Employment Law Alert: Transfer of Undertaking – Undeclared Work

Following a transfer of undertaking, may an employee claim the statutory indemnity for undeclared work from the new employer for facts attributable to the former employer?

As a reminder, the lump-sum indemnity for undeclared work is linked to the performance of the employment contract and is subject to a two-year limitation period. However, this indemnity becomes payable only upon termination of the employment contract (Cass. soc., 4 September 2024, no. 22-22.860).

In the present case, an employee sought payment of the lump-sum indemnity for undeclared work based on facts that occurred prior to the automatic transfer of his employment contract. The Court of Appeal held that the claims were time-barred and, as such, could not be borne by the transferee.

In a decision dated 28 January 2026 (no. 24-18.999), the Social Chamber of the French Supreme Court (Cour de cassation) overturned the lower court’s ruling. It reiterated that the lump-sum indemnity for undeclared work is payable only upon termination of the employment contract. Consequently, the action for payment, which is subject to the two-year limitation period under Article L.1471-1 of the French Labour Code, runs from the date of termination of the contract and not from the date on which the unlawful acts were committed. Therefore, where the employment contract has been transferred and subsequently terminated by the new employer, the employee may bring a claim against the latter to obtain payment of the indemnity, even if the acts of undeclared work are attributable to the former employer and predate the transfer.

This case law highlights the importance for transferees of anticipating, during acquisition due diligence, the social risk associated with situations of undeclared work, which may materialise several years after the facts occurred.

Link to the decision: https://lnkd.in/ehcA76pc