Application of French Labour Law to distribution agreements

Application of French Labour Law to distribution agreements Didier Ferrier Professeur émérite de la Faculté de Droit de Montpellier IDI – Munich June 15, 2013 1

Protection of the distributor by application of French Labour Law q Protection by direct application of French Labour Law (FLL) § Salaried worker (French Labour code, art. L. 1221 -1). § « VRP » : Travelling sales representative within a specified territory (French Labour Code, art. L. 7311 -1). q Protection by extension of French Labour Law § Branch Manager (French Labour Code, art. L. 7321 -2). § Branch Manager specialized in food retailing (French Labour Law, art. 7322 -1). q Protection by inspiration from French Labour Law § Commercial agent (French Commercial Code, art. L. 134 -1). § Business Manager (French Commercial Code, art. 146 -1). IDI – Munich June 15, 2013 2

Legal Protection by direct application of French Labour Law Requalification of distribution agreements into salaried worker agreements q All provisions of French Labour Law apply to distribution agreements (franchisee, exclusive distributor. . . ) in the event of a requalification which happens when the following conditions are satisfied: Ø Work provided by the distributor to the financial benefit of the supplier; Ø Remuneration of the distributor based on the work done (and not on the financial results); Ø Subordination of the distributor to the supplier characterised by: 1. Orders and guidelines given by the supplier, 2. Monitoring by the supplier of the performance of his orders and guidelines, 3. Disciplinary measures inflicted by the supplier in case of distributor’s failure to follow orders and guidelines. IDI – Munich June 15, 2013 3

E. g. : The franchisor was imposing: § Resale prices, § Orders and guidelines regarding the selling method (compulsory schedule of client meetings, with the obligation to comply with strict sale conditions), § Obligation to regularly report on the work done, § Disciplinary measures in case of breach of agreement (abrupt termination of the contract). (French Supreme court, labour chamber, 18 janvier 2012, n° 10 -16. 342) IDI – Munich June 15, 2013 4

Protection by direct application of French Labour Law Requalification of distribution contracts into « VRP » agreements q All provisions of French Labour Law (with the special bonus of a « clientele compensation » at the end of the contract) apply to distributors who: Ø Prospect for the financial benefit of the supplier. . . Ø. . . a clientele or a strictly defined territory. . . Ø. . . in a personal and exclusive way. IDI – Munich June 15, 2013 5

Protection by extension of French Labour Law Application of some provisions of the French Labour Code (French labour code, art. L. 7321 -2) q Some provisions of French Labour Law apply to distribution agreements in the following conditions: Ø The distributor (franchisee. . . ) sells products supplied exclusively or quasi-exclusively by one single supplier; Ø On the premises provided or simply approved by the supplier (franchisor); Ø On the sales conditions and on sale prices defined by the supplier, These three conditions have to be met. IDI – Munich June 15, 2013 6

Case law on the requalification of distribution agreements E. g. : The franchisee sold products exclusively supplied by the franchisor, Ø On the premises provided by the franchisor and under the brand name of the franchisor Ø The franchisor set the commercial conditions as well as the resale price of the products (French Supreme court, labour chamber, 9 March 2011) IDI – Munich June 15, 2013 7

Protection by inspiration from French Labour Law Application of certain provisions of the French Labour Code q Protection of the distributor also comes from an indirect reference to French Labour Law: Ø Commercial agents (French Commercial Code, art. L. 134 -1) who negotiate and, when required, contract on the behalf of and to the financial benefit of the principal Ø Business managers (French Commercial Code, art. L. 146 -1) who run an economic activity on behalf of and for the benefit of the owner (landlord). IDI – Munich June 15, 2013 8

Explanatory table of consequences for each type of distributor Salaried worker « VRP » Branch manager Minimum remuneration Legal notice period Compensation at the end of the contract Compensation for noncompete covenant after the end of the agreement Collective convention of the company Union right Paid leave vacation and overtime Health care ü ü ü ü ü ü ü Commercial agent Business manager ü Under specified conditions ü IDI – Munich June 15, 2013 9