Co-employment within business groups: a new definition for an exceptional situation – Real estate and construction

0


In a decision rendered on November 25, 20201, the Court of Cassation(French Supreme Court) reaffirmed the exceptional nature of co-employment by giving a new definition of its constituent elements.

This more restrictive definition, which reinforces the exceptional nature of the co-employment situation, should have a dissuasive effect on employees wishing to invoke this concept in court.

Co-employment within groups of companies is a concept developed by the French courts, in particular in the context of disputes with a view to seeing a company belonging to a group (the parent company) to be held jointly responsible for the financial consequences of redundancies. for economic reasons (layoffs) implemented by its subsidiary.

Indeed, the parent company of a group can get involved in the management of its subsidiaries to such an extent that the employees of the subsidiary – most often during the implementation of layoffs – invoke, outside the relationship of subordination, the status of co-employer of the parent company and claims that the latter must, therefore, fulfill the obligations resulting from this status. The objective of employees is thus to have a new debtor responsible for the payment of the damages they claim, thus improving their chances of compensation, in particular when their employer has initiated insolvency / bankruptcy proceedings, which limits the possibilities of contesting the reason (s) put forward to justify the dismissals, or when the recognition of the existence of a co-employment situation affects the validity of the dismissals, for example when a dismissal plan is not not properly implemented.

As dismissed employees frequently invoke the concept of co-employment, the Court of Cassation had already limited the recognition of the existence of a co-employment situation to exceptional situations.

As such, in addition to the existence of a relationship of subordination, a company belonging to a group could be considered as a co-employer with regard to the personnel employed by another company of the group, only if it existed between them, beyond the coordination of economic actions that is necessary between companies belonging to the same group and the economic domination that those belonging to the same group can create,
a mix of (i) interests, (ii) activities and (iii) management resulting in interference in the economic and social management of this other company in the group.2

the Court of Cassation has, for example, decided that the following cannot be used as criteria to establish the existence of a co-employment situation:

  • the existence of common managers, a head office located in the same place, the need for the employer to take into account the decisions taken at group level, the financial assistance that a holding company may be required to grant, in particular for contribute to the financing of related measures3;
  • common commercial and administrative services, as well as treasury or netting agreements4;
  • technical assistance and cash management agreements5 ;
  • close cooperation between companies of the same group within the framework of a support agreement providing for such support to be taken into account6;
  • commitments made to guarantee the obligations of the subsidiary7.

On the other hand, a situation of co-employment could result from the permanent power of action exercised by the director of human resources of the group to the detriment of the director of the subsidiary, from the interference of the parent company in the economic and social management of the subsidiary, control of the administrative, contractual and financial activities of another entity, all these elements establishing that the employer was totally subject to joint management and no longer had any own power in the conduct of the company8.

In its decision of November 25, 2020, the Court of Cassation abandoned these three traditional criteria and established a new definition of co-employment which is intended to be more explicit and more restrictive.

In this particular case, a company had laid off its employees for economic reasons due to the cessation of its commercial activities. The employees contested their dismissal, brought proceedings before the labor tribunal and brought actions for damages against their employer as well as against the parent company, arguing that the latter had the status of co-employer.

The Court of Appeal recognized the existence of a co-employment situation on the grounds that the employer had delegated to the parent company the management of its human resources when it ceased its commercial activities, the financing of the dismissal procedure; and cash and support agreements in exchange for payment.

The parent company brought an appeal before the Court of Cassation, arguing that the conditions required for the establishment of co-employment were not met.

the Court of Cassation quashed the appeal decision on the grounds that the trial judges had failed to qualify “the permanent interference of parent]
company in the economic and social management of the employer that is to say the subsidiary], resulting in the total loss of autonomy of action of the subsidiary]”.

As such, it considers that henceforth, in addition to the existence of a relationship of subordination, a company forming part of a group can therefore only be considered as a co-employer of staff employed by another company if it exists, beyond the coordination of economic actions that is necessary between companies belonging to the same group and the economic domination that those belonging to the same group can create, a permanent interference of this company in the economic and social management of the employer, resulting in the total loss of autonomy of action of the last.

In other words, the work of the Court of Cassationfact of the permanent interference of one company in the economic and social management of another, resulting in the total loss of autonomy of the latter, the only criterion to establish the existence of a situation of co-employment.

This more restrictive definition, which reinforces the exceptional nature of the co-employment situation, should have a dissuasive effect on employees wishing to invoke this concept in court.

Footnotes

1. Labor chamber of the Court of Cassation, November 25, 2020 18-13.769

2. Labor chamber of the Court of Cassation, July 2, 2014, 13-15.208

3. Labor chamber of the Court of Cassation, July 2, 2014

4. Labor chamber of the Court of Cassation, October 9, 2019 n ° 17-28.150 FS-PB

5. Labor chamber of the Court of Cassation, May 24, 2018 n ° 16-18.621 FS-PB

6. Labor chamber of the Court of Cassation, March 7, 2017 n ° 15-16.865 FS-PB

7. Labor chamber of the Court of Cassation, July 6, 2016 n ° 14-27.266 PB

8. Labor chamber of the Court of Cassation, June 6, 2016 n ° 15-15.481 FS-PB

To read in French, please click here.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought on your particular situation.

Leave A Reply

Your email address will not be published.