1. Preliminary review: understanding your rights before negotiating an exit

1.1 – Why a preliminary review matters

Before entering into exit negotiations, a senior executive needs a precise, quantified assessment of their entitlements. Negotiating without identifying accrued rights and applicable minimum protections risks accepting an inadequate offer. A preliminary legal and financial review is the first step towards a well-managed departure.

1.2 – Matters to review

The review should cover all rights and obligations arising from the employment contract and the position held:

• Calculation of the dismissal indemnity: the statutory or collectively agreed amount, whichever is more favourable, based on the correct reference salary (fixed pay, variable remuneration and benefits in kind)
• Notice period and applicable terms: contractual or collectively agreed duration, release from the obligation to work and pay during that period
• Applicable collective bargaining agreement and any provisions specific to executive employees
• Employment contract provisions: non-compete, mobility, training-cost repayment and confidentiality clauses
• Share option, free share and BSPCE plans: accrued rights, vesting conditions and consequences of departure
• Employee savings and supplementary pension arrangements: PEE employee savings plans, collective PER retirement plans and supplementary pension schemes, including legacy arrangements commonly known as “Article 83” and “Article 39” schemes
• Benefits in kind: company car, accommodation, telephone and insurance
• Any golden parachute arrangements under the employment contract or the company’s constitutional documents

2. Choosing the right exit strategy: mutual termination, dismissal or settlement

2.1 – Mutual termination agreements: flexibility within a statutory framework

A mutual termination agreement (rupture conventionnelle) is often an attractive option for senior executives. Neither party has to establish grounds for dismissal; the termination payment can be negotiated above the applicable statutory minimum; the arrangement may give rise to entitlement to unemployment benefits, subject to the relevant eligibility conditions; and the statutory procedure offers safeguards for both parties. However, the agreement must be genuinely mutual and cannot be imposed by either party.

For senior executives, this process provides scope to negotiate the payment, the termination date, any non-compete obligations and the return of company property. There is a statutory withdrawal period of fifteen calendar days, followed in principle by an administrative approval procedure with a fifteen-working-day examination period. For employees with special statutory protection, authorisation from the labour inspector replaces the standard approval procedure.

2.2 – Dismissal: responding strategically

When an employer initiates dismissal proceedings, the executive should promptly assess whether the stated grounds are substantiated, whether the procedure is lawful and the prospects of a successful challenge. A dismissal lacking a genuine and serious cause (cause réelle et sérieuse) may give rise to compensation under the statutory scale, subject to exceptions for void dismissals and other special regimes. Statutory and contractual termination payments must be considered separately.

In some circumstances, it may be strategically preferable not to challenge the dismissal where the proposed payments are satisfactory and the outcome of litigation is uncertain. In others, a legal challenge may be necessary to secure appropriate compensation.

2.3 – Settlement agreements: resolving disputes

A settlement agreement (transaction) is a contract through which the parties, by making reciprocal concessions, resolve an existing dispute or seek to prevent a prospective dispute. Where it settles the consequences of a dismissal, it must be concluded after the dismissal has been duly notified. It bars further proceedings concerning the same subject matter, within the scope of the disputes settled (Article 2052 of the French Civil Code).

For a settlement agreement to be valid, it must:

• Where it concerns a dismissal, be entered into after the dismissal has been notified, in accordance with the applicable case law
• Involve genuine reciprocal concessions by both parties
• Be entered into freely and without any defect of consent

2.4 – Employee-initiated termination for employer breach: a high-risk option

Under the French procedure known as prise d’acte de la rupture, an employee may terminate the employment relationship on the basis of serious breaches by the employer, such as harassment, unilateral alteration of contractual terms or failure to pay remuneration. If the breaches are sufficiently serious to make continued employment impossible, the termination has the legal consequences of dismissal without genuine and serious cause or, in some circumstances, void dismissal. Otherwise, it has the consequences of resignation, without extinguishing accrued salary claims or outstanding holiday pay. Any entitlement to unemployment benefits must be assessed under the applicable unemployment insurance rules. This is a high-risk course of action requiring careful legal advice.

