Non-Compete Clause Illegal
Thursday 08 August 2019
A non-compete clause that prevents a former employee from exercising a new professional activity is null and void, a French court has ruled.
The use of non-compete clauses in France is widespread, used by companies who seek to prevent former employees from carrying out a professional activity that could potentially harm it.
Although such clauses are not illegal, they are only valid provided they meet a number of strict conditions:
- be essential to the protection of the company's legitimate interests, assessed in the light of its actual activity;
- be limited both in time and scope, so as not to prevent the employee from carrying out any activity in accordance with his training, knowledge and professional experience;
- take into account the specifics of the employee's employment;
- provide for a financial contribution to be paid by the employer.
In this case, a customer adviser of a credit company that was subject to a non-competition clause had resigned and was then recruited in a similar post by a competing company.
The employer brought a legal action, arguing that the agreement had been violated.
The case ended up in the Supreme Court, the Cour de Cassation, where judges considered that this clause was null and void on the grounds that it was imprecise and had the effect of making it impossible for the employee to carry out a normal activity in accordance with his professional experience.
The imprecision of the clause was mainly based on the prohibition to work in "the territory of the department or departments on which [the employee] had been involved".
In fact, as drafted, a simple telephone contact to the headquarters of a Parisian company regarding a case in Marseilles (where the employee worked) fell within the definition of the intervention.
Therefore, the judges considered that he was unable to anticipate the actual perimeter of his exclusion zone.
In addition, the judges noted that the terms of the clause prevented the employee from exercising his functions as a customer adviser not only in in the banking sector, but also in the insurance sector, and not only with individual customers but also with professionals and companies.
Finally, the judges considered that an 18-month period was excessive.
The clause thus infringed the fundamental principle of freedom to pursue a professional activity and had the effect of making it impossible for the employee to pursue a normal activity in accordance with his professional experience.
This article was featured in our Newsletter dated 08/08/2019