Which Collective Bargaining Agreement Applies to a Business with Multiple Activities in France?

Determining the applicable collective bargaining agreement (convention collective — the sector-wide agreement governing employment terms) is a central issue in French labour law. It determines the legal framework applicable to employees: salary scales, working time, notice periods, severance indemnities, supplementary welfare cover (prévoyance), and job classifications. When a company carries out several activities, the question becomes considerably more complex. Article L.2261-2 of the French Labour Code sets out the principal-activity principle, but its practical application generates abundant litigation. DAIRIA Avocats guides you through the applicable rules and case law.

The Principle: The Collective Agreement of the Principal Activity

Article L.2261-2 of the French Labour Code provides that “the applicable collective agreement is the one covering the principal activity carried out by the employer”. This principle is of general application: whether or not the agreement has been extended (étendue), it is the company’s actual principal activity that determines which agreement applies.

The collective agreement then applies to all employees of the company, regardless of their individual role. An accountant employed by a construction company falls under the construction agreement, and not under some hypothetical agreement for chartered accountants. It is the company’s activity that prevails, not that of the employee.

Criteria for Determining the Principal Activity

The Turnover Criterion for Commercial Businesses

For businesses of a commercial nature, the principal activity is determined by the highest turnover. This is the criterion consistently applied by the case law of the Cour de cassation (French Supreme Court). Thus, a company generating 60% of its turnover from trading in materials and 40% from installation falls under the construction materials trade agreement (Cass. soc., 23 April 2003, no. 01-41.196).

This criterion is assessed over a period long enough to reflect the company’s actual activity. An isolated financial year cannot alter the applicable agreement if the principal activity is usually different. The Cour de cassation has accordingly held that the actual and habitual activity of the company must be examined, and not a one-off or exceptional situation (Cass. soc., 10 November 2009, no. 08-40.088).

The Headcount Criterion for Industrial Businesses

For businesses of an industrial nature, the criterion applied is the greatest number of employees assigned to one or the other activity. This criterion is justified by the fact that, in industry, turnover does not necessarily reflect the relative importance of the various activities in terms of working conditions.

The distinction between a commercial and an industrial business rests on the nature of the dominant activity. A company that transforms raw materials into finished products is industrial; a company that buys goods to resell them in the same state is commercial. Where a company combines both characteristics, case law tends to apply the headcount criterion if the production activity is predominant.

The Secondary Role of the APE/NAF Code

The APE code (Activité Principale Exercée — principal activity code) assigned by INSEE when the company is registered is merely a presumption and has only indicative value. The Cour de cassation regularly recalls that the APE code binds neither the parties nor the court, and that it is the activity actually carried out that determines the applicable agreement (Cass. soc., 10 March 2010, no. 08-44.950).

An employer whose APE code does not match its actual principal activity cannot rely on that code to apply a different agreement. Conversely, an employee may demonstrate that the employer’s actual activity falls within a different collective bargaining scope than the one suggested by the APE code.

Special Situations

Separate Establishments Carrying Out Different Activities

Where a company has several separate establishments carrying out clearly differentiated activities, the question arises whether each establishment may fall under a different collective agreement. Case law allows this possibility, provided the establishments constitute genuine autonomous centres of activity, with their own activity distinct from that of the other establishments.

The Cour de cassation has thus held that a company operating both a hotel and a restaurant in separate premises, with separate management and staff, could apply the hotel industry agreement to one and the restaurant agreement to the other. Conversely, mere internal departments do not constitute separate establishments within the meaning of the collective agreement.

The criteria applied by case law to characterise a separate establishment are:

A separate geographical location (although this is not sufficient in itself);
A specific and autonomous activity, distinct from the principal activity of the head office;
Its own management, with relative independence in its direction;
Dedicated staff assigned to the establishment’s activity.

Business Transfers and Change of Agreement

In the event of a business transfer within the meaning of Article L.1224-1 of the French Labour Code (merger, sale, demerger), the principal activity of the acquiring entity may differ from that of the transferred entity. This situation triggers a mise en cause (automatic lapse) of the collective agreement previously applicable to the transferred employees, in accordance with Article L.2261-14 of the French Labour Code.

The transferred employees then benefit from a temporary survival regime for their former agreement for a maximum period of 15 months (3 months’ notice + 12 months), unless a replacement agreement (accord de substitution) is concluded within a shorter period. At the end of this period, the agreement of the host company applies, subject to the maintenance of the remuneration received over the last 12 months.

Voluntary Change of Activity

Where a company gradually changes its activity to the point that its principal activity changes, the applicable collective agreement changes accordingly. This change is not conditional on a modification of the APE code: it is the reality of the activity that prevails.