3. Negotiating severance payments: statutory minimums and negotiating leverage

3.1 – Statutory and collectively agreed minimum entitlements

The statutory dismissal indemnity is calculated at one-quarter of a month’s salary for each year of service for the first ten years, then one-third of a month’s salary per year thereafter (Article L. 1234-9 of the French Labour Code). Entitlement is subject, in particular, to the required length of service and the absence of dismissal for faute grave or faute lourde. The calculation is governed by Article R. 1234-2. An applicable collective bargaining agreement may provide a higher payment, but payments serving the same purpose are not automatically cumulative.

3.2 – Negotiating leverage for senior executives

Beyond the statutory or collectively agreed minimum, several factors may support a claim for a higher termination payment:

• Weaknesses in the grounds for dismissal: where the stated reasons are open to challenge, the employer may prefer negotiation to costly proceedings
• Procedural irregularities: certain breaches of procedure may give rise to compensation, depending on the loss suffered and the applicable regime
• Length of service and difficulty securing an equivalent role: factors that may support an enhanced payment
• Restrictions arising from a non-compete clause: where the clause remains in force, its effect on future employment opportunities is a relevant negotiating consideration
• Oral or written commitments: established and legally enforceable undertakings should be taken into account
• Confidentiality and reputation: the announcement of the departure, reciprocal confidentiality and external communications may be addressed through lawful provisions, without restricting protected reporting or the right to give evidence

3.3 – Golden parachute arrangements

The term golden parachute may refer to different payment obligations: a contractual indemnity on termination of employment or a payment triggered by cessation of a corporate office. Whether such payments can be combined, their validity and their tax and social security treatment depend on their legal basis. In listed companies, arrangements benefiting corporate officers must also be assessed against the applicable corporate governance and remuneration policy rules. It would be incorrect to assume that all executive exit payments are subject to the same regime.

4. Non-compete clauses: negotiating a waiver or enhanced compensation

4.1 – The implications of non-compete restrictions for senior executives

A post-termination non-compete clause can be particularly restrictive for a senior executive whose expertise lies within a specialised sector. A properly drafted clause may prevent competing activities for one or two years across a defined geographical area. Such restrictions can significantly affect prospects of finding a comparable position.

4.2 – Negotiating the release of a non-compete obligation

An employer may unilaterally waive a non-compete restriction only where that power is provided for by the applicable contractual terms or legal framework, and subject to the relevant formalities and time limits. The deadline for waiver requires particular attention where the employee is released from working their notice period. A valid waiver releases the employee from the restriction and the employer from the obligation to pay the associated consideration. For an executive, securing such a waiver may be more valuable than negotiating a larger payment, because it can facilitate an earlier return to comparable employment.

4.3 – Negotiating the financial consideration

If the non-compete obligation remains in force, the financial consideration must not be merely nominal or derisory. French case law requires genuine consideration but does not prescribe a general statutory minimum. There is no generally applicable statutory threshold of 20% or 25% of salary: the adequacy of the consideration must be assessed in light of the restrictions imposed and any relevant collective bargaining provisions. Its negotiation is therefore a significant financial issue.

5. Employment-related benefits: share options, free shares and company cars

5.1 – Share options and BSPCE warrants

The treatment of share options and BSPCE warrants (bons de souscription de parts de créateur d’entreprise, a French tax-advantaged equity warrant scheme) on departure depends on the specific statutory provisions, the award decisions and the relevant plan rules. The mechanisms and tax regimes are not the same. Some plans provide for the lapse of unexercised options on departure; others allow a limited post-termination exercise period. Reviewing the plan documentation before negotiations is essential. The timing of the termination may significantly affect an executive’s rights.

