This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

French Distribution Law

In principle, the subordination of the salaried manager excludes, like for any employee, any financial liability on his part. However, since his task consists in selling goods entrusted by the supplier, he may be held responsible for the inventory shortfalls under certain conditions. The inventory shortfall is the difference between the value of the initial stock plus the value of the supplied goo …

Obligation of sound management and restitution.

The Labor Code grants the salaried manager the benefit of social provisions in respect of working hours, wages, rest breaks and vacation where the supplier has fixed the conditions of work, health and safety in the workplace in the establishment, or if those conditions have been subject to his consent. Otherwise, the manager is regarded a company head and the provisions relating, in particular, to individual working relations, working hours or salary apply to him in that respect (Labor Code, Article L. 7321-3).

Where the salaried manager's relationship of subordination is recognized, he may thus obtain payment for overtime where he needs to work beyond the statutory duration  or paid vacation, unless he is free to fix the terms thereof . He benefits from the provisions of the Labor Code on collective bargaining agreements and falls within the agreement to which the head of business who “hires” him is subject . 

Like any employee, and except in the event of gross misconduct, the salaried manager is entitled to a minimum monthly remuneration equal to at least the minimum wages (SMIC) , as well as to repayment of his business expenditures which cannot be charged to the remuneration owed to him . His claim relating to pay cannot be offset with sums paid by the oil company to the company incorporated by the manager for the operation of the gas station . Similarly, dividends paid by the company to its director, which cannot be equated with a salary, cannot be deducted from the unpaid wages owed by the oil company to the manager having requested the reclassification of his contract . The supplier ordered to pay the branch manager the compensation due in application of a mandatory public policy provision cannot therefore claim from the legal entity constituted by the latter, the payment, even in part, of the sums paid for services it has performed in execution of the distribution agreement .

The right to back pay for the period of performance of the contract is subject to a five-year statute of limitations, like any claim related to pay (Labor Code, Article L. 3245-1) . The five-year limitation period for salary claims stands where salaried managers do not bring evidence that they were unable to sue for the reclassification of their contracts as employment contracts and are unable to show any legally admissible cause for the suspension of the limitation period . Where the profits from his operations are less than the minimum remuneration that he should have received under the collective bargaining agreement, he must first bring evidence of their amount by submitting his accounts since his remuneration comes from the profits derived from sales rather than payments of the company that hires him . He may be bound under a contract to guarantee any stock shortfall but that obligation is valid only up to his right to receive minimum wages . By contrast, during the same year, he cannot obtain both sums owed to him as wages and sums received as commercial profit . Finally, although the manager meeting the conditions laid down by Article L. 7321-2 of the Labor Code may avail himself of the collective agreement applicable to the employer-employee relationship, he cannot, in the absence of any relationship of subordination, be equated to an executive and cannot therefore benefit from the corresponding contractual classification .

At the end of the contract, the termination of the salaried manager contract is governed by the rules applicable to the termination of an employment contract (meeting, sending of a letter setting forth reasons , compliance with notice, severance payment, unemployment benefit, etc.) . He cannot claim payment of compensation for end of management set forth in his contract or for the taking back of stock . However, although he cannot combine the benefits stemming from labor law resulting from his legal status as employee and the benefit of the contractual compensation for end of the management provided for in a professional agreement, he may waive that compensation . The fact of withdrawing from an action under emplyment law aimed at recognizing the status as salaried manager irrevocably shows a renunuciation of the benefit of such status . In case of a transfer of the undertaking, he benefits from the rules of Article L. 1224-1 of the Labor Code which require the purchaser to pursue his contract . 

Lastly, the salaried manager falls within the social security rules on employees (Social Security Code, Article L. 311-3, 26º). This social protection is one of the main advantages of such classification. However, the manager does not fulfill the conditions of membership to the supplementary retirement pension schemes, AGIRC and ARRCO .

Cass. soc., 22 May 1986, LawLex201000000748JBJ; 22 September 2015, LawLex201500001181JBJ; 10 October 2018, LawLex201800001534JBJ.

Cass. soc., 19 March 1991, LawLex201000000749JBJ: the former manager of a gas station who benefits from the status of salaried manager is entitled to paid vacation only if he shows that this vacation is imposed by the company.

Cass. soc., 6 February 1980, LawLex201000000747JBJ, for a manager of petrol station.

Compare with the non-salaried manager of a retail business branch who must in all events assume all the inventory shortfall: CA Orléans, 2 April 1998, LawLex200200004429JBJ.

See for a salaried management of a service station: Cass. soc., 13 March 2001, LawLex201000000746JBJ.

Cass. soc., 7 March 2018, LawLex201800000405JBJ; 7 December 2017, LawLex201700002049JBJ, cited above.

Cass. soc., 23 May 2000, LawLex201000000752JBJ.

