Restrictive covenant clauses Q&A: France

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COUNTRY Q&A

byPhilippe Thomas and Maëlle Chausse, Dechert LLP

Status: Law stated as at 31-Jul-2021 | Jurisdiction: France

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France-speciﬁc information concerning the key legal and commercial issues to be considered

when drafting restrictive covenant clauses for use in the terms of employment between the

employer and employee. See Standard clauses, Restrictive covenant clauses: International, with

country speciﬁc drafting notes and Standard document, Terms of employment: International.

Restrictive covenants

1. In your jurisdiction, can Standard

document, Restrictive covenant clauses:

International be used in the following

documents:

• Terms of employment with the employee at the

start of employment?

• A simple separate agreement?

• A deed?

Article L.1222-1 of the French Labour Code provides

that “the employment contract shall be executed

in good faith”. As a result, under French law, during

the performance of their employment contract,

employees are bound by an obligation of loyalty

which prohibits them, among other things, from

undertaking competing activity (French Supreme Court,

Employment Division, 28 June 1994 n°90-43.660).

However, once the contract is terminated, the default

position is that they regain, in principle, complete

freedom of activity and competition.

To limit the risks to which employers are exposed to

post-termination under the law, recourse to post-

termination restrictive covenants has been expanded.

These may be included:

• In the employment contract, when it is entered into.

• In a simple separate agreement, during the course of

employment.

It is worth noting that, exceptionally, some collective

bargaining agreements (CBAs) provide for a mandatory

non-compete clause. In these cases, a non-competition

obligation can arise from the CBA, if the employee is

made aware of this when they are hired.

Any restriction on an employee’s freedom to work must

be sufﬁciently clear, so the employer cannot reserve the

right to potentially impose a non-compete clause in the

future. As an illustration, the French Supreme court has

ruled that “a clause included in an employment contract

under the terms of which the employer reserves the

right, after termination of the employment contract, to

impose a non-competition obligation on the employee is

invalid” (French Supreme Court, Employment Division,12

February 2002, n° 00-41.765).

These provisions cannot therefore be unilaterally

imposed in a termination letter, but they could be

entered into, in a separate agreement, before or after

notiﬁcation of the termination.

2. Is it possible in your jurisdiction for

employers to use restrictive covenants to

protect their business by restricting an

employee’s activities for a period of time

after their employment has ended?

Yes. Employers may restrict an employee’s activities for

a speciﬁc period by using post-termination restrictive

covenants.

No speciﬁc period is provided for by statute. The parties

will agree on the duration of the restrictions, taking into

account case law and the applicable CBA. It usually

varies between one and two years after the termination

of the employment relationship (see Question 20).

Deﬁnitions

3. Is there any deﬁnition of conﬁdential

information in your jurisdiction that is

required by law or standard practice in

restrictive covenants?

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Restrictive covenant clauses Q&A: France

There is no deﬁnition of conﬁdential information that is

required by law or that is standard practice in restrictive

covenants.

The parties can agree on the scope and deﬁnition of the

information that should be protected as “conﬁdential

information” under a conﬁdentiality clause.

(In practice, a conﬁdentiality clause differs from a

non-competition clause because it does not limit the

employee’s ability to compete after the termination of

the employment contract.)

4. Is the term “group company” recognised

in your jurisdiction? If so, please can you set

out an appropriate deﬁnition for Standard

document, Restrictive covenant clauses:

International.

The Commercial Code does not deﬁne the term “group

company”.

A group is generally deﬁned commercially as a set of

several companies, each with their own legal existence

but all belonging ultimately to the same company, the

“parent company”, which:

• Holds the others under its control.

• Exercises control over the whole group.

• Ensures that a unity of decision prevails.

The individual companies are group companies.

”Group” has a more economic than legal meaning;

in particular, a group company does not have legal

personality.

5. Are the terms “subsidiary” and

“holding company” deﬁned and

recognised under the laws of your

jurisdiction? If so, please can you set out

an appropriate deﬁnition for Standard

document, Restrictive covenant clauses:

International.

The term holding company has never been deﬁned in

the Commercial Code, and does not have a particular

legal status.

It is generally understood commercially to be a company

whose purpose is to hold shares in companies to ensure

a unity of management and control.

The term “subsidiary” is deﬁned as follows in the

Commercial Code:

”When a company owns more than half of

the capital of another company, the latter is

considered as a subsidiary of the former.” (Article

L.233-1, Commercial Code).

6. In your jurisdiction, where an employer

wrongfully dismisses an employee or

the employee resigns in response to a

repudiatory breach, is the employee

released from any restrictive covenants?

No. The method of, or the reasons for, the termination

of the employment relationship do not have any

legal consequences regarding restrictive covenants.

