Author

AdminPrad

Date

22 March 2013

Transfers of undertakings: application of Article L. 1224-1 of the French Labour Code

Need to take over directly or indirectly any tangible or intangible means that are significant and necessary for operating the entity.

Pursuant to Article L. 1224-1 of the French Labour Code, the employment contracts are transferred when an independent economic entity that retains its identity is taken over, so long as the business activity is continued or taken over. In a decision of 27 February 2013, France’s Court of Cassation (Cour de Cassation) recalled the application conditions.

 (Cass.Soc. 27 février 2013 – pourvoi n°12-12305).

In June 2005, a private hospital in Bordeaux outsourced its cleaning, reception, switchboard, catering, and maintenance services.

In 2008, the hospital took back over the reception and switchboard services, and entrusted the cleaning to Company F. whose rights have been transferred to the company Elior Services Propreté et Santé.

The employees taken back or taken over disputed the conditions under which their employment contracts were transferred.

The Court of Appeal of Bordeaux quashed the judgments rendered by the industrial tribunal (conseil des prudhommes), the Court of Appeal of Bordeaux ruling in favour of the employees, ruling that the employment contracts of the employees had been transferred in a situation to which Article L.1224-1 of the French Labour Code applies as of right, and upholding their various claims.

The decision of the Court of Appeal of Bordeaux states “that for certain sectors in which the business activity relies essentially on labour, a group of workers united durably by a common activity may correspond to an economic entity that can maintain its identity beyond its transfer when that group of staff implements technical knowledge or qualified know-how thus constituting a intangible economic asset, and that, in this case, the employees assigned to this cleaning activity developed specific cleaning techniques and expertise such as “clean room” cleaning or “bio-cleaning” of technical areas”.

For the judges of the Court of Cassation, Article L. 1224-1 of the French Labour Code applies in cases of “transfer of an independent economic entity that keeps its identity and whose business activity is continued or taken over; whereas an independent economic entity is an organised group made up of people and of tangible or intangible elements pursing its own economic objective; whereas transfer of such an entity takes place if tangible or intangible means that are significant and necessary to operating the entity are taken over directly or indirectly by a new operator.”

The Court of Cassation thus recalls the definition of an “economic entity” as given for its decision MGEN / CPAM PARIS 12 (Cass. Soc. 7 juillet 1998, n° 96-21. 451) close to that given by European Community case law and to that resulting from European Council Directive 2001/23/EC of 12 March 2001 relating to safeguarding of employees’ rights in the event of transfers of undertakings.

It should also be observed that the above definition recalls the possibility of direct or “indirect” takeover of tangible or intangible means, mentioned for the first time in the decision Sté Avenance Enseignement et santé / Dumont (Cass. Soc. 24 novembre 2009, n° 08-44.148). In this case, mere continuance of the same cleaning activity, even if it is done by employees to whom the Court of Appeal had recognised “specific cleaning techniques and expertise such as “clean room” cleaning or “bio-cleaning” of technical areas”, is not sufficient to establish the transfer of an independent economic entity, in the absence of takeover of tangible or intangible elements. Transfer of such an entity thus takes place if tangible or intangible means that are significant and necessary to operating the entity are taken over, directly or indirectly, by a new operator.

Author

AdminPrad

Date

22 March 2013

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