Power and responsibility are at the heart of the employment relationship. In theory, the company director is the first to be held liable should there be a violation of laws or regulations within the company. That is the case even if he was not the actual author of the violation, which goes against the general principles of French criminal law.
In today’s day and age, criminal risks in a company surround the company director. Everything can lead to criminal penalties: accidents at work, predatory pricing, poorly written contracts, poorly enforced rules related to the environment, competition, corruption, and money laundering, mismanagement of personal data, and the list goes on.
A delegation of powers is used in order for the company director to avoid being held criminally responsible by putting this responsibility on the persons who are in a better position to supervise the regulation. Thus, this delegation is a way to better manage human resources and prevent risks more efficiently.
What is a delegation of powers?
1. An approach of a legal definition
There is no textual or jurisprudential definition. The notion of delegation of powers is only mentioned in a few legal texts, like in article R. 237-3 of the Labor Law Code for instance.
A delegation of powers is a transfer of powers and responsibilities from a delegator to a delegate. This kind of delegation is to be distinguished from delegations of signature, delegations of power to engage in legal proceedings, and from social mandates.
2. The relevant areas of use
Although most delegations of powers revolve around hygiene et security matters, and more broadly around work regulations (article L. 260-1 of the Labor Law Code), the jurisprudence has extended their scope to all areas of the law. Indeed, they can now affect recruitment, working time, staff and salary management, the staff register, and economic crimes, among other things.
Five landmark cases of the French Supreme Court that date back to March 11th, 1993, have laid out the principle of delegability of all matters where the company director’s criminal liability is concerned. Indeed, “unless the law states otherwise, the company director who did not personally participate to the commission of the infraction can be exonerated if they prove that they delegated their powers to someone who has competency, authority and the necessary resources”. Simultaneously, the Supreme Court admitted in these cases the principle of delegation of powers concerning economic crimes, such as misleading advertising, resales below cost, tariff transparency, and counterfeit to name a few.
However, it is impossible to delegate within small-sized companies, in which the company director is held fully liable as part of his general safety obligation and of the company’s strategy. The French Supreme Court’s ruling on August 19th, 1997 is a good illustration. Indeed, although the company director is held responsible for the company’s tax obligations save for a delegation of powers (Cass. Crim., May 30th 2001, n° 00-85557), judges considered that the company director cannot invoke a delegation of powers involving the chief financial officer to escape from being held liable, as the company director had the exclusive right of check signature, required a weekly detailed report regarding financial matters, and kept the effective control of the company’s respect to the tax administration’s obligations (Cass. Crim., August 19th, 1997).
3. A necessarily precise and unequivocal subject-matter
Broad-based delegations of powers are prohibited, since the subject-matter must be restricted. Indeed, the delegate’s means of intervention have to be clearly indicated (organization charts, memoranda, internal charters and policies, etc.). The delegation must have a minimum of duration and stability. It is also prohibited to cumulate several delegations of powers for the same job.
Concerning the power to dismiss employees, only the head of the structure is capable to do so when nothing is specified in the company’s statutes (Soc. July 10th, 2013, n° 12-13985). A delegate who obtained by delegation the power to recruit employees is not always legally capable to dismiss employees.
The power to dismiss cannot be given by implicit delegation (Cass. March 2nd, 2011, n° 08-45422). It is necessary to explicitly specify it in the delegation act. If the company’s statues do not allow this kind of explicit delegation concerning this particular power, the delegator is obviously prohibited to do so (Soc. June 8th, 2011, n° 09-69853).
Therefore, an act of delegation written broadly in order to enable a more versatile management of the company can cause various issues when confronted to the operational realities.
4. The company director’s criminal liability
As soon as a delegation of powers is valid, it causes the transfer of the company director’s criminal responsibility to the delegate. However, the company director stays criminally liable for the violations committed within their company in a few cases.
The company director will be held criminally liable if the act that forms the basis of the offence was committed outside the mission that has been delegated or outside the scope of the company’s employment relationship. Similarly, they will be held criminally liable if the delegation of powers does not complete the conditions of validity.
If the delegator has participated to the criminal offense or if the offence results from their order, the delegator cannot be protected by a delegation of powers (Crim., May 20th, 2003, n° 02-84307).
The delegation of powers will not be taken into account if it deals with the company director’s inherent powers (Crim., Nov. 6th, 2007, n° 06-86027).
