France: Bidding UK law ‘adieu’?

Last Updated: 29 October 2003

Article by Philippe Desprès and Sébastien Le Coeur

Foreign employees posted to France often successfully claim that French law governs their employment contracts. Philippe Desprès and Sébastien Le Coeur of Gide Loyrette Nouel examine the issues for UK employers.

In spite of increasing convergence in the employment laws of the EU member states, and growth in employees’ international mobility, significant disparity persists in the treatment of employees in different European countries. In this respect, the law governing the employment relationship in accordance with the EC Convention on the Law Applicable to Contractual Obligations (the Rome Convention) continues to raise practical problems.

Although, in accordance with the Rome Convention, the parties to an employment contract are free to choose the governing law, we shall see that French law strictly limits this choice. In practice, employees posted to France under an employment contract governed by a foreign law often successfully claim that French law governs the employment relationship, especially in the event of dismissal, in order to benefit from provisions that are frequently more favourable.

Under French law, in the event of dismissal, employees benefit in particular from:

  • a strictly regulated dismissal procedure involving a formal preliminary meeting and notification;
  • a notice period and severance pay which are due except in the event of gross misconduct;
  • damages for unfair dismissal amounting to at least six months’ gross salary (where the employee has at least two years’ service in a company employing more than ten employees); and
  • specific redeployment and training measures for employees faced with redundancy.

'Posting’ is the term used in EU legislation rather than ‘assignment’ or ‘secondment’, and is different from ‘transferring’ an employee. In the event of a posting, the employee is supposed to work for a limited period of time and on a specific assignment in France. In the event of a transfer, the employment contract with the English company is terminated or suspended and a new employment contract is entered into with the French company.

This article reviews the basic principle applying to conflicts of law and discusses the limits of this principle.

Freedom of choice

French courts apply the Rome Convention to resolve conflicts of laws relating to contractual obligations. Under Article 10, the law applying to a contract shall, in particular, govern interpretation, performance, damages and termination.

The basic rule set forth by the Rome Convention is that ‘a contract shall be governed by the law chosen by the parties’ (Article 3). The choice of law must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. The parties can select the law which applies to all or a part of the employment contract (dépeçage).

Therefore, when an English company posts an employee to France, it should ensure that English law expressly governs the whole employment contract and not only, for instance, termination. It is also advisable to subject other important obligations, such as non-compete, confidentiality or working time clauses, to English law.

If the employment contract does not state that English law applies, the letter of assignment - which sets out the terms and conditions of the posting - should stipulate that the entire employment contract is governed by English law, even during the posting to France.

There are, however, limits on this freedom of choice, which are provided in Article 6 of the Rome Convention and French case law.

Habitual place of work

Under Article 6, a choice of law made by the parties in a contract of employment shall not have the result of depriving the employees of the protection afforded to them by the mandatory rules of the law that would apply in the absence of choice. An employment contract shall, in the absence of choice, be governed by the law of the country in which the employees habitually carry out their work in performance of the contract, even if they are temporarily employed in another country.

In other words, the employees are covered by the mandatory rules of the law of the country where they habitually carry out their work. This concept of the habitual place of work is a traditional tool used to resolve conflicts of jurisdictions and laws.

If the employees do not habitually carry out their work in any one country, their employment contracts shall be governed by the law of the country of the company which appointed them. This provision is designed to apply to employees, generally in sales-related positions, who work in several countries at the same time. This would not be the case for an English employee posted to France, who would work consecutively in two countries.

Article 5 of the Brussels Convention on jurisdiction (as replaced by Article 19 of Regulation 44/2001/EC) contains a similar provision to the Rome Convention, stating that an employer domiciled in a member state may be sued before the courts in the place where the employees habitually carry out their work. This test was added to the Brussels Convention in 1989. When drafting the amendment, the view was taken that disputes should as far as possible be brought before the courts of the state governing the contract in line with the case law of the European Court of Justice (Report on the Convention on the Accession of Spain and the Portuguese Republic to the Brussels Convention, OJ 1990 C 189, p 35, at paragraph 23).

Since courts determine firstly whether they are competent and subsequently which law applies, case law on the habitual place of work is generally based on Article 5 of the Brussels Convention.

The place where the employee has worked the longest

The employment law section of the Supreme Court has ruled that:

  • Portuguese law applied where the employee had worked in Portugal for 30 years and in France during the four years prior to his dismissal (Gasalho v Tap Air Portugal [2000]);
  • US law applied where the employee had worked in Amsterdam for six years, in Singapore for four years, and in New York during the six years prior to his dismissal (Ferwerda v BNP [1999]);
  • French law applied where the employee had worked in Argentina for 14 years and in France during the 15 years prior to his dismissal (Carlos Olivia Campos v Banco de la Nacion Argentina [2001]); and
  • French law applied where the employee had worked in France for the last ten years out of 15 (Trans Mediterranean Airways v Raphaël [1996]).

Applicable test

Pursuant to case law, the place of performance is the location where the employees actually perform the work covered by the contracts with their employer – or, in other words, the location which is the centre of their professional activities.