A change of collective agreement resulting from a change of principal activity constitutes a mise en cause within the meaning of Article L.2261-14 of the French Labour Code. Employees then benefit from the protective regime of the temporary survival of the former agreement, and the employer must open negotiations with a view to concluding an adaptation or replacement agreement.

The Cour de cassation reviews whether the change of activity is genuine. A purely artificial change, motivated solely by the desire to reduce collectively bargained benefits, would constitute fraud.

Consequences of Incorrectly Applying a Collective Agreement

For the Employer

Applying the wrong collective agreement exposes the employer to multiple risks:

Back pay claims: if the agreement actually applicable provides for higher minimum salaries, employees may claim the differences for the last three years (three-year limitation period under Article L.3245-1 of the French Labour Code);
URSSAF reassessment: applying the wrong agreement may lead to errors in social security contributions, particularly regarding supplementary welfare (prévoyance) and complementary health cover;
Employment tribunal litigation: employees may bring proceedings before the conseil de prud’hommes (labour tribunal) to obtain application of the correct agreement and payment of the corresponding benefits;
Invalidity of contractual clauses: clauses in the employment contract referring to an inapplicable agreement are unenforceable against the employee.

For Employees

An error in the collective agreement may be favourable or unfavourable to the employee. If the employer has mistakenly applied a more favourable agreement, the question arises whether it may reverse this benefit. Case law distinguishes according to whether the application results from a custom (usage), a unilateral commitment, or a mere error. In the case of a custom, the employer must follow the denunciation procedure (informing employee representatives, individually informing employees, and observing a notice period).

Practical Method for Determining the Applicable Agreement

Step 1: Identify the Company’s Actual Activity

The activities actually carried out by the company must be analysed concretely, based on objective factors: the corporate purpose in the articles of association, the description of the activity in the trade register, commercial contracts, invoices, the nature of the services or products, etc. The APE code is merely one indicator among others.

Step 2: Quantify Activities Where There Are Several

Where the company carries out several activities, the principal one must be determined by applying the correct criterion: turnover for commercial activities, headcount for industrial activities. The analysis must cover a representative period (generally the last two or three financial years).

Step 3: Verify the Scope of the Agreement

Once the principal activity has been identified, it must be verified that the agreement under consideration does indeed cover this activity within its professional and territorial scope. The scope is defined in the opening clauses of each collective agreement. Certain activities may fall into a “collective bargaining gap” if no agreement specifically covers the sector.

Step 4: Consult an Expert in Case of Doubt

Where doubt persists, it is strongly recommended to seek the expertise of a lawyer specialising in employment law. DAIRIA Avocats has in-depth expertise in determining applicable collective agreements and can carry out a full audit of your company’s collective bargaining position.

Recent Case Law and Developments

The case law of the Cour de cassation continues to refine the criteria for determining the principal activity. Among the recent significant decisions:

The Court reiterates that the principal activity is assessed at the level of the company as a whole, and not at the level of a department or a category of staff;
Confirmation that the APE code is merely a rebuttable presumption, which may be overturned by proof of the activity actually carried out;
Where there are several inseparable activities, the court must determine which activity best characterises the company’s purpose.

FAQ: Collective Agreements and Multiple Activities

My company has two activities of comparable size. How is the matter decided?

The relevant criterion must be applied according to the nature of the company: turnover for commercial businesses, headcount for industrial businesses. If the two activities are perfectly equal, case law tends to favour the activity that best characterises the company’s principal purpose, by analysing its history, its positioning and its prospects.

My APE code does not match my actual activity. Should I change agreements?

Yes. The APE code has only indicative value and does not determine the applicable agreement. It is the actual and principal activity that prevails. If you identify a discrepancy, you must apply the agreement corresponding to your actual activity and request an amendment of your APE code from INSEE.

Can a different collective agreement be applied voluntarily?

An employer may decide to voluntarily apply an agreement more favourable than the one that would normally apply. However, such voluntary application does not exempt it from complying with the mandatory provisions of the agreement that actually applies. It also creates a commitment that can only be terminated in accordance with the rules for denouncing customs.

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

The agreement of the absorbed company is subject to a mise en cause. The transferred employees retain the benefit of their former agreement for a maximum of 15 months (3 months’ notice + 12 months’ survival). During this period, the employer must negotiate a replacement agreement. Failing that, the agreement of the absorbing company applies, with a guarantee of maintaining the annual remuneration received over the last 12 months.

Can each establishment of my company have its own agreement?

Yes, provided each establishment carries out an autonomous and distinct activity. Case law requires the establishment to constitute a genuine independent centre of activity, with its own management, staff and activity. Mere internal departments are not sufficient.

Can an employee challenge the agreement applied by their employer?

Yes. The employee may bring proceedings before the conseil de prud’hommes to establish that the agreement actually applicable differs from the one applied by the employer. They may obtain back pay and collectively bargained benefits over three years, in addition to damages for the harm suffered.