The debate regarding restrictive covenants under French employment law is mainly focused on non-compete clauses; more specifically on their validity and application on termination of employment contracts.

It has long been established that, to be valid, a non-compete clause should protect the interests of the employer; be limited in time and space as well as to a specific activity; be justified in relation to the type of position held by the employee; and, finally, provide for financial compensation for the duration of the restriction.

During the first part of 2013, the French Supreme Court has refined its case law:

  • In February the Court confirmed that if there is no non-compete clause (typically, this clause would only prevent the employee from setting up a competing company on termination of employment), the resigning employee is free to pursue any professional activity of his or her choice after leaving the company.
  • If the employer wants to waive the non-compete duty (and stop paying the compensation), the Court has decided that, as long as the employee is notified as required in the employment contract or the collective bargaining agreement (and the employer is able to certify that the employee received the registered letter sent to his address), the decision to release the employee takes effect, even if the employee claims he did not receive the notification, or he has never actually received it.
  • On the issue of delay in releasing the employee from a non-compete covenant, in March the Supreme Court stated that if the dismissed or resigning employee is freed from working his notice period and the employer does not want to apply the non-compete clause, the employer must waive it immediately on termination of the employment contract and not on the theoretical expiry of the notice period.

On financial compensation, the principle is that it must not be derisory, otherwise there is a risk that the non-compete clause will be held to be null and void. In a decision in February, the Supreme Court specified that it can be paid in instalments over time, since the amount is not affected by the method of payment. Also in February, the Court held that a non-compete clause providing for reduced financial compensation on resignation is not totally invalid; only the provisions relating to that reduction are regarded as void. As a result, the employer has to pay the employee the compensation provided for by the employment contract that would have been paid if the employee had not resigned.

Another point to note from a decision in July this year is that so-called "non-solicitation" clauses, which aim to prevent the employee from enticing the employer's customers after leaving the company, can sometimes be construed by the judge as non-compete clauses (thereby automatically attracting financial compensation) where they deprive the employee of freedom of employment to a significant extent.