An Order dated 2 April 2015 has formally defined “umbrella companies” and set out the conditions under which they may operate in France.
New law in 2008 concerning the modernisation of the labour market had said that a national agreement could entrust a professional sector with the task of organising umbrella companies. However, certain provisions of the 2008 law were deemed unconstitutional by the Constitutional Council in April 2014. Consequently, Article 4 of Law No. 2014-1545 dated 20 December 2014 green-lighted the French Government to take “any measure to determine the conditions essential to the exercise of umbrella companies” and this new Order is its response.
Umbrella companies allow an individual to provide his services to a business customer and negotiate the terms of their performance whilst benefitting from the protection of employment status with an umbrella company. The Order states that “The employee has the expertise, qualification and autonomy that allows him to seek his own customers and agree with them the conditions of his performance and price.” The umbrella company is paid fees by the customer and it then in turn pays the umbrella employee a salary, having retained any social contributions and management fees.
The new Order sets out:
(i) the conditions under which an umbrella company arrangement can be used with a business client:
- A business client cannot enter into a contract with an umbrella company if the umbrella employee is replacing an employee whose employment contract is suspended following a collective labour dispute, or who is performing a particularly dangerous job as referred to in the list in Article L. 4154-1 except as otherwise provided for in the same article (L.1254-4-I. 1 and 2-I L.1254-4 of the Labour Code).
- Umbrella companies are not permitted for job roles that do not require a professional qualification.
- The service activities mentioned in Article L. 7231-1 (for example: personal services for child care, older people or housework) cannot be subject to an umbrella company contract (L.1254-5 of the Labor Code).
- The provisions of articles L.8231-1 to L.8234-3 and L.8241-1 to L.8243-3 of the Labour Code concerning bargaining and illicit supply of workers (“marchandage and prêt illicite de main d’oeuvre”) are not applicable to umbrella companies (article L.1254-6. of the Labor Code).
(ii) The types of employment contract permitted (fixed term contract or indefinite term contract) between the employee and the umbrella company:
- Article L.1254-10 the Labour Code provides a new basis for entering into fixed term employment contracts which benefits umbrella companies and therefore client companies.
- The umbrella company cannot enter into temporary fixed-term common law contracts, e.g. for the interim replacement of an absent employee (maternity/sick leave) or to cover a short-term sudden increase in the activity of the company.
(iii) the commercial provisions which may feature in the contract between an umbrella company and the end-user client company.
For example, the contract could contain a clause setting out the minimum provisions relating to certain benefits paid by the employee
(iv) the obligations of the umbrella company (exercise conditions, specific obligations vis-à-vis umbrella employees); and
(v) the internal governance rules applicable within an umbrella company, professional elections, voluntary profit sharing (“intéressement”), mandatory profit sharing (“participation”) and employee savings plans (“plans d’épargne d’entreprise”).
The report to the President which accompanied the publication of this Order states that “A system of civil and criminal penalties will shortly be introduced by the law to ensure effective implementation of the defined rules” and that a collective agreement will complete the legal and regulatory measures to bring these changes into fully effective force.