Bankruptcy Law

In accordance with Article L. 1224-1 of the Labor Code, when there is a change in the legal status of an employer, in particular by succession, sale, merger, transformation of the business or incorporation of the company, all employment contracts in force on the date of the change subsist between the new employer and the company's employees. Under this text, the transfer of a debtor company automa …

Taking over of employment contracts

In accordance with Article L. 1224-1 of the Labor Code, when there is a change in the legal status of an employer, in particular by succession, sale, merger, transformation of the business or incorporation of the company, all employment contracts in force on the date of the change subsist between the new employer and the company's employees. Under this text, the transfer of a debtor company automatically entails the continuation, with the transferee, of the employment contracts of employees who have not been redundant under the disposal plan . However, as we have seen, the sale plan may provide for redundancies  and prevent the disposal of the employment contracts of employees, even protected employees, to the transferee . Consequently, the temporary assignment of an employee to the company that is to take over the business, pending his redundancy, does not prevent the debtor from implementing this measure, provided that it was provided for in the disposal plan . In the absence of such provisions, redundancies carried out by the debtor without authorization from the labor inspector, on the unjustified grounds that the protected employee was not on the list of contracts taken over, constitute the offense of obstructing the functions of an employee representative .

Since redundancies can only be validly ordered if they are provided for in the disposal plan  and mentioned in the judgment which must adopt it, those notified to employees prior to the plan are null and void. In fact, the Social Chamber of the Court of Cassation considers that the disposal to an assignee who subsequently took over part of the debtor's staff entails, notwithstanding the temporary interruption of activity, the disposal of an autonomous economic entity retaining its identity and renders the redundancies ordered null and void . An employee who was made redundant before the transfer plan was adopted may therefore seek to have the plan annulled and ask to be reinstated by the new employer, all the more so where the plan does not provide for redundancies on economic grounds, but only for a list, devoid of any value, of the employees taken over, in which he or she is not included . A fortiori, an employee made redundant by the debtor's procedures and hired by the transferee of the business cannot be made redundant by the transferee at the end of a trial period, since the contract has continued ipso jure by virtue of Article L. 1224-1 of the Labor Code, the application of which renders the first redundancy null and void . The text also precludes the transfer plan from providing for the redundancy of all the employees and the subsequent recruitment of a certain number of them .

The protected employee's contract, which is still in force if the debtor's redundancy is null and void because it occurred despite the refusal of authorization by the labor inspector, must be transferred to the transferee company, which must reinstate him and pay him the advance on the wages due to him . He may also challenge his redundancy on economic grounds, even if it was authorized by the labor inspector, before a transfer plan is adopted, on the grounds that it was unfair, before the court, provided that he does not challenge the validity of the administrative decision . If the redundant employee works for the purchaser from the date of the judgment which must adopt the transfer plan until the date of authorization of dismissals, he may claim compensation from the purchaser .

Employees whose redundancy is rendered ineffective may not ask the transferor to pay them redundancy compensation , and must repay it if they have already received it . Nor can they hold the transferor liable for the consequences of changes made to the employment contract by the transferee , except in cases of fraudulent collusion .

Article L. 1224-2, 1° of the Labor Code provides that the new employer is not bound, in respect of employees whose contracts of employment remain in force, by the obligations incumbent on the former employer at the date of the change. This provision concerns debts arising from the performance of the employment contract prior  to the judgment adopting the sale plan, such as wages, compensation and damages for redundancy without real and serious cause . However, it does not apply to benefits granted to employees under a unilateral undertaking given by the former employer or under a collective agreement, which are automatically transferred to the transferee . For example, the debtor's unilateral undertaking to pay its employees an end-of-year bonus, pursuant to Article L. 1224-1 of the Labor Code, is transferred to the transferee when the transfer is carried out as part of the insolvency procedure initiated in respect of the transferor, without this being prevented by the conditions set out in the transferee's offer accepted by the Commercial Code . The transferee may only terminate the agreement if it gives individual notice to the employees and the staff representative bodies within a period that allows negotiations to begin . The obligation resulting from a collective agreement is not transferred if the agreement has lapsed . Similarly, the transferee is not obliged to contribute to supplementary pension schemes set up by the debtor where the debtor had stopped making payments to the bodies nearly five years before the sale plan .