The Criminal Chamber of the French Supreme Court concluded that “even if they entrust a representant with the task to preside the company’s central comity, the company director shall be held liable concerning rules that fall within the scope of their inherent powers of control and management, without being able to invoke a delegation of powers” (Crim., May 15th, 2007, n° 06-84318).
Conditions of validity of a delegation of powers?
1. Who is in position to delegate?
According to article 117 of the July 24th, 1996 Law, the Chief Executive who holds powers of control and management from a delegation by the board of directors, decided in accordance with the president, can delegate powers. The “Head” mentioned in the Labor Law Code (in articles L. 263-2 and R. 261-3), as the director who has control, management and surveillance powers, can also delegate powers.
Concerning French Sociétés Anonymes with a board of directors and a supervisory board, the jurisprudence seems to consider that the company director or the person criminally liable is the Chairman of the board of directors. When in co-management, it is necessary to do either a repartition of the various sectors between the co-managers, or to make a joint delegation.
When in a consortium of companies, it is necessary to make a joint delegation by all company directors of the consortium.
Even if a Chief Executive Officer who delegated to an employee a part of their powers to represent the company leaves office, the delegation of powers will remain effective. Indeed, the company director gave to the delegate the power to represent the company on its behalf, although within the delegate’s remits (CA Paris, January 25th, 2018, n° 17-01883).
This solution is not applicable concerning delegations of signature because in this kind of delegation the delegate can sign only on behalf of the delegator and not on behalf of the whole company.
2. Who to name as delegate?
a. The various criteria
The delegate must satisfy three conditions: they must have competency, authority, and resources.
Being competent implies having not only the technical expertise necessary to the delegated task, but also sufficient legal knowledge to to understand the regulations’ content and to assume their prerogatives.
Mere professional qualification or experience is not always sufficient to establish competency; there must a verification to know whether or not the employee has a specific educational background depending on the requirements needed.
Authority mostly corresponds to the power to give orders and to execute them. It thus implies at least some independence for the delegate, allowing them to take action without having to ask everything for authorization to the company director.
It also implies having the power to command and the employees’ obedience. Therefore, the delegate must have the power to sanction employees and the power to immediately put an end to a potentially dangerous situation. This authority must be exclusive, which prohibits cumulation of delegations.
Finally, the delegate must have resources, that is the power of financial commitment.
b. The complex evaluation of these criteria
All of these criteria are assessed in the light of a few complex elements concerning either authority, resources, or competency, or all three at the same time. For instance, some elements taken into consideration are the employee’s qualification, their salary, their seniority in the activity in question, the number or employees under the authority of the delegate, the power to hire employees and to order supplies.
As long as these three objective conditions are respected, all employees can be delegates, regardless of their hierarchical level.
Delegates can also be delegators by sub-delegating all or parts of their powers to another delegate as long as the person in question has competency, authority and resources, regardless of the initial delegator’s authorization.
c. The delegate’s acceptation
The traditional jurisprudence never required an explicit acceptation of the delegation as a condition of validity. Nevertheless, acceptation, even when implicit, has always been considered by jurisprudence as a deciding factor to admit more easily the existence of a delegation of powers.
An employee’s refusal in the context of a delegation of powers or of an amendment of the working contract can be problematic. However, when the delegation of powers is only the mere translation or a reminder of the employee’s duties as they are defined in the working contract, the delegation cannot be disputable.
3. The lack of formal requirements, but a few precautions to take
Jurisprudence, following the legislator, has never set formal requirements concerning delegations of powers. While written form is not necessary, it is not sufficient either: if the delegation is solely formal with no actual practical illustration in the management of the company, it will not be valid and will lose all value.
The written document on which the delegation is based on must include the working contract, a nominative letter, the memorandum, the board of directors’ minutes which mentions the delegation of powers, and a referral to the company’s organizational hierarchy chart. Obviously, there must be a mention of the name, role and duties of the delegator, the name and role of the delegate, the duties, area of expertise, formation and seniority of the delegate.
The delegate must receive a formal nomination, that is the powers to ensure regulation. Moreover, it must be specified that the delegate has all the necessary powers (including disciplinary powers) and resources (financial resources) for their missions. It is also useful to mention the effective date of the delegation.
The best way to fully understand the relevance of delegations of powers is to invert the wording and talk about “the power of delegation”.
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