Without prejudice of the nature of the contemplated transaction (purchase of real estate, purchase of the sole assets, transfer of a part of the activity, etc), the main issue consists in determining whether such a transaction would automatically entail the transfer of the employment contracts to the transferee or not (in this latter case, each employee’s consent would be required prior to the transaction).
Article L. 1224-1 of the French Labor Code which leads to the transfer of the employment contract to the purchaser does not always apply and must be examined on a case by case basis. For example it does not apply to the transfer of tangible assets dedicated to an activity if the activity in itself is not transferred or to the transfer of materials without the transfer of the business or the customers or to the sale of an asset without the actual transfer of the economic activity.
According to well-established case law, the provisions of Article L 1224-1 apply to any transfer of an autonomous economic entity where the operations are continued or resumed while its identity is maintained. An autonomous economic entity is defined as an organized group of persons and tangible or intangible assets allowing for the conduct of an economic activity pursuing its own objective.
Only if this condition is satisfied do the employment contracts of the employees become transferred automatically without any right for the employees concerned to oppose such a transfer.
Is should be noted that an authorization of the labor inspectorate is needed prior the transfer if any concerned protected employees (employee rep. union reps., etc) are affected by a partial transfer of activity.
If Article L. 1224-1 does apply, it will have an effect on the employment contract (transferred automatically without changes to the purchaser who takes over all the contractual employment obligations according to seniority and without any trial (probation) period) and it will also have consequences on the collective status of the transferred employees. The collective bargaining agreements, understandings and applicable practices are also transferred to the purchaser for a limited period of time and certain conditions will apply to mandatory profit-sharing schemes and incentive schemes. The employees’ representative body may also be transferred under specific conditions.
Subject to the particular terms of the contemplated project, in relation to the procedure, each member of each institution (the works council of the transferring company and the works council of the recipient company, if any) may need to be given written notice of a meeting and a meeting of the health and safety committee may also be required if the transfer implies a modification of the working and/or safety at work conditions. These meetings must be held prior to any transaction being completed.
It is also important, according to the type of transaction, to take into account the commitments provided by the articles 18 to 20 of the Law n° 2014-856 of July, 31st, 2014 relating to the prior information of the employees on the contemplated selling of the company.
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