Holding both a corporate office and an employment contract within a corporate group

Pauline Pontier examines a key issue for executives and practitioners in labor and corporate law: the concurrent holding of a corporate office and an employment contract within corporate groups, as illustrated by the Court of Cassation’s decision of June 2, 2016 (No. 14-29.727).

In a corporation, the validity of holding multiple positions requires :

• separate compensation;
• the employee’s technical duties differ from those of a corporate officer;
• a relationship of subordination between the employee and the company.

But what happens when the employment contract is entered into with the parent company and is intended to cover the performance of a corporate office in a subsidiary?

In the practice of international groups, it is common for the parent company to hire an employee to manage a subsidiary.

The Court of Cassation upheld the validity of this arrangement, subject to the following conditions:

• the existence of a genuine relationship of subordination to the parent company;
• the payment of salary by the parent company;
• the actual performance of the corporate office in the subsidiary, in accordance with the parent company’s directives.
• Special feature: Unlike the holding of multiple positions within the same company, it is not necessary for the employment contract to pertain to technical duties distinct from the corporate office.

Please note, however:

If any of these conditions are not met, the corporate office may be reclassified as an employment contract.
The removal of the corporate officer could justify his or her dismissal by the parent company.