5.2 – Free share awards (AGA)

For free share awards (attributions gratuites d’actions, or AGA), it is important to distinguish unvested rights, shares that have vested definitively and any mandatory holding period. The consequences of departure depend on the plan and applicable legislation, including continued-service conditions, provisions for death or disability and the relevant plan terms. Forfeiture of unvested rights is not an invariable rule. Negotiating the preservation of some or all unvested rights can be important where equity makes up a substantial proportion of remuneration.

5.3 – Company cars and other benefits in kind

The return of a company car is usually governed by the employment contract or agreed as part of the termination arrangements. The return date, any preferential purchase option and responsibility for transport costs during the notice period should be addressed expressly. The same applies to telephones, computers, employer-provided accommodation and other role-related benefits.

6. Tax and social security treatment of termination payments

6.1 – Distinguishing payments by type of termination

The tax and social security treatment of termination payments cannot be reduced to a single exemption threshold. It depends on the nature of the payment and the manner in which the relationship ends (dismissal, mutual termination, a redundancy programme known as a plan de sauvegarde de l’emploi or PSE, settlement, or cessation of corporate office). For dismissal indemnities outside a PSE, the income tax exemption is determined under Article 80 duodecies of the French General Tax Code: in particular, the statutory or collectively agreed amount, or the greater of twice the previous year’s gross annual remuneration and 50% of the indemnity, with the latter alternative subject to a ceiling of six annual French social security ceilings (plafond annuel de la sécurité sociale, or PASS).

Social security contributions and the French CSG and CRDS levies are governed by separate limits and conditions, including special rules for certain high-value termination payments. The applicable ceilings must be calculated using the PASS relevant to the period in question, rather than carrying forward figures from an earlier year.

6.2 – Mutual termination agreements and the specific employer contribution

For an individual rupture conventionnelle, the conditions for income tax exemption depend, among other things, on whether the employee is entitled to receive a retirement pension. The specific employer contribution applicable to certain mutual termination indemnities must be distinguished from ordinary social security contributions and the rules governing dismissal payments. Its rate and assessment base should be checked by reference to the relevant termination and payment dates.

6.3 – Salary-related payments and settlement compensation

• Salary, earned bonuses, accrued holiday pay and payment in lieu of notice: these sums generally retain their employment income character and corresponding tax and social security treatment.
• Dismissal indemnities: their treatment depends on the statutory conditions and ceilings applicable to the particular dismissal.
• Settlement payments: their classification depends on their actual purpose and the loss genuinely compensated. The wording of the settlement agreement alone cannot guarantee an exemption.
• Payments relating to corporate office: their tax and social security treatment must be assessed separately from payments arising on termination of the employment contract.

7. Executives holding both a corporate office and an employment contract

7.1 – Concurrent corporate office and employment

Some senior executives hold both an employment contract (for genuinely distinct operational or technical duties) and a corporate office (mandat social, such as president, managing director or gérant). This dual status raises particular issues on departure: removal from corporate office and termination of employment are legally separate events, governed by different rules.

7.2 – Removal from corporate office

The rules governing removal depend on the corporate form, the office held and the company’s constitutional documents. Some corporate officers may be removed without the need to establish just cause. By contrast, the gérant of a French SARL may be entitled to damages if removed without just cause (Article L. 223-25 of the French Commercial Code). Humiliating or otherwise abusive circumstances surrounding removal may also give rise to compensation, independently of the question of just cause. The competent court depends on the nature of the dispute.

7.3 – Protection of the employment contract

Removal from corporate office does not automatically terminate a genuine employment contract. If the contract was suspended during the term of office, the conditions for its resumption must be considered. If it remained in force, any termination must comply with French employment law. Conversely, termination of the employment contract does not, of itself, end the corporate office. This distinction is central to an executive’s exit strategy: they may be removed from office while retaining an employment contract, or dismissed as an employee while remaining a corporate officer.

