(Cass. soc. 2 mars 2011, no. 09-40.547)

This decision by the social Chamber of the French Supreme Court analyzes the effects of a non-solicitation clause on the employee's freedom to work.  It also draws the necessary conclusions from the relative effect of contracts.

In the case at hand, two companies had inserted a non-solicitation clause in their business contracts, pursuant to which each party agreed not to solicit or use the services of the other party's employees. An employee of one party, after his employment agreement had been terminated in 2006, was prevented from being hired by the other company before the end of the term provided in this clause.

In 2008, the Versailles Court of Appeal had ordered the former employer to pay damages to the employee, considering that the implementation of the non-solicitation clause concluded between the two companies had caused him harm. The employer appealed the decision to the French Supreme Court (Cour de Cassation), arguing that a non-solicitation clause was not a non-compete clause, that the employee was a third party to the clause and, as such, had no right to any resulting compensation. The former employer concluded that the Court of Appeal's decision had violated Articles 1134 and 1165 of the Civil Code.

The French Supreme Court confirmed the Court of Appeal's decision and stated that, "this [non-solicitation] clause had infringed his [the employee's] freedom to work and that his employer should have compensated him for the harm it had caused him."

Although a non-solicitation clause concluded between two companies is distinguished from the non-compete clause between the company and its employee (Cass. Com., 11 juillet 2006, no. 04-20.438), it nevertheless results in a limitation of the employee's freedom to work, much as a non-compete clause. The French Supreme Court concluded that this restriction to a fundamental freedom had to be compensated based on the harm incurred.

In addition, the principle of the relative effect of contracts does not prevent a third party to the agreement from obtaining redress if the agreement causes him harm. In the case at hand, the non-solicitation clause indirectly placed on the employee a negative duty and he therefore had an interest in objecting to the clause in order not to be prevented from finding another job.

This outcome could already be deduced from a decision of the Commercial Chamber of the Supreme Court, which had stated, "that only an employee can invoke the harm that a non-solicitation clause without financial consideration may cause him." The Commercial Chamber therefore seemed to go further by envisaging the possibility that a company which provides a non-solicitation obligation in a business contract should provide for financial consideration to the employee(s) affected by this clause, even if the enforceability of such a clause is not subject to payment of a financial consideration (Cass. com., 10 mai 2006, no. 04-10.149).

Therefore, as compared with the Commercial Chamber, which appeared to require that the employer automatically compensate any employee affected by a non-solicitation clause inserted into a business contract, the social Chamber in its March 2nd, 2011 decision, ruled that employees must prove the existence of a damage caused by such a clause in order to be compensated.

The French Supreme Court therefore distinguishes between a non-compete clause inserted in an employment agreement, which must always be compensated, from a non-solicitation clause inserted into a business contract which entitles the employee to seek financial compensation if he can prove to have suffered a damage, i.e., an obstruction to his freedom to work.