In this case, following the resignation of an employee, her former employer brought an action before the Employment Tribunal on the grounds that she had failed to comply with her non-competition undertaking.
The Court of Appeal ruled that such a clause was lawful and released the company from the obligation to pay the financial consideration. It went further and ordered the employee to pay the sums already received in that respect back to the employer and to bear the liquidated damages associated with her breach.
The employee appealed to the French Supreme Court, arguing, pursuant to Article L1221-1 of the French Labor Code:
– A non-competition clause under which the employer reserves the right to extend the scope of the clause over time after termination of the employment contract is null and void;
– That such a clause leaves the employee uncertain as to the extent of their liberty to work;
– That it follows from the judgment’s own findings that the non-competition covenant included in the employment contract provided for a prohibition on competition limited to a period of one year renewable for a similar period at the company’s option;
– In holding that such a clause was limited to a maximum of two years, which the employee was aware of since the beginning of the contractual relationship and at the time of the termination of the employment contract, so that she could not validly maintain that she was kept in a state of uncertainty as to its duration, the Court of Appeal violated the aforementioned text.
The French Supreme Court endorsed the plaintiff’s arguments and quashed the appeal decision.
The Supreme Court thus ruled that a clause included in an employment contract under which the employer alone reserves the right, after termination of the employment contract that sets out the rights of the parties, to renew the duration of the prohibition on competition for a period equal to the initial duration, is null and void.
Thus, by declaring such a clause lawful, the Court of Appeal had violated Articles L1221-1 of the French Labor Code and 1134 of the Civil Code.
This decision represents an unprecedented solution by the French Supreme Court, which until now, accepted that a non-competition clause could be renewed by the employer (French Supreme Court, Sept. 21, 2022, No. 20-18.511). It should be noted, however, that in the aforementioned decision, the dispute did not relate to the validity of the clause but to the payment of the financial consideration.