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The recognition of the existence of an employment relation

December 14th 2015

The litigation concerning the recognition of the existence of an employment relation is multifarious.

For many years, the Cour de cassation has consistently ruled that the existence of an employment contract shall not be dependent either on the intentions expressed by the parties, or the title that they have given to their agreement, but on the conditions under which the service shall be effectively provided.

Despite the lack of legal definition, it is undisputed that the employment contract is the agreement under which an individual, the employee, provides his activity for the service (or for the benefit) of another person, the employer, to whom he shall report, in consideration for the payment of remuneration.

Therefore, the qualification shall assume the combination of three elements:

  • A personal provision of work,
  • Remuneration for this provision,
  • A relation of subordination.

Of the three decisive elements, the relation of subordination is the most difficult to qualify and, undoubtedly, the most controversial before the courts. Since 1996 (Cass. Soc., November 13, 1996, no.94-13187), the Cour de cassation has set a rigorous definition for this notion: this relation shall only be established if the work is carried out “under the supervision of an employer who has the power to give orders and instructions, control the enforcement and sanction the defaults of his subordinate”.

Therefore, the sole proprietorship relation has been requalified into an employment relation in a recent case (Cass. Soc., May 6, 2015, no.13-27355) whereby certain indicators suggested a subordinate relation (obligatory respect to a specific daily schedule drawn up by the principal, obligation to attend individual interviews and sales meetings, mandatory annual turnover obligation, mandatory procedure for sales practices, subject to a refusal of sales, heavy criticism in the event of the non-compliance with the procedure…).

In theory, there is no impediment to the recognition of the existence of an employment contract alongside a corporate mandate, of any form whatsoever, insofar as the duties carried out under the employment contract are not incorporated into those covered by the mandate. The examples of such accumulation are numerous and multifarious.

Nevertheless, in a decision rendered on October 14, 2015, the Cour de cassation, as far as we are aware, deciding for the first time on this issue, has established an absolute incompatibility and as an underlying tenet, between the status as shareholder of a general partnership and the status as employee of this company.

By doing so, it goes beyond the standard context of this litigation, as recalled above.

To exclude the possibility of such accumulation, the Court upholds that pursuant to Article L. 221, paragraph 1, of the French Commercial Code, the shareholder of a general partnership has the capacity of merchant trader, jointly and severally liable for the corporate debts.

It concluded that the shareholder shall not be connected to this company by an employment contract. One of the essential consequences of the subordination, a decisive criterion of the employment contract, is the absence of the employee’s liability for any damages caused to the employer, apart from the case of gross misconduct, understood as a fault with the intent to harm.

The double status as shareholder and employee within the same general partnership appears, accordingly, to be clearly incompatible.

The solution upheld is in line with the significant majority of the doctrine.

(Cass. Soc., October 14, 2015, no.14-10960)

Raphaël Oualid
Nicolas Audibert