Employment claims facing yacht owners

Yacht owners are facing increasing risk and uncertainty arising from crew employment claims in France.

What claims?
Crew members are successfully arguing on termination that French law applies to their employment contract.

Why would French law apply to an employment contract when it is not expressly stated to apply?
French courts have long held that mandatory provisions of French law apply to an employment contract where:

• The crew member is a French resident or the employment contract has sufficient ties to France;
• The yacht on which the crew member is employed is based for long periods of the year in France;
• Other factors are in play, including the place of the crew member’s repatriation, where crew wages are paid and where the contract of employment was signed.

How do crew members make use of this?
Crew members can argue that French law applies to their employment contract and:

• The proper termination procedures under French law have not been followed;
• They are eligible for paid leave;
• They are a victim of ‘hidden employment’, i.e. the failure to register their employment with the French or another social security system has deprived them of social security benefits.

What are the consequences for yacht owners and managers?

• Arrests of yachts as security for seafarer claims for employee rights and unpaid social security contributions, leading to immobilisation of the yacht and resulting in costly inconvenience.
• Courts upholding claims against yacht owners where proper termination procedures have not been followed, regardless of whether the termination of employment was justified.
• ‘Hidden employment’ can result in criminal sanctions for the employer (imprisonment and a fine) and the obligation to pay damages to the crew member (based on their gross salary).

How can yacht owners and managers mitigate these risks?

• Where there is a risk of French law applying to a crew member’s employment contract, employers need to ensure that the employment contract is compliant with mandatory rules of French employment law.
• Employers need to ensure that they are registering crew members with the French or other social security authorities where necessary.

Additional considerations

• The Maritime Labour Convention, ratified by France, requires that seafarers subject to France’s social protection legislation are protected to the same extent as shoreworkers.
• Crew members must be registered for retirement benefits in France where they are embarked on a foreign flagged yacht, they reside in France and they are not subject to the social security legislation of another Convention State.
• A draft decree (likely to be fully applicable on 1 July 2017), provides that non-French established employers must register French residing crew members for retirement benefits through ENIM and provide a deposit or a guarantee to ENIM to secure payment of the contributions.
• Detailed and tailor-made advice to employers and yacht managers on the procedures which must be followed when terminating a crew employment contract, including drafting termination notices.
• Review of seafarer contracts of employment, to ensure that they are compliant with the mandatory provisions of French law.
• Auditing employers’ compliance with social security registration requirements, to ensure that employers are not falling foul of ‘hidden employment’ rules.
• Assisting with the consequences of a yacht arrest.

This was originally published by Ince & Co.

For more information, please contact Andrew Charlier, global head of yachts & superyachts, Ince & Co.
[email protected]  | +33 1 53 76 9100