8. When negotiations fail: preparing French employment tribunal proceedings

8.1 – Building a robust evidential record

Where negotiations fail to produce a satisfactory agreement, proceedings before the French employment tribunal (conseil de prud’hommes) remain a possible remedy. The executive should prepare relevant evidence lawfully, respecting confidentiality, data protection and the requirements that evidence be necessary and proportionate:

• Retain relevant contractual documents: employment contracts, amendments, share option plan documents and workplace rules
• Compile evidence of remuneration: payslips, bonus statements and bonus award confirmations
• Record alleged employer breaches: relevant emails, meeting notes and messages
• Document actual working conditions: working hours, business travel and responsibilities exercised

8.2 – Time limits for bringing claims

Senior executives must pay close attention to the applicable limitation periods:

• 12 months to challenge termination of the employment contract (including dismissal and an individual mutual termination agreement)
• Two years, as a general rule, for claims concerning performance of the employment contract; three years for claims in respect of payments legally characterised as wages, including certain bonuses
• Five years, in principle, for compensation claims arising from discrimination or harassment, subject to the applicable commencement rules and specific provisions

These periods are subject to exceptions and different starting points (see, in particular, Article L. 1471-1 and Article L. 3245-1 of the French Labour Code).

8.3 – Why early legal advice matters

Employment disputes involving senior executives are rarely straightforward. They may involve substantial sums, challenges to employment status, complex remuneration arrangements and a possible overlap with corporate office. Seeking advice from a French employment lawyer at the outset of negotiations, rather than only after they break down, can materially affect the available options and the eventual outcome.

9. Frequently asked questions about exit strategies for senior executives

10. Legal advice on negotiating a senior executive’s departure

The departure of a senior executive can involve employment law, company law, taxation and contract law simultaneously. These issues are interconnected: the form of termination affects the tax treatment of payments, non-compete restrictions influence negotiations, and the status of a corporate officer determines the applicable removal rules. This complexity calls for a coordinated approach informed by each of these areas of French law.

Patchwork Avocats advises senior executives and businesses throughout negotiated exits, from assessing entitlements and developing a negotiating strategy to drafting or reviewing termination and settlement agreements, analysing contractual restrictions and, where necessary, handling employment or commercial litigation.

Are you a senior executive considering leaving your role or facing dismissal proceedings? Contact us.

1. The fixed-term contract: principles and prohibitions

1.1 – The open-ended contract as the normal form of the employment relationship

Article L. 1221-2 of the Labour Code establishes the fundamental principle: the open-ended employment contract is the normal and general form of the employment relationship. A fixed-term contract is an exception to this principle, permitted only in the cases provided for by statute.

1.2 – The prohibition on using a fixed-term contract to fill a permanent post on a lasting basis

A fixed-term contract may neither have as its object nor produce the effect of filling on a lasting basis a post linked to the normal and permanent activity of the company (Art. L. 1242-1 of the Labour Code). This prohibition is fundamental: it means that an employer cannot use a succession of fixed-term contracts to permanently occupy a post forming part of the company’s principal activity.

1.3 – Cases in which fixed-term contracts are formally prohibited

Even where a fixed-term contract would otherwise be permitted, it is prohibited in certain specific situations (Art. L. 1242-6 of the Labour Code):

• To replace a striking employee
• To carry out particularly hazardous work appearing on a list established by regulatory order
• Within 6 months following an economic dismissal, for the posts affected by that dismissal (unless the contract is a temporary agency assignment, or the fixed-term contract does not exceed 3 months)

2. Permitted grounds for concluding a fixed-term contract

2.1 – Replacing an absent employee

This is the most common ground. An employer may conclude a fixed-term contract to replace an employee whose contract of employment is suspended (Art. L. 1242-2, 1° of the Labour Code):

• Sick leave, maternity leave, paternity leave, parental leave
• Sabbatical leave or unpaid leave
• Temporary reduction to part-time working
• Any other case of suspension of the contract

A fixed-term contract may also be concluded to replace an employee whose post is temporarily vacant pending the arrival of their successor.

