Asset deals and collective bargaining – how does it work in France?
Cass. soc., 28 February 2024, n° 22-18.369
Asset deals and collective bargaining – how does it work in France? Let's break this down.
In an asset deal scenario (as opposed to a sale of shares), under specific conditions, French employees might automatically transfer from the seller entity to buyer on closing.
But which collective agreements should apply post-transfer? Seller's or buyer's?
According to French law:
collective agreements from the seller entity survive during a (generally) 15-month period post-closing/transfer;
negotiations must be kicked off within the buyer entity in the 3 months following closing to adapt and/or replace the collective agreements;
once the 15-month continuation period ends (or, before that, when replacement collective agreements are implemented within the buyer entity), the temporary continuation of the seller's agreements stops, and the transferring employees are solely covered by the buyer's collective agreements;
if no replacement collective agreements are implemented upon expiry of the continuation period, the transferring employees' remuneration is guaranteed at a level at least equal to what they received under the temporarily surviving collective agreements during the last 12 months.
Here is a fresh, real-life example of this (French Supreme Court, 28 February 2024, ruling no. 22-18.369):
1990: the claimant started with company A, under the metallurgy collective bargaining agreement;
2013: due to a corporate transaction, the employee transferred to company B, which operates under the office supplies collective bargaining agreement;
2017: the employee was terminated.
The employee filed a claim before the Nanterre labor court, arguing, among other things, that his severance indemnity should be calculated in accordance with the provisions of the metallurgy CBA.
The French Supreme Court disagrees: because the dismissal occurred after the expiration of the continuation period and the application of the metallurgy CBA had not been contractualized, the metallurgy CBA was no longer applicable to the claimant at the time of his dismissal. Therefore, his severance pay should have been calculated on the basis of the office supplies CBA.
Worth keeping in mind: because collective bargaining is sometimes a pain point in the context of French M&A transactions, French law provides various tools (so-called "transition" or "harmonization" agreements) allowing buyer, seller and unions to negotiate new collective agreements before closing.