News - France

France - November 2016

French Supreme Court Clarifies that Intra-Group Transfers may Continue to be Formalised Through Tripartite Agreements

The background

Under French labour law, an employment contract may only be terminated through resignation by the employee, dismissal by the employer or mutual agreement between the parties.  According to a 2014 decision by the French Supreme Court, termination of the contract through mutual agreement may only be valid following compliance with the specific procedure provided by the French labour code for the Approved Contractual Termination (“Rupture Conventionnelle Homologuée”).  Under this procedure the termination of the contract allows the employee to benefit from an indemnity at least equal to the one he/she would have received in case of dismissal.  This decision has caused much uncertainty regarding intra-group transfers.

Generally speaking, intra-group transfers of employment contracts are formalised through tripartite agreements entered into between the original employer, the new employer and the employee.  Through these agreements, the parties agree that the original employment contract is transferred to the new employer and therefore that the contractual relationship with the first employer is terminated without compensation or specific procedure. In such a case the length of service of the employee would be maintained.

The question before the Supreme Court was whether, since the only valid procedure for termination by mutual agreement is, according to the Supreme Court, the special procedure of the Rupture Conventionnelle Homologuée, was it necessary to follow such procedure (and therefore ask for the approval of the French labour authorities and pay an indemnity) within the context of intra-group transfers.

The Supreme Court's ruling

On 8 June 2016, the Supreme Court confirmed that this specific procedure does not apply to tripartite agreements dealing with intra-group transfers of an employment contract, where the purpose is to organise the continuation of the work relationship with another employer of the group and not the termination of the first contract.  The Court specifically indicated that the specific procedure only applies for the purpose of “securing the termination of the employment contract, which leads to the definitive loss of employment”, which is definitely not the case in a transfer of an employment contract.

Comment

This is good news for international companies using international mobility as a career development strategy.  Tripartite transfer agreements remain the simplest way to ensure that for such international transfers, only one agreement is concluded between the mobile employee and his two successive employers.  This decision establishes the practice of autonomous tripartite agreements in case of intra-group transfers such that there is no specific procedure or severance payment.

Further information

For further information or to discuss any of the issues raised, please contact Stéphanie Le Men-Tenailleau (lementenailleau@galahad-legal.com) on +33 1 40 06 28 29.

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