2.2 – Temporary increase in business activity

An employer may use a fixed-term contract where there is a temporary increase in the company’s business activity (Art. L. 1242-2, 2° of the Labour Code). This ground requires the additional activity to be genuine, temporary and distinct from the company’s normal and permanent activity. A structural and lasting increase in workload does not justify repeated use of fixed-term contracts.

2.3 – Seasonal employment

Seasonal employment covers tasks linked to the season or to cyclical variations in activity (Art. L. 1242-2, 3° of the Labour Code): agriculture, tourism, hospitality and catering. This ground allows repeated renewals across successive seasons without the employee being able to claim reclassification as an open-ended contract.

2.4 – Sectors where it is customary not to use open-ended contracts

In certain sectors known as “customary use” sectors, it is established practice not to use open-ended contracts for certain posts (Art. L. 1242-2, 3° of the Labour Code). These sectors are defined by regulatory decree or collective agreement: audiovisual production, live performance, education, hospitality and catering, removal services, information technology, leisure centres, etc. In these sectors, fixed-term contracts may succeed one another without limit of number, provided each contract has a genuine ground.

2.5 – Other permitted grounds

Statute also authorises fixed-term contracts in the following situations:

• Contracts concluded with young people during school or university holidays
• Employment integration contracts (contrats d’accompagnement dans l’emploi)
• Replacement of a business owner, a farm operator or a non-employed partner
• Recruitment of engineers and managers for the performance of a defined project, pursuant to a sectoral agreement (fixed-term contract for a defined purpose, CDD à objet défini)
• Pending permanent elimination of the post vacated by a departing employee (Art. L. 1242-2, 5°)

3. Formal requirements for the fixed-term contract

3.1 – The requirement for a written contract

A fixed-term contract must be drawn up in writing and provided to the employee no later than 2 working days after the start of employment (Art. L. 1242-12 of the Labour Code). Failure to put the contract in writing results automatically in reclassification as an open-ended contract.

3.2 – Mandatory provisions

The contract must contain a number of provisions, the absence of which is sanctioned according to their nature (Art. L. 1242-12 and L. 1242-13 of the Labour Code):

• The precise ground for using a fixed-term contract (including, where applicable, the name and job title of the employee being replaced)
• The end date: a specific date or a triggering event (return of the absent employee)
• The minimum duration where the end date is uncertain
• The description of the post and the employee’s professional classification
• The remuneration and its component elements
• The name and address of the supplementary pension fund and provident scheme
• The duration of any probationary period

3.3 – The probationary period in a fixed-term contract

The probationary period in a fixed-term contract is governed by statute (Art. L. 1242-10 of the Labour Code):

• 1 day per week of the contract’s intended duration, up to a maximum of 2 weeks for contracts of less than 6 months
• 1 month for contracts of more than 6 months

Where the fixed-term contract has no fixed end date, the probationary period is calculated by reference to the minimum duration stated in the contract.

4. Duration, renewal and succession of fixed-term contracts

4.1 – Maximum duration of the fixed-term contract

The total duration of a fixed-term contract, including renewals, may not exceed the following limits (Art. L. 1242-8 of the Labour Code):

4.2 – Renewal of the fixed-term contract

A fixed-term contract may be renewed twice, within the applicable maximum duration (Art. L. 1243-13 of the Labour Code). The renewal must be provided for in the original contract or be the subject of an amendment submitted to the employee before the current contract expires. An extended sectoral agreement may provide for different renewal conditions.

4.3 – The mandatory gap between successive fixed-term contracts

At the end of a fixed-term contract, the employer must observe a mandatory gap before concluding a new fixed-term contract or a temporary agency contract for the same post (Art. L. 1244-3 of the Labour Code). This gap is equal to:

• One third of the duration of the fixed-term contract (including renewals) where the contract lasted 14 days or more
• One half of the duration of the fixed-term contract where the contract lasted fewer than 14 days

This mandatory gap does not apply in several cases: replacement of an absent employee or one whose contract is suspended, seasonal employment, customary use employment, early termination at the employee’s initiative, or the employee’s refusal to renew.

