Raphaël Mellerio Bertrand Baheu-Derras January 30 2018 Swap of staff within franchising networks: definition of 'group' clarified Aramis Law Firm | Franchising - France Raphaël Mellerio, Bertrand Baheu-Derras Franchising Previous casesMacron ordersCommentFor labour law purposes, the definition and extent of a 'group' is key. When employees are made redundant, either for economic reasons or on the grounds of personal inability, the employer must try to reassign or relocate the relevant employee, not only within the company itself but more widely within the group of companies to which it belongs (including companies located outside of France).Previous cases The extent of the group in the context of a franchising network has given rise to a number of court decisions, leading to some uncertainty for employers as to the scope of their reassignment obligations.For example, the Metz Court of Appeal heard a case regarding whether the group could extend to entities trading under the trade name Leclerc (one of the top food retailers in France), although no shareholding relationship existed between them and the entities were merely Leclerc franchisees.(1) The court found that the concept of a group in relation to the redeployment obligation is wider than the meaning of a 'group' under corporate law. The court held that for such purposes, a 'group' must be defined as any undertakings whose activities, organisation and location of operations allow the swap of personnel. In the context of the Leclerc network, the court noted that each Leclerc shop was operated by a distinct legal entity. It concluded that the existence of other supermarkets trading under the same name does not per se result in the constitution of a group or a possible swap of personnel. Hence, the employee who had been made redundant due to a physical inability could not seek to be reassigned to another franchisee operating under the Leclerc brand.However, other court decisions have adopted a wider approach of the concept of a group in the context of franchising. For instance, a recent case involved a McDonald's franchisee and one of its former employees who had been made redundant on psychological grounds. The Limoges Court of Appeal held as a matter of principle that the existence of a franchise network is not sufficient to demonstrate that there is no possible swap of personnel between the members of the network, as the legal independence of the undertakings involved and the lack of share ownership relationships do not prevent the existence of a group for employee reassignment purposes.(2) The court noted that the McDonald's organisation was such that all restaurants had identical businesses, objectives and employment structures which must comply with minimum requirements on quality and hygiene, as well as administrative and management organisation standards. Membership of the network also implies that the franchisees take part in a standardised training and recruitment programme (which is supported by the centralisation of job offers on the franchisor's website). Finally, the networks are based on a system of specific training sessions involving the exchange of good practices between the franchisees. Thus, the court held that the organisation by network meant that the restaurants had enough common features (including human resources) to allow for the swap of personnel within the network. Therefore, the court held that the employer had failed to fulfil its redeployment obligation by seeking other job positions for the employee in only the same region, as opposed to the whole national territory. Consequently, the dismissal of the employee was held illegal.Macron orders In September 2017, shortly after the election of President Macron, the government enacted a set of bills as part of the priority measures intended to bring greater flexibility to labour legislation.Among such measures, Order 2017-1387 (September 22 2017) provides a narrow definition of a 'group' in relation to the obligations to reassign employees who are dismissed either for economic reasons or for personal inability.(3)The geographical scope of the employer's obligation is now restricted to France only. Further, the 'group' is defined as a French parent company and its controlled subsidiaries and affiliates (within the meaning of corporate law).CommentIf a franchisor holds no shares or has only a minority stake in the capital of its franchisees, then the franchisees have no redeployment obligation for dismissed employees.For further information on this topic please contact Raphael Mellerio or Bertrand Baheu-Derras at Aramis Law Firm by telephone (+33 1 53 30 7700) or email ([email protected] or [email protected]). The Aramis Law Firm website can be accessed at www.aramis-law.com.Endnotes(1) Metz Court of Appeal, Labour Chamber, December 8 2008, RG 06/00927.(2) Limoges Court of Appeal, Labour Chamber, November 21 2017, RG 16/01308.(3) Order 2017-1387, September 22 2017 on the securing of working relationships.