At a time when it frequently happens, for economic reasons or career development reasons, that an employee holds several jobs, undergoes dismissal or opts for a conventional termination, the non-competition clause raises many questions.
The non-competition clause is a specific provision inserted in the employment contract. It aims to limit the freedom of an employee to exercise equivalent functions for a competitor or on their own account after the termination of their contract. However, its validity remains conditional on compliance with strict criteria subject to the judge’s assessment. At the expiration of their employment contract, the employee who is not bound by such a clause remains free to be hired by a competing structure or to create their own business in the same sector, provided they act loyally.
To avoid this competitive risk, employers frequently include this guarantee in contracts. However, as it restricts the fundamental freedom to work, case law rigorously regulates its conditions of validity, which generates abundant litigation before the courts.
During the duration of the employment contract
The employee’s obligation of loyalty
The employee must execute his employment contract in good faith. In particular, he takes care not to carry out any competitive act or harm the interests of his company. Thus, he cannot create a competing business before the end of his contract, participate in the activity of a competing company run by a member of his family, or provide third parties with quotes for competing products or services before his departure.
However, the employee can prepare for the creation or takeover of a business. To do this, he must not cause any harm to his employer or encroach on his working time.
If the employee does not respect these obligations, the employer can dismiss him for misconduct.
Compliance with the exclusivity clause
This clause prohibits the employee from combining their employment with another professional activity, whether salaried or not.
On the other hand, the law makes this clause unenforceable against employees who create or take over a company for a period of one year (extendable under conditions), as long as they respect their obligation of loyalty. During this period, the employee does not need any authorization or prior information from his employer to launch his project. He also retains the possibility of requesting a written exemption from his employer.
Furthermore, the employer can insert such a clause into a part-time contract only if the employee’s duties strictly justify it.
If the employee does not respect this obligation, the employer can dismiss him.
After termination of the employment contract
Employee rights and obligations
This clause aims to prohibit a former employee from reusing his know-how with a competitor or on his own account, if this undermines the protection of the legitimate interests of his former employer.
To be valid, the non-competition clause must comply with several essential conditions:
- Formal inclusion: It must appear in the employment contract or in the applicable collective agreement.
- Geographic and temporal limitation: It must define a precise duration and geographical area.
- Suitability for the position: It must take into account the specificities of the employee’s job.
- Financial counterpart: It must provide compulsory compensation for the employee.
- Legitimate protection: It must remain essential to the protection of the company’s strategic interests.
If the employer omits even one of these conditions, the courts cancel the non-competition clause. Furthermore, the employee retains the possibility of requesting in writing from his employer to waive this obligation or to grant him an exemption.
The ban on unfair competition of the former employee
Once the contract comes to an end, the employee released from any contractual obligation remains free to carry out a competing activity, provided that he does not commit acts comparable to unfair competition.
What are the prohibitions?
The following are considered acts of unfair competition:
- Misappropriation of customers and files: the unfair capture of customers or the appropriation of databases from the former employer.
- The disorganization of the company: internal disruption of the network or general functioning of society.
- Poaching of employees: the solicitation and organization of the departure of employees from the former employer, prepared before the end of the employment contract.
- The denigration: publicly discrediting the former employer, its commercial policy, its products or its services.
- Creating confusion: the use of a name, an acronym or almost similar visual elements creating a risk of confusion, through imprudence or negligence, between the two structures or their products.
- Parasitism: the set of behaviors by which an economic agent interferes in the wake of another in order to profit freely from its reputation, its investments or its distinctive signs.
In case of non-compliance: these breaches may result in a court order to immediately cease the competing activity as well as the payment of damages to compensate for the loss suffered.
Reminder of validity conditions
According to the consistent case law of the Court of Cassation, the non-competition clause is only lawful if it meets strict cumulative criteria (Cass. soc., July 10, 2002, Bull. V, n° 239):
- Be justified by the protection of the legitimate interests of the company;
- Take into account the specificities of the employee’s job;
- Be limited in time (reasonable duration) and space (precise geographical area) to a specifically targeted activity;
- Mandatory financial compensation for the benefit of the employee.
If even one of these conditions is missing, the clause is void.
Implementation and violation of the clause
The non-competition clause takes effect at the end of the employment contract. It applies at the end of the notice period (on the effective date of end of the contract) or from the physical departure of the employee if the employer exempts him from notice.
If the employee violates the non-competition clause:
- Refund : He must return all of the compensatory compensation received.
- Financial compensation: The judge can order him to pay damages to his former employer.
- Responsibility of the new employer: The employer who hires the employee knowing of the existence of this clause also incurs his own liability for complicity.
The employer can also unilaterally waive the non-competition clause during the execution of the contract or upon its termination. To do this, the employment contract or collective agreement must expressly provide for this right of waiver. The employee then regains his complete professional freedom at the end of his contract.