4.4 – The end-of-contract payment

At the end of a fixed-term contract, save in certain cases, the employee is entitled to an end-of-contract payment equal to 10% of total gross remuneration paid during the contract (Art. L. 1243-8 of the Labour Code). This payment, sometimes referred to as a “precariousness premium” (prime de précarité), is designed to compensate for the inherent instability of fixed-term employment. It is not due where the employer offers the employee an open-ended contract at the end of the fixed-term contract and the employee refuses, nor for seasonal or customary use employment where the applicable collective agreement so provides.

5. Early termination of the fixed-term contract

5.1 – The general prohibition on early termination

Early termination of a fixed-term contract is in principle prohibited, save in the cases exhaustively provided for by statute (Art. L. 1243-1 of the Labour Code). An employer who terminates a fixed-term contract without justification is liable to pay the employee damages corresponding to the remuneration the employee would have received until the end of the contract.

5.2 – Permitted grounds for early termination

Early termination of a fixed-term contract is permitted in the following situations:

• Agreement of the parties: the employer and employee may agree by mutual consent to end the contract before its term
• Serious misconduct by the employee (faute grave): the employer may terminate the contract immediately without paying any indemnity
• Force majeure: an unforeseeable, irresistible and external event making it impossible to continue the contract
• Permanent incapacity certified by the occupational health physician: where redeployment is impossible
• Recruitment under an open-ended contract: the employee may terminate their fixed-term contract if they can demonstrate that they have been offered an open-ended contract elsewhere, subject to a notice period of 1 day per remaining week, up to a maximum of 2 weeks

6. Reclassification of the fixed-term contract as an open-ended contract

6.1 – Grounds for reclassification

Reclassification of a fixed-term contract as an open-ended contract may be ordered by the labour tribunal in the following cases (Art. L. 1245-1 of the Labour Code):

• Absence of a written contract or failure to provide it within the 2-working-day period
• Absence of the ground for the contract or insufficiently precise statement of the ground
• Reliance on a ground not provided for by statute
• Exceeding the applicable maximum duration
• Failure to observe the mandatory gap between successive fixed-term contracts
• Renewal beyond the permitted limit (more than twice)
• Fixed-term contract used to fill a permanent post on a lasting basis
• Failure to state the name of the employee being replaced in a replacement contract

6.2 – Consequences of reclassification

Where the court orders reclassification of a fixed-term contract as an open-ended contract, the employee is entitled to:

• A reclassification indemnity of no less than 1 month’s salary (Art. L. 1245-2 of the Labour Code)
• The termination payments applicable to an open-ended contract where the employment relationship has ended: statutory or contractual severance pay, payment in lieu of notice
• Damages for dismissal without real and serious cause, where the dismissal is unjustified
• Salary arrears corresponding to periods between successive fixed-term contracts during which no remuneration was paid

6.3 – Time limit for bringing a reclassification claim

A claim for reclassification of a fixed-term contract as an open-ended contract is subject to a 2-year limitation period running from the end of the fixed-term contract in question (Art. L. 1471-1 of the Labour Code). Once this period has expired, the claim is inadmissible, even where the fixed-term contract was irregular.

7. Frequently asked questions about fixed-term contracts

8. Your employment lawyer for fixed-term contract matters

Fixed-term contracts are technically demanding instruments: the permitted grounds are exhaustive, the formal requirements are strict, and the consequences of any irregularity can be severe for both employer and employee. A poorly drafted fixed-term contract, an insufficiently characterised ground, or failure to observe the mandatory gap between contracts can all lead to costly reclassification. For employees, understanding their rights is essential to avoid being kept in a precarious employment relationship that should properly be made permanent.

As specialists in employment law, Patchwork Avocats assists companies in drafting and securing their fixed-term contracts, and defends employees whose rights have not been respected in the context of a fixed-term contract.

1. Collective agreement: definition and sources

1.1 – What is a collective agreement?

