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Restrictive Covenants in France

1. Definition of Restrictive Covenants

Post-termination restrictive covenants are fairly common in French employment contracts, especially for senior employees or those with access to confidential information, senior responsibilities or contact with the clientele.

In principle, restrictive covenants must be justified by the nature of the duties to be performed, and proportionate to the aim that is pursued.

2. Types of Restrictive Covenants

a. Non-Compete Clauses

Under French employment law, the validity conditions of a non-compete clause were defined by case law. The clause must:

  • Be essential to preserve the legitimate interests of the company;
  • Be of limited duration;
  • Be geographically limited;
  • Take into account the specific features of the employee’s position;
  • Provide a financial compensation for the employee after the termination of the contract.

b. Non-solicitation of customers

According to the article 1134 of the French Civil Code, an employee owes a duty of loyalty to his employer until the expiry of his employment contract and during any suspension of it.

c. Non-solicitation of employees

A clause of non-solicitation of employees usually prohibits employers from recruiting a competitor’s or supplier’s employees.

The French Supreme Court concluded that this restriction to a fundamental freedom had to be compensated based on the harm incurred.

3. Enforcement of Restrictive Covenants—process and remedies

Under French law, restrictive covenants can be enforced in different ways depending on the situation:

  • If the employee breaches the restrictive covenant, the former employer can issue a claim before the Labour court in order to obtain an injunction.
  • If the employer breaches the restrictive covenant or if the clause is void, the employee may claim for damages if he has observed the provisions of the clause.
  • If an employer knowingly hires an employee subject to a non-compete clause, the former employer has grounds for claiming for damages against it.

4. Use and Limitations of Garden Leave

The notion of “Garden leave” as such does not exist under French law.

Upon termination of employment, the employer may release the employee from working during all or part of the notice period and pay him an indemnity in lieu of notice, or alternatively require the employee to work until the end of the notice period.

The French Supreme Court recently ruled that the employee, who is not subject to a non-compete clause and who is on Garden leave, may work with a competing company while he is on notice period.

For more information on these articles or any other issues involving labour and employment matters in France, please contact Joël Grangé, Partner at Flichy Grangé Avocats (www.flichygrange.com) at grange@flichy.com
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