Restrictive covenants will still be binding on both the

employer and the employee unless they are expressly

and validly waived.

7. If the answer to the question above

is “yes” can the employer attempt to

get around this by stipulating that the

restrictions apply on Termination which

includes in its deﬁnition “on termination

howsoever caused”, or “on termination

whether lawful or not”? Would these be

enforceable?

N/A.

Restrictions

8. Are all the restrictions in Standard

document, Restrictive covenant clauses:

International: clauses 2.1 (a) – (f)

recognised in your jurisdiction?

The restrictions set out in Standard document,

Restrictive covenant clauses: International:

clauses2.1(a), (d) and (e) are not valid as currently

drafted, as they do not provide for any ﬁnancial

compensation or geograpical scope.

In order to be valid, they must:

• Be necessary for the protection of the company’s

legitimate interests.

• Be limited in time and geographical scope.

• Take account of the speciﬁc features of the employee’s

position.

• Provide for appropriate ﬁnancial compensation.

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Restrictive covenant clauses Q&A: France

Generally speaking, however, the effectiveness

and enforceability of all clauses will depend on the

circumstances of the individual case.

The restriction set out in clause 2.1(b) is valid and not

subject to any condition.

The restriction set out in clause 2.1(c) is unusual, because

it may constitute an unlawful restraint on the former

employee’s freedom to work (see Question 10).

The restriction set out in clause 2.1(f) is rarely encountered

in practice, because there would be other legal recourses

available without having to justify a contractual breach,

for example, based on civil law principles.

9. In your jurisdiction, is it common

practice to include a restriction on the

employee leaving the employer to work

for a customer?

Post-termination restrictive covenants, and in particular,

non-compete obligations, can prevent the employee

from working for a designated customer. However, to be

valid they will need to comply with the conditions set out

in Question 8.

10. Speciﬁcally, is Standard document,

Restrictive covenant clauses: International:

clause 2.1(c) which restrains the employee

from employing or facilitating the

employment of their former colleagues

usually included as a restriction in

your jurisdiction? If so, is it likely to be

enforceable?

This clause is unusual, because it may constitute an

unlawful restraint on the employee’s freedom to work.

As a result, enforceability is unlikely.

Limitations on restrictions

11. In Standard document, Restrictive

covenant clauses: International: clause

2.2, what percentage (%) shareholding is

commonly inserted into a clause such as

this clause in your jurisdiction?

A clause like Standard document, restrictive covenant

clauses: International: clause 2.2 does not usually target

listed competing companies; for non-listed competing

companies, a percentage shareholding of 5% would be

commonly inserted.

Ambit of the restrictions

12. In your jurisdiction, does Standard

document, Restrictive covenant clauses:

International: clause 2.3 have the effect

of ensuring that the covenants apply

when necessary, even if the individual is

simply providing information to others in

order to allow them to compete, rather

than acting in breach of the covenants

themselves?

Yes, this would generally have the intended effect.

However, practice illustrates that it is difﬁcult to prove

the competing activity in these cases.

Enforceability

13. In your jurisdiction, are restrictive

covenants void as an unlawful restraint of

trade?

No, but they may be deemed an unlawful restraint on

the freedom to work if they do not meet the conditions in

Question 8.

14. In your jurisdiction are restrictive

covenants only enforceable if they are

narrowly drafted?

Yes. Post-contractual non-compete obligations must be

narrowly drafted to be enforceable.

15. What terminology may be used in your

jurisdiction in relation to the scope of the

restrictions?

There is no speciﬁc terminology that must be used, but

it should include:

• Details of the company’s activity and legitimate

interests in the clause.

• Details of the employee’s job and role.

• Speciﬁc geographical limits.

• Speciﬁc time limits.

• Speciﬁc appropriate ﬁnancial compensation to be

paid after the end of the employment relationship.

• Methods for waiver of the clause, if this option is open

to the employer.

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Restrictive covenant clauses Q&A: France

16. To increase the enforceability of

restrictive covenants in your jurisdiction,

is it beneﬁcial for the covenants to explain

why the employer needs to have the

protection contained in the restrictions?

Yes; while this is not common practice, it will help

to illustrate that the covenant is necessary for the

protection of the company’s legitimate interests (see

Question 17).

17. What legitimate business interests

may be recognised in your jurisdiction as

being capable of protection by restrictive

covenants?

A non-competition clause is lawful only in so far as the

restriction of freedom which it entails is necessary to

the protection of the company’s legitimate interests,

assessed on the basis of the employee’s role and job

level (see Question 22), such as:

• Client base.

• Manufacturing process.

• Pricing.

• Strategy.