A collective agreement (convention collective de travail) is a written agreement concluded between:

• On the one hand, one or more representative trade union organisations
• On the other hand, one or more representative employer organisations or one or more individual employers

It is defined in Article L. 2221-1 of the Labour Code. Its purpose is to set the conditions of employment, professional training and work of employees, as well as their social guarantees.

1.2 – The different levels of collective agreements

The French collective bargaining system is organised at several levels:

1.3 – Extension of collective agreements

A collective agreement may be the subject of an extension order (arrêté d’extension) issued by the minister responsible for labour, making it binding on all employers in the relevant sector, whether or not they are members of the signatory employer organisation (Art. L. 2261-15 of the Labour Code). It is this extension mechanism that explains why most national sectoral collective agreements are binding on all employers in a sector, even those not affiliated with the signatory employer organisation.

2. How to determine the applicable collective agreement

2.1 – The principal criterion: the company’s principal activity

The collective agreement applicable to a company is determined by reference to its principal activity, not the nature of the functions performed by each employee. It is the company’s or establishment’s principal economic activity that determines the scope of application of the collective agreement, regardless of the functions held by the employees concerned (Art. L. 2261-2 of the Labour Code).

2.2 – The APE/NAF code: an indicator, not an absolute rule

The APE code (Activité Principale Exercée, principal activity carried out), also known as the NAF code (Nomenclature des Activités Françaises), is assigned by INSEE to each company at the time of registration. It constitutes a presumption of principal activity, but is not by itself determinative of the applicable collective agreement.

The APE code may be:

• Incorrectly assigned at registration, where the actual activity does not precisely correspond to the assigned code
• Outdated, where the company’s activity has changed since registration without the code being updated
• Insufficiently precise to determine, as between several collective agreements, which one applies

2.3 – Available search tools

Several tools are available to identify the applicable collective agreement:

• The collective agreement search engine on Légifrance
• The official portal convention-collective.fr
• Sectoral employer organisations, which can indicate the agreement applicable to their members
• The labour inspectorate, which may be consulted on this point

3. The principal activity criterion

3.1 – Defining the principal activity

The principal activity of a company is the one that accounts for the predominant share of its revenue, workforce or corporate purpose. It is assessed globally, taking into account all the activities carried out. Where a company carries on several activities, it is the economically dominant one that determines the applicable agreement.

Where there is doubt, the courts assess the principal activity on a sovereign basis by reference to:

• The breakdown of revenue between the different activities
• The breakdown of the workforce by activity
• The corporate purpose set out in the articles of association
• The nature of the contracts concluded with clients
• The job titles and functions performed

3.2 – Companies with multiple activities

Where a company carries on several distinct activities, each falling under a different collective agreement, determining the applicable agreement may give rise to difficulties. Case law holds in principle that the agreement of the economically dominant activity applies. However, where the activities are separated into distinct establishments, each establishment may fall under the agreement applicable to its own activity.

3.3 – Territorial scope

National collective agreements apply across the whole of French territory, including overseas departments and territories where the agreement expressly so provides. Certain regional agreements apply only within a defined geographical area. Where activity is carried on across several regions, the national agreement takes precedence over regional agreements, unless otherwise stipulated.

3.4 – Groups and holding companies

Within corporate groups, each legally distinct company may fall under a different collective agreement, depending on its own activity. A holding company and its subsidiaries may thus be subject to different agreements. However, where the holding company directly employs staff, its own collective agreement applies to those employees, irrespective of the agreement applicable to its subsidiaries.

4. The employer’s obligations under the collective agreement

4.1 – The obligation to inform employees

The employer is required to inform each employee, at the time of recruitment, of the collective agreement applicable in the company. This information must appear:

• In the employment contract (stating the applicable agreement)
• On the payslip (stating the title of the collective agreement and its IDCC number)
• On a notice posted in the workplace, stating the title of the agreement and where it may be consulted (Art. L. 2262-5 of the Labour Code)

The employee also has the right to obtain a copy of the applicable collective agreement on simple request to the employer, or to consult it on Légifrance.