The debtor and the transferee may nevertheless derogate from Article L. 1224-2 and agree to the transfer of certain obligations arising from the performance of the employment contract. The transferee, who has undertaken to take over a certain number of employment contracts and all the acquired rights attached to them, must guarantee the debtor the amount of the sums due to the employee in respect of overtime, paid leave, standby duty and days of reduced working hours worked within his company, the rights to which are acquired by the employees on the day they are completed . Thus, if the disposal plan is silent on the fate of days saved by employees in a time savings account, the debtor, with the guarantee of the AGS, and not the transferee, must be liable for them .

Lastly, the transferee to whom part of the debtor company's employment contracts have been transferred may rely on the settlement reached between the redundant employee and his first employer, in which the latter waived its right to challenge his redundancy, to oppose the latter's request for reinstatement .

Cass. soc., 6 July 1999, LawLex202200009996JBJ (RJ) ; 12 February 2008, LawLex202300004489JBJ (RJ).

Cass. soc., 26 June 1991, LawLex202300003808JBJ (RJ).

Cass. soc., 21 April 2022, LawLex202300003768JBJ (LJ).

Cass. com., 2 February 1999, LawLex202300003761JBJ (RJ).

Cass. soc., 9 July 1997, LawLex202300003760JBJ (RJ) ; 20 January 1998, LawLex202300003810JBJ (LJ) ; 13 May 2009, LawLex202300003815JBJ (LJ) ; 27 November 2013, LawLex202300003812JBJ (LJ) ; 4 November 2015, LawLex202100003481JBJ (LJ).

Cass. soc., 17 October 2000, LawLex202300003757JBJ (RJ).

Cass. soc., 27 November 2013, LawLex202300003812JBJ (LJ).

Cass. soc., 13 May 2009, LawLex202300003815JBJ (LJ).

Cass. com. 18 January 2011, LawLex202100003483JBJ (RJ) holding that the future burden of paying end-of-career benefits to employees taken over under a sale plan, under an insurance contract taken out by the debtor, legally falls on the transferee.

Cass. soc., 23 September 2008, LawLex202300004790JBJ (RJ).

Cass. soc., 30 April 2014, LawLex202300003756JBJ (RJ), emphasizing that the seniority acquired by an employee, taken over by the transferee, in his previous jobs within the same entity, must be taken into account by the transferee.

Cass. soc., 12 September 2018, LawLex202300003759JBJ (RJ).

Cass. soc., 12 March 2008, LawLex202100003482JBJ (RJ).

Cass. soc., 22 January 2008, LawLex202100003591JBJ (RJ).

Cass. soc., 17 June 2003, LawLex202100003489JBJ (LJ).

Cass. soc., 24 May 2000, LawLex202300004449JBJ (RJ).

Cass. soc., 30 June 2016, LawLex202100003495JBJ (LJ).

Cass. soc., 7 April 2010, LawLex202100003484JBJ (LJ).

Cass. soc., 20 November 2013, LawLex202300003809JBJ (LJ).

Cass. soc., 18 December 1991, LawLex202300003807JBJ (RJ).

Cass. crim., 17 March 1992, LawLex202300003805JBJ (RJ).

See, for example, Cass. soc. of 8 December 2004, LawLex202100003479JBJ (RJ), holding that a purchaser commits fraud which gives rise to a right to damages for redundancy without real and serious cause when he redundantly dismisses one of the debtor's employees and replaces him on the same day with another employee.

Cass. soc., 31 March 1998, LawLex202300003811JBJ (LJ).

Cass. soc., 12 May 2021, LawLex202300003758JBJ (RJ).

Cass. soc., 31 March 1998, LawLex202300003769JBJ (RJ).

Cass. soc., 30 June 1992, LawLex202100003476JBJ (RJ).

Bankruptcy Law

602. Taking over of employment contracts

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602. Taking over of employment contracts

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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