See, for example, Cass. soc., 23 May 2000, LawLex201000000752JBJ, as regards a letter that puts an end to a contract of lease-management of a gas station which amounts to a dismissal without real and serious cause where it does not set forth the reasons for the dismissal; 22 September 2015, LawLex201500001181JBJ, censuring CA Paris, 22 October 2013, which had held that the application of the status specific to the branch managers, laid down in Article L. 7321-2 of the Labor Code, provided for the the latter to be covered by the protective provisions of labor law only in the area of overtime, paid vacation, compensatory rest days, annual leave, weekly leave, authorized hours of work per week and holidays, excluding the part of the Labor Code dealing with termination of employment.

Cass. soc., 26 February 1992, LawLex200200004519JBJ.

Cass. com., 8 April 1992, LawLex200200004518JBJ.

CA Nancy, 20 June 1988, LawLex200200006212JBJ upheld by Cass. soc., 8 April 1992, LawLex200200004518JBJ.

Cass. soc., 7 October 1992, LawLex201000000750JBJ: Article L. 1224-1 of the Labor Code (former Article L. 122-12) applies to the manager of a service station who benefits from the status as salaried manager set forth in Article L. 7321-2 of the Labor Code (former Article L. 781-1);

Cass. soc., 6 December 2017, LawLex201700002050JBJ; 7 March 2018, LawLex201800000405JBJ, cited above.

Cass. soc., 5 March 1981, LawLex201000000760JBJ; 7 February 1990, LawLex200200004516JBJ; 20 January 1993, LawLex200200004536JBJ; 10 October 2018, LawLex201800001534JBJ, cited above, allowing the claim for a salary adjustment where without counting time off for union duties, his remuneration is less than the minimum wage.

Cass. soc., 25 February 1998, LawLex200200005106JBJ.

Cass. soc., 17 November 2010, LawLex201000001265JBJ; 12 January 2011, LawLex201100000047JBJ.

Cass. soc.,  5 July 2017, LawLex201700001192JBJ

Cass. com., 11 December 2019, LawLex201900001563JBJ; 12 February 2020, LawLex202000000223JBJ. 

Cass. soc., 22 October 2008, LawLex200800001878JBJ; 26 November 2008, LawLex200900001730JBJ; 1 July 2009, LawLex200900003297JBJ.

Cass. soc., 17 November 2010, LawLex201000001265JBJ; 12 January 2011, LawLex201100000047JBJ; 5 December 2012, LawLex201200002420JBJ; 20 February 2013, LawLex201300000214JBJ; 30 May 2013, LawLex201300000900JBJ; CA Montpellier, 5 June 2013, LawLex201300000944JBJ; 5 March 2014, LawLex201400000454JBJ; 5 July 2017, LawLex201700001197JBJ; 8 November 2017, LawLex201700001829JBJ..

Rights of the salaried manager.

In principle, the subordination of the salaried manager excludes, like for any employee, any financial liability on his part. However, since his task consists in selling goods entrusted by the supplier, he may be held responsible for the inventory shortfalls under certain conditions. The inventory shortfall is the difference between the value of the initial stock plus the value of the supplied goods and the value of goods deposited at the time of the inventory, plus the value of the sold products . The salaried manager may thus commit himself under a contract to pay the amount of any inventory shortfall which may be offset by severance payments . However, his commitment may not undermine his right to the legal minimum wage .

However, unlike employees, the manager subject to the application of Article L. 7321-2 of the Labor Code may incur pecuniary liability in respect of the principal independently of the existence of a serious breach . Simple negligence in supervising the stock may partly incur the liability of the salaried manager for mismanagement . Likewise, he may be charged for the operational deficit resulting from his mismanagement and expense commitments that are too high . In effect, even if, in principle, he does not bear the operating risks, the manager has more autonomy than an employee in exercising his commercial activity. This hybrid status is sufficient to allocate part of the operational risk liability on him. His liability in the occurrence of the deficit is presumed. Furthermore, the salaried manager must show transparency with respect to third parties. The employer cannot be personally held liable for an order placed by the salaried manager in the interest of the undertaking if that salaried manager has exceeded his powers and contracted in his personal name with the payment of a deposit out of his own pocket without the seller knowing of the existence of the true owner of the business .

Finally, the status of branch manager of the individual operator does not remove the legal personality of the dependent undertaking nor the existence between the latter and the supplier, of trade relations which may give rise to debts guaranteed by that manager for which the undertaking is liable .

Cass. soc., 10 March 1988, LawLex201000000758JBJ, as regards a non-salaried manager of branches of retail food businesses.

Cass. soc., 23 June 1988, LawLex200200004413JBJ, which excludes by contrast any offset with the claim relating to pay.

Cass. soc., 20 January 1993, LawLex200200004536JBJ.

Cass. soc.,  23 November 2016, LawLex201600001923JBJ.

Cass. soc., 7 February 1990, LawLex200200004516JBJ, quashing CA Grenoble, 9 February 1987, LawLex200200004423JBJ.

Cass. soc.Cass. com., 5 March 1981, LawLex201000000760JBJ, as regards a manager who has neglected to protect himself against the foreseeable consequences of theft and in particular to take out insurance.

CA Orléans, 11 June 1996, LawLex200200006376JBJ.

Cass. com., 13 December 2017, LawLex201700002083JBJ.

French Distribution Law

564. Obligation of sound management and restitution.

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564. Obligation of sound management and restitution.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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