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The French State Administrative Court provides clarification on the definition of the group of companies in the context of a job protection plan

On July 21, 2023, the French State Administrative Court (“Conseil d’Etat”) ruled on an important aspect concerning job protection plans (or “PSE” for “Plans de sauvegarde de l’emploi”).

The case at stake involved a company operating a network of self-service restaurants, which decided to close several restaurants, resulting in 80 job eliminations. The company implemented a unilateral PSE (i.e. not agreed upon with the trade unions) that was approved by the French administration (the “Dreets”), s required by law.

The core of the dispute revolved around the definition of the “group” to which the company belonged. According to the French Labor Code, the means granted under a PSE must be proportionate with the resources of the group which the employer company is part of. The appellants, including staff representatives and employees, challenged the sufficiency of the PSE considering the financial resources of the group to which their employer belonged.

The French State Administrative Court supported the “capitalistic” definition of the group. As defined by the French Commercial Code, the Court stressed that the group’s resources, particularly financial, are assessed by considering all companies under the control of a dominant company. Moreover, these resources have to be assessed regardless of the location of the headquarters of these companies.

In this case, the Dreets had considered that the group’s perimeter only includeed those companies that were under the direct control of a specific dominant company. Three other affiliated companies were excluded because none of them had exclusive control over the dominant company. This decision was approved by the Administrative Court of Appeal. However, the appellants argued that these companies should have been included in the group’s perimeter.

The French State Administrative Court rejected the appeal on the grounds that the argument was not presented before the lower court judges. It nonethless stressed that the judge’s examination is indeed limited to the conditions set by the French Commercial Code.

This decision highlights the complexity and potential challenges faced by employee representatives in understanding the structure of the group and assessing the adequacy of a PSE. It underlines the importance of transparency and sincere communication from the employer to ensure that the group’s perimeter is accurately defined and the PSE measures are balanced.

This decision also clarifies the role of the administrative judge in cases involving the scope of the group to which a company belongs in the context of a PSE. This confirms that the judge’s review is limited to the claims made by the litigants and the details and information provided by the parties involved.

Conseil d’État, 4ème – 1ère chambres réunies, 21/07/2023, 435896