Defending Employers Against Corporate Veil Piercing and Assisting Employers to Tiptoe Out of France


U.S. employers with French operations must focus carefully on their investments or divestment operations. Through the "joint employer theory," employees of a French company can now pierce its corporate veil to hold the ultimate parent, even one based in the United States, liable for restructuring costs, including severance packages and damages for unfair dismissal.

The French Supreme Court has set forth three cumulative criteria for a foreign company to be judged a joint employer (Jungheinrich 18 January 2011), and as a result sentenced to pay French personnel liabilities:

- A common management (e.g., someone from the U.S. parent company board catapulted into the chairman position of the French subsidiary)

- A direct or indirect majority stake in the French subsidiary

- A common business carried out by the parent and the subsidiary (obvious notion in an industrial group, but that has been extended to portfolio management for holdings or private equity funds)

It creates a great concern for private equity funds where "top-down" and hands-on control on companies in portfolio is embedded in the business model. So it is for international group holdings. Alas, this is the new battlefield for French employees of U.S. companies.

"Better be a living rat than a dead lion" is the moral of the second breathtaking case (Dunlop Goodyear 1st February 2011): Shutting down a business in France will not be a legitimate reason for massive layoffs.

Please see full Alert below for further information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.