France: Henri Pouvin And Marie Dijoux v Electricite de France

Last Updated: 28 December 2018
Article by Virginia K. Allen, Sarah Beeby, Ryan Carthew, Mark Hamilton and Jessica Pattinson

The idea that an employment contract could also be a consumer contract would seem unlikely at first blush. However, in the recent case of Pouvin v. Electricité de France (EDF) (Case C-590/17), this is exactly what happened, the effect being that the contract was then brought within the scope of certain laws designed to protect consumer rights.

In this case, EDF agreed to provide a loan to one of its employees, Mr Pouvin, and his wife to help them finance the purchase of a new home. The loan contract included a clause which stated that if Mr Pouvin left his employment with EDF, the loan would become immediately repayable.

In 2002, Mr Pouvin resigned from his role at EDF and subsequently stopped paying the loan instalments. EDF brought a claim against Mr Pouvin and his wife for the repayment of the outstanding sum, plus interest. Whilst Mr Pouvin and his wife argued that the repayment provision in the agreement was unenforceable under Unfair Contract Terms Directive (93/13/EEC) (the Directive), EDF took the position that the Directive did not apply because there was no supplier/consumer relationship in place. It was a pure employment relationship.

At first instance the French court upheld Mr Pouvin's position, holding that the automatic termination clause was unfair; however, the Court of Appeal overturned that decision, saying that EDF had granted the loan in its capacity as an employer only, and not as a seller or supplier under the Directive, meaning the Directive did not apply and so there was no need to consider the fairness of the loan contract.

Mr Pouvin then appealed to the Court of Cassation in France, which ultimately referred the case to the European Court of Justice (ECJ) to decide whether the Directive applied to the loan or not.

The Attorney General's view

The Attorney General (AG) has now given his view on this issue, in advance of the case being heard by the ECJ. Whilst his opinion is not binding, it tends to be persuasive and is often followed by the court.

In this case, the AG highlighted that the Directive is aimed at protecting consumers, who are in a weaker bargaining position than suppliers and who may therefore be forced to accept less favourable terms without negotiation. In reviewing the case, the AG commented that Mr Pouvin was clearly in a weaker position to EDF when entering into the loan contract in question because he was less informed, economically weaker and legally less experienced.

EDF tried to argue that it did not enter the contract in the capacity of a supplier, but the AG gave that argument short shrift. In particular, the AG commented that an employer can still be regarded as a supplier when acting outside the specific field of activity that corresponds to its realm of professional competence. Here, the AG said that the contractual arrangement was in fact ancillary to EDF's primary business activity and could be construed as conducive to the successful running of the business, because it had the aim of attracting and retaining staff.

EDF also argued that a recital to the Directive stipulated that employment contracts were specifically excluded from the protection of the Directive. However, the AG was also sceptical of that argument, pointing out that recitals are non-binding and that this could not be taken to mean that employment contracts automatically fall outside the scope of consumer relationships. The situation must always be reviewed on a case-by-case basis. In particular, the AG commented that it would be unfair if consumer-employees who are attracted to contract services or buy goods from their employers because of advantageous conditions being offered automatically lost their rights to consumer protection as a "hidden cost" for contracting with their employers.

Finally, EDF tried to argue that the loan contract was part of a social policy that sought to provide its employees with beneficial conditions, and that it was not seeking a profit for itself. The AG also rejected this argument, stating that the public or private character of the activity, the fact that it pursues a public interest objective, or that it is not carried out on a lucrative basis or for consideration, is not determinant of whether the Directive applies.

Decision

Taking these factors into account, the AG found that EDF had entered into the loan contract in its capacity as seller or supplier and passed the case back to the French courts for decision on the fairness of the loan contract under the Directive.

Whilst the AG's opinion is not binding, it raises potential red flags for employers who provide contractual benefits or arrangements to employees, such as car loans, mortgages, training costs and credit facilities. Such arrangements may fall within the scope of the Directive, as they provide an incentive for employees to stay with their employer, and are therefore ancillary to the successful running of any employer's business. This will be the case even if there is no visible profit for the employer arising from the contractual arrangement. Employers should therefore be aware that the terms of such arrangements could potentially be challenged as unfair under the Directive, although whether those terms are indeed found to be unfair is a separate question to be considered.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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