Restrictive covenants are clauses in a contract which prohibit an employee from competing with their former employer for a certain period of time after the termination of their employment contract, or prevent them from soliciting or dealing with customers of their former employer by using knowledge they had access to during their prior employment.
Non-solicitation, non-dealing, non-poaching and non-compete covenants are different types of restrictive covenants, governed by different rules under French law. We will focus on non-compete covenants.
Under French law, to be valid, a non-compete clause must be provided in writing and it must:
- protect the company’s legitimate interests (the specific tasks associated with the employee’s job must be taken into account);
- be limited both in time (usually between 6 months and 2 years) and in terms of geographical scope (usually a few regions in France, more rarely the entire French territory or even abroad, depending on the employee’s position and responsibilities),
- provide for a financial compensation to the employee (generally at least 1/3rd of the employee’s monthly wage) to be paid during the period covered by the covenant.
But the employer should never forget to check the rules set by the applicable collective bargaining agreement (CBA), if any, which often provide for a specific minimum compensation or for specific rules (for instance, the possibility for the employer to waive the covenant at the end of the contract), which is the case in the Metallurgy, Pharmaceutical or Chemical industries.
Before including a non-compete clause in an employee’s employment contract, one should:
- check the applicable CBA’s provisions, to be sure whether and how such a restrictive covenant can be provided for;
- carefully word the clause, taking into account the business scope of the protection and the specifics of the employee’s role;
- secure the employee’s written consent;
- call your employment lawyer in order to review the validity and enforceability of the covenant (at the time it is signed and at the time the employment contract is about to end).