A sole shareholder with the power to dismiss the manager is not entitled to the status of employee

The sole shareholder of a limited liability company, who had entrusted the management of that company to a third party brought a claim before the Labour court for a back pay request and related paid leave, severance pay and damages.

The sole shareholder claimed to hold an employment contract on the basis that he performed the duties of CFO under the supervision of the Company’s General Manager.

The court of appeal confirmed the Labour Court judgment and refused to recognize an employee status to the sole shareholder, who therefore appealed to the French Supreme Court.

The French Supreme Court dismissed the appeal considering that the plaintiff was not in a subordinated relationship with the Company; insofar as:

  • He was the sole shareholder of this company,
  • He had been General Manager until 30 November 2011,
  • He had the power to dismiss the manager.

After recognizing that “the status of sole non-managing shareholder is not per se inconsistent with the employee status” (Cass. soc., 11 July 2012, nº 11-12.161 D), the French Supreme Court insists in this decision that the existence of a subordinated relationship is the core condition for the employee status.

FSC, January 16, 2019, no 17-12.479