France Extends the Scope of Duty of Vigilance Binding Prime Contractors

Under French law, any entity that enters into a subcontracting contract worth at least EUR 5,000 (excluding VAT) must verify, at the time of contracting and every six months thereafter, that its subcontractor complies with its obligations regarding undeclared work—which covers employee registration, social security declarations, and issuance of pay slips. A prime contractor who fails to carry out these verifications faces joint liability for the subcontractor’s unpaid taxes, social contributions, and/or employee wages. This is known as the duty of vigilance.

Until the Anti-Fraud Law (No. 2026-534, June 25, 2026), only the entity that directly contracted with a subcontractor was bound by this duty of vigilance. This meant, consequently, that in the case of cascading subcontracting arrangements, there was no joint liability recognizable between the prime contractor at the top of the subcontracting chain and any of the indirect subcontractors (i.e., the companies involved in the chain but with no contractual link with the prime contractor). This solution was confirmed by a landmark ruling of the French Supreme Court of September 4, 2025 (No. 23-14.121). It created a significant enforcement weakness in the liability chain, since the social security authorities, when auditing companies, were only entitled to pursue in joint liability direct contractors—and not necessarily the prime one, which is usually the most solvent party.

The recent reform legislatively reverses this caselaw by subjecting prime contractors to the same duty of vigilance and to expediting sanction procedures.

Conditions of Extension of the Duty of Vigilance Scope

According to the recent Anti-Fraud Law, prime contractors who “accept” a subcontractor (including the subcontractor of their own subcontractor) are required to periodically verify, until the end of the subcontracting agreement, that the subcontractors are not engaged in undeclared work.

This obligation will only apply to:

• contracts above a minimum amount to be set by decree; and
• subcontractors whose existence is acknowledged by the prime contractor through a formal acceptance process.

In practice, the prime contractor will be deemed compliant if it obtains supporting compliance documents (the list and delivery conditions of which will be specified by decree) and verifies their authenticity. According to the impact study accompanying the original Anti-Fraud draft law, these documents are to be provided by the so-called general contractor (i.e., the subcontractor with whom the prime contractor will have entered into agreement) at the time the subcontracting contract is concluded, and then every six months thereafter.

Although the implementing decree has yet to be published, the documents are expected to include, in particular, a certificate of registration of the subcontracting entity and a social security compliance certificate issued by the French social security agency (“URSSAF”). For subcontractors established abroad, the prime contractor will likely be requested to obtain documents evidencing the entity’s tax identification number or identity and proof of compliance with its home-country social security obligations, all of which must be translated into French.

Labour inspectors and social security auditors may require the prime contractors to produce these documents during inspections.

Joint Financial Liability Specifics

A prime contractor which fails to comply with this new duty of vigilance could be held jointly liable alongside the offending subcontractor for: (i) the payment of taxes and mandatory contributions, as increased by late penalties; (ii) the repayment of any public subsidies received; and (iii) the payment of wages, benefits, and employment-related charges owed to the affected employees.

The new law nonetheless offers incentives for prime contractors which promptly settle all contributions, penalties, and late-payment surcharges, or which agree to an instalment payment plan within a prescribed deadline. If payments are made promptly, the prime contractor will not be held jointly liable for the punitive surcharges ordinarily applied in cases of undeclared work.

Expediting Sanction and Asset Seizure Procedures 

For the companies which would organize their insolvency through short-lived corporate structures so as to evade financial sanctions by circumventing asset-seizure procedures, the Anti-Fraud Law provides a “social flagrance” fast-track procedure, which may be engaged by the control agents who would have identified circumstances threatening the recovery of the social security debt. In such cases, once a report of undeclared work has been issued, the control agents may immediately freeze accounts or seize assets of suspect companies without prior judicial authorization. The debtor retains the right to petition the enforcement judge for release of the measures and the judge must rule within 15 days of being petitioned.

In anticipation, prime contractors in France—particularly those operating in sectors with multi-tier subcontracting such as construction, logistics, and facility services—should review their subcontracting oversight processes in order notably to decide whether to accept the various contractors involved in the activity chain.