4.2 – The obligation to comply with the minimum rates set by the agreement

The employer is required to comply with all the provisions of the applicable collective agreement, in particular:

• The minimum wages set by category and coefficient
• The job classifications provided for by the agreement
• The notice periods set by the agreement
• The severance pay provided for by the agreement, where more favourable than the statutory minimum
• Any additional leave entitlements provided for by the agreement (seniority leave, family event leave)

4.3 – Making the collective agreement available

The employer is required to make an up-to-date copy of the applicable collective agreement available to employees. In practice, it is sufficient to inform employees that the agreement is available on Légifrance and to post its references in the workplace. Failure to post the required notice or to provide the required information may expose the employer to an administrative fine.

5. Interaction between collective agreement, company agreement and the Labour Code

5.1 – The favourability principle

Traditionally, French employment law was governed by the favourability principle: where several norms conflict (statute, collective agreement, company agreement, employment contract), the norm most favourable to the employee applies. This principle continues to apply in areas not delegated by statute.

5.2 – The reform introduced by the Macron Ordinances of 2017

The Ordinances of 22 September 2017 fundamentally restructured the hierarchy of norms in employment law. They introduced a three-tier system:

• Public order provisions set by statute, from which no agreement may derogate
• The field of collective bargaining: matters on which a sectoral or company agreement may derogate from statute in either direction
• Default provisions: which apply in the absence of a collective agreement

Under this new system, a company agreement may, in many areas, derogate from the sectoral collective agreement, including in a manner less favourable to employees.

5.3 – Areas where the sectoral agreement takes precedence over the company agreement

Statute nonetheless reserves to the sectoral collective agreement an exclusive block of competences in which a company agreement may not derogate (Art. L. 2253-1 of the Labour Code):

• Minimum hierarchical wages
• Professional classifications
• Pooling of vocational training funds
• Collective supplementary welfare guarantees
• Certain conditions for the use of fixed-term contracts and temporary agency work
• Equal treatment between women and men

5.4 – The employment contract and the collective agreement

An individual employment contract may not be less favourable than the applicable collective agreement. Where a contractual clause falls below the minimum rates set by the agreement, the collective agreement applies automatically in place of that clause. Conversely, a contract may provide for advantages more favourable than those under the agreement, which then apply in place of the relevant agreement provisions.

6. Wrong collective agreement: consequences and remedies

6.1 – Consequences of applying the wrong collective agreement

Applying the wrong collective agreement, or failing to apply the correct one, may have significant consequences for the employer:

• Salary arrears: where the minimum rates under the correct agreement are higher than the wages paid, the employee may claim the difference over 3 years
• Higher severance pay: where the correct agreement provides for higher payments than those made
• Longer notice period: with corresponding payment in lieu
• Additional leave entitlements not granted: with corresponding compensatory payment
• Damages for disloyal performance of the employment contract

6.2 – Case law on the application of the wrong collective agreement

The Court of Cassation has clarified the consequences of an error in collective agreement identification in several important rulings. In the area of the annual day-based package (forfait annuel en jours) in particular, it has held that applying the wrong collective agreement does not necessarily invalidate the package, where the correct agreement also authorises this arrangement — but that the employee may claim salary arrears for days worked beyond the ceiling set by the correct agreement (Cass. soc., 25 March 2026, n° 24-22.129).

6.3 – Time limits for bringing a claim

Claims based on the application of the wrong collective agreement are subject to the following limitation periods, depending on the nature of the claim:

• 3 years for salary arrears and indemnities of any nature (Art. L. 3245-1 of the Labour Code)
• 12 months for claims relating to termination of the contract (Art. L. 1471-1 of the Labour Code)

7. Frequently asked questions about collective agreements

L’article Applicable Collective Agreement in France: How to Determine It est apparu en premier sur Patchwork Avocats.