On July 10 2002 the Social Chamber of the Supreme Court decided that a non-competition clause in an employment contract is only valid if it provides for financial compensation to the employee.

The Supreme Court also confirmed the other prerequisites for validity. A non-competition clause may only be imposed on employees when:

  • it relates to the protection of a company's regular interests;

  • it is limited in its duration;

  • it is limited in territorial scope; and

  • it takes into consideration the particular attributes of the service to which it relates.

The new requirement for financial compensation will oblige employers to renegotiate non-competition clauses if this is not provided for.

Failure to pay the compensation specified releases the employee from the non-competition clause.

In addition, according to case law the amount to be paid to the employee is not considered as an indemnification, but is rather viewed as a salary on which social contributions must be paid.

For further information on this topic please contact Philippe Blaquier-Cirelli at Jeantet et AssociĆ©s by telephone (+33 1 45 05 81 85) or by fax (+33 1 45 05 82 28) or by email ([email protected]).