The Parent Company's Responsibility Towards Its Subsidiary in France

The Court of Cassation extends the liability of the parent company to its subsidiary for the continuous and abnormal interference of a parent company in the economic and social management of its subsidiary, going beyond the necessary collaboration between companies of the same group.

For the first time since it redefined the criteria of co-employment in a group of companies, the Court of Cassation, in a recently published decision, has jointly and severally condemned the parent company and its subsidiary for the benefit of an employee of the subsidiary, considering the existence of a situation of co-employment of this employee with regard to the following facts observed

• The subsidiary was economically dependent on the parent company: it had no customers of its own, the company itself subcontracted transport to it and organized it through transport orders, the operations manager no longer had any decision-making power because he was dependent on the two planning managers of the parent 
company, who planned the rounds of the drivers employed by the subsidiary and informed the customers of their arrival time,

• The parent company had replaced its subsidiary in the management of its personnel, both in individual and collective relations, as the subsidiary no longer had any autonomy in drawing up the drivers' rounds, their schedules, relations with customers and the management of the drivers' sick leave or their voting time for the personnel representative institutions,

• The parent company was responsible for the financial and accounting management of the subsidiary.

The Court of Cassation considers that these facts constitute a permanent interference of the parent company in the economic and social management of the employing company, leading to the total loss of autonomy of action of its subsidiary and to a situation of co-employment.

The situation of co-employment is a jurisprudential concept whose criteria were recently defined by the Court of Cassation in a decision dated November 25, 2020: «Apart from the existence of a subordination relationship, a company that is part of a group may be qualified as a co-employer of the personnel employed by another, if there exists, beyond the necessary coordination of economic actions between companies belonging to the same group and the state of economic domination that this membership may engender, a permanent interference of this company in the economic and social management of the employing company, leading to the total loss of autonomy of action by the latter. „