Co-Employment Within Corporate Groups: A New Definition For An Exceptional Situation

• Published date: 29 December 2020
• Subject Matter: Corporate/Commercial Law, Employment and HR, Corporate and Company Law, Unfair/ Wrongful Dismissal, Redundancy/Layoff, Employee Rights/ Labour Relations
• Law Firm: Soulier Avocats
• Author: Ms Palesa Hove

In a ruling issued on November 25, 2020¹, the Cour de Cassation (French Supreme Court) reaffirmed the exceptional nature of co-employment by giving a new definition of its constituent elements.

This more restrictive definition, which reinforces the exceptional nature of the situation of co-employment, should have a deterrent effect on employees wishing to rely on this concept in court.

Co-employment within corporate groups is a concept developed by French courts, in particular in the context of disputes with a view to having a company belonging to a group (the parent company) be held jointly and severally liable for the financial consequences of the dismissals on economic grounds (redundancies) implemented by its subsidiary.

Indeed, the parent company of a group may become involved in the management of its subsidiaries to such an extent that the employees of the subsidiary - most often when redundancies are implemented - invoke, apart from the relationship of subordination, the status of co-employer of the parent company and claim that the latter must, therefore, perform the obligations resulting from such status. The employees' aim is thus to have a new debtor liable for the payment of the damages they claim, thereby improving their chances of compensation, in particular when their employer has entered into insolvency/bankruptcy proceedings, which limits the possibilities for challenging the ground(s) put forth to justify the dismissals, or when the recognition of the existence of a situation of co-employment affects the validity of the dismissals, for example when a lay-off plan is not properly implemented.

As dismissed employees frequently invoke the concept of co-employment, the Cour de cassation had already limited the recognition of the existence of a situation of co-employment to exceptional situations.

As such, apart from the existence of a relationship of subordination, a company belonging to a group could be considered as a co-employer with respect to the staff employed by another group company, only if there existed between them, beyond the coordination of economic actions which is necessary between companies belonging to the same group and the economic dominancy that such belonging to the same group may create, an intermingling of (i) interests, (ii) activities, and (iii) management that resulted in an interference in the economic and social management of this other group company.²

The Cour de Cassation has, for example, ruled that the...