreement is concluded

Where a substitution agreement is concluded within the 15-month period, it immediately replaces the provisions of the former agreement. The transferred employees are then governed by the combination of the receiving undertaking’s collective agreement and the substitution agreement, which may provide for specific transitional provisions.

The substitution agreement is an ordinary collective agreement, subject to the usual validity conditions (signature by trade unions representing at least 50% of votes cast, or 30% without majority opposition). It may be concluded for a fixed or indefinite term.

Anticipation: A Strategic Imperative

Before any transfer operation, it is essential to carry out a comprehensive social audit of the collective status of the employees concerned. This audit must identify:

The collective agreements applicable in each of the entities;
The disparities in treatment between the employees of the two undertakings;
The unilateral commitments and established practices in force;
The transition costs (remuneration maintenance, harmonisation of welfare schemes, reclassification);
The potential litigation risks.

Planning the social timeline is crucial:

Before the transfer: information and consultation of the Social and Economic Committee (CSE) on the transfer project and its social consequences; where appropriate, opening of anticipated negotiations for an adaptation agreement;
At the time of the transfer: individual information of employees on the change of agreement; opening of substitution negotiations;
During the survival period: active and good-faith negotiations; regular information of employees and staff representatives;
At the end of the survival period: application of the receiving agreement, payment of the remuneration top-up where necessary.

The role of the employment law firm

Managing the “mise en cause” of a collective bargaining agreement in a business transfer requires sharp legal expertise. DAIRIA Avocats assists companies at every stage: preliminary audit, drafting of protocols, negotiation of substitution agreements, securing the transition and handling any litigation.

FAQ: ‘Mise en Cause’ and Business Transfers

What is the calling into question (‘mise en cause’) of a collective bargaining agreement?

The “mise en cause” is the automatic lapse of a collective agreement resulting from an external event, such as a business transfer, merger or change of activity. It differs from termination by notice (“dénonciation”), which is a voluntary act. The “mise en cause” opens a temporary survival period of a maximum of 15 months.

Do transferred employees immediately lose their collective benefits?

No. The former agreement continues to apply for a maximum of 15 months (3 months’ notice + 12 months’ survival). During this period, employees combine the benefits of the former and the new agreement, with the principle of favour applying benefit by benefit.

Is the employer required to negotiate a substitution agreement?

Yes. Article L.2261-14 of the French Labour Code requires the employer to open good-faith negotiations with a view to concluding a substitution agreement. A failure to negotiate may be penalised by an award of damages to employees.

What happens if no substitution agreement is reached?

On expiry of the 15-month period, the former agreement ceases to apply. Employees become subject to the receiving undertaking’s agreement but benefit from a remuneration guarantee: their annual remuneration may not be lower than that received during the 12 months preceding the “mise en cause”.

Can the substitution agreement provide for less favourable terms than the former agreement?

Yes, within the limits of compliance with mandatory public-policy provisions and the minimum standards of the receiving undertaking’s collective agreement. The substitution agreement is an ordinary agreement that is not required to reproduce prior benefits. It may organise a gradual smoothing.

Can the ‘mise en cause’ be anticipated before the transfer is completed?

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

Managing the 'Mise en Cause' of a Collective Bargaining Agreement in a Business Transfer in France