The ECJ sets out the applicable test in Weber v Universal Ogden Services Ltd [2002]:

Where an employee performs his contract of employment in several member states the place where he habitually works is the place where, or from which, taking account of all the circumstances of the case, he in fact performs the essential part of his duties vis-à-vis his employer.

In the case of a contract of employment under which an employee performs for his employer the same activities in more than one member state, it is necessary, in principle, to take account of the whole of the duration of the employment relationship in order to identify the place where the employee habitually works.

Failing other criteria, that will be the place where the employee has worked the longest.

Therefore, where the employees carry out their work consecutively in two countries, as would be the case for an employee posted by an English company to France, the court will choose the location where the employee has worked the longest.

This test has been applied by the French Supreme Court (Cour de Cassation) in a number of cases. Obviously, if the employees have performed their work in only one country, the law of that country will apply (see Steinman v Société Générale [1999], Paris Court of Appeal).

Mandatory rules

Under French law, the concept of law further to the Rome Convention covers the aggregate of legislation, regulations, judicial decisions and accepted legal principles. It also covers sector-wide collective bargaining agreements. However, it does not apply to the common practices for a particular industry sector or company.

Pursuant to Article 3.3 of the Rome Convention, mandatory rules are the rules which cannot be derogated from by contract. Under French employment law, it is almost always possible to derogate by contract from rules set forth by statutes, regulations or collective bargaining agreements.

However, it is only possible to derogate from rules to the employee’s advantage. Therefore, in any given situation, the rules of the law chosen by the parties will not apply if they are less favourable than the rules of French law.

Although case law covers rules relating to dismissals and their direct consequences, this rationale would apply to any other rules (such as leave of absence, compensation and working time).

Does English or French law apply?

To determine whether English or French law governs the employment relationship, the employer should firstly consider whether it is possible to derogate from the French rule of law by contract. This is almost always possible, provided that the derogation is in favour of the employee.

Secondly, it should compare the French and English rules of law relating to the same matter to determine which is more favourable to the employee. If the matter is not covered by English law, the French provisions will be deemed more favourable and, therefore, applied.

If the employee has already received payments under English law, the courts will offset them from the payments due under French law if they relate to the same matter (for example, the notice period).

Examples of mandatory rules

In the case of Institut Culturel Autrichien v Maria Marceglia [2002], the employment section of the French Supreme Court characterised a number of French rules as mandatory rules in accordance with the Rome Convention. It found that the French rules governing the preliminary meeting in the event of dismissal, and those governing damages for dismissal without cause, were more favourable than Austrian law. It also found that state-funded measures for employees faced with redundancy, which do not exist under Austrian law, were more favourable under the French rules.

In the case of Air Afrique v Maillard [1992], the Supreme Court ruled that French rules on redundancy were more favourable than the law of the Ivory Coast.

Management and supervision

Where a French company acts as if it were the posted employee’s employer, a court would be likely to rule that it is the actual employer, even if the English company continues to manage and supervise the employee during the posting. To avoid French law governing the employment relationship with one of its posted workers, an English employer should ensure that:

  • it determines the terms and conditions of the posting, and the French company does not enter into an employment contract with the posted employee (see, for example, Sethurman v Mandataire Liquidateur de la BCCI [1996]);
  • the French company does not carry out an appraisal for the employee or give him instructions;
  • the management of the French company does not take disciplinary action or dismiss the employee (see BP France v Panetier [2001]);
  • the employee’s remuneration is not paid by the French company and is not dependent on the French company’s performance – nor must the employee be included on the French payroll (see Jego-Quéré v Beauséjour [1998]);
  • the management of the French company does not inform the employee of the upcoming termination of his posting (see International Harvester v Klaus Helkov [1988]);
  • the French company carries out none of the above measures ‘on behalf’ of the English company (see Barrat v Angelloz-Nicoud [1998]);
  • the French immigration services consider that the employee is posted and not engaged in France (see International Harvester v Klaus Helkov);
  • the employee is posted in accordance with Articles 14 et seq of Regulation 1408/71/EC – in other words, his English social security cover should be maintained during the posting and the French company should not pay social security contributions to the French authorities for him (see Jego-Quéré v Beauséjour); and
  • the letter of assignment specifies that the employee will be reinstated in a similar position upon his return to England.

Practical guidelines

In light of the above, English companies wishing to post employees to France under an employment contract governed by English law should:

  • expressly state in the employment contract that English law applies;
  • avoid posting a newly appointed employee to France, since French law will apply if the employee has worked longer in France; and
  • continue to manage and supervise the employee, and give the French company clear instructions not to act as the posted employee’s employer.

Moreover, since the courts assess the applicable law on a case-by-case basis, English employers should seek specialist legal advice before terminating the employment contract of an employee posted to France whose employment contract provides for the application of a foreign law.

Philippe Desprès is a Partner (with effect from 1 January 2004) and Sébastien Le Coeur an associate at Gide Loyrette Nouel, Paris.

Article initially published in Employment Law Journal – April 2003

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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