The employer must establish that the company would

be likely to suffer effective damage if the employee

were to carry out their professional activity in a

competing company (Dijon Court of Appeal, 22 May

2001, RJS 2002, n° 378, Paris Court of Appeal,19 May

2020, n°18/01931; Paris Court of Appeal,19 May 2020,

n°18/01931).

18. To increase the enforceability of

restrictive covenants in your jurisdiction,

must they be limited in terms of the

restricted activities?

Yes, restricted activities should be limited by being

precisely deﬁned.

A non-compete clause should leave the employee

with the possibility of exercising a professional activity

in accordance with their training and professional

experience.

As an illustration, a restrictive covenant drafted in

such general terms that it prohibits an employee from

carrying on a professional activity corresponding to their

professional experience acquired over 20 years is likely

to be void.

19. To increase the enforceability of

restrictive covenants in your jurisdiction,

should any competitors be speciﬁcally

listed? Are there any potential

disadvantages or consequences of listing

the competitors, that is, those not listed

may not then be included?

Yes, it is possible to list the competitors speciﬁcally

and to draft the clause in such a way that the list is not

understood as a restrictive list (that is, competitors not

listed will still be included).

This is recommended, because if the clause is instead

drafted in such a way that it is considered to constitute a

comprehensive list of competitors, then as competition

within the market evolves, the list may no longer be

up-to-date, and any change to the list will require the

employee’s consent.

20. To increase the enforceability of

restrictive covenants in your jurisdiction,

must they be limited in terms of the

restricted period of time? If so, what is this

period likely to be in practice?

Yes, it is compulsory for restrictive covenants to be

limited in terms of their time period.

Standard practice would typically provide for a

restrictive covenant of one to two years’ duration.

However, CBAs may provide for a different period which

must not be exceeded. If the non-compete obligation

agreed to is for a longer period than the one provided

for in the CBA, a judge may either decide that it is void

altogether, or reduce it.

21. To increase the enforceability of

restrictive covenants in your jurisdiction,

must they be limited in terms of the

restricted geographical area? If so, what

is this geographical area likely to be in

practice?

Yes, it is compulsory for restrictive covenants to be

limited in terms of the restricted geographical area.

In practice, the scope of the prohibition’s application will

depend on a number of factors, including the perimeter

of activity of the employee.

As an illustration, a court has recently considered

that a non-competition clause covering the whole of

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Restrictive covenant clauses Q&A: France

Europe and Asia-Paciﬁc was not of itself unlawful,

since it was not demonstrated that “the employee

was unable to carry out an activity in accordance with

her training, knowledge and professional experience”

(French Supreme Court, Employment Division, 3 July

2019, n°18-16.134).

This was, however, quite exceptional. In another recent

court decision, the Supreme Court considered that a

non-competition clause covering the whole world was

not properly restricted in terms of geographical area

(French Supreme Court, Employment Division, 8 April

2021, n°19-22.097).

A careful balance must be struck between the duration

of the prohibition and its geographical or professional

scope (that is, a long-term commitment can be

compensated by a more restricted geographical area,

and vice versa).

22. In your jurisdiction, is it necessary for

the restriction to reﬂect the employee’s

role and job level?

Yes; the courts will assess the protection of the

company’s legitimate interests in light of the

employee’s role and job level; this is one of the main

conditions for the validity of the restrictive covenant

(see Question 17).

The employer must establish that the company would

be likely to suffer effective damage if the employee

were to carry out their professional activity in a

competing company (Dijon Court of Appeal, 22 May

2001, RJS 2002, n° 378; Paris Court of Appeal,19 May

2020, n° 18/01931).

In assessing this, the courts take account of various

factors, such as among other things:

• The employee’s qualiﬁcations.

• The nature of the duties performed by the employee.

• The conditions under which those duties are

performed (in particular, whether customer contacts

and knowledge have been acquired).

23. Will the reasonableness of any

restraints be considered more by

reference to the status of the employee

at the time of entering into the restraint

as opposed to on termination of their

employment?

French case law considers that the validity of the

non-competition clause must be assessed on the date

the agreement was concluded; that is, at the time of

entering into the restraint, as opposed to on termination

of the employee’s employment.

Garden Leave

24. Can an employee be placed on

garden leave prior to termination in your

jurisdiction, that is a period during which the

employee remains employed and bound by

their employment terms but is released from

their duties, usually prior to termination (see

Standard document, Restrictive covenant

clauses: International: clause 2.4)?

No, the concept of garden leave does not exist under

French law.

On termination of employment, an employer has two

options available:

• To exempt the employee from work during all or part

of the notice period and offer pay in lieu of notice.

• To require the employee to work until the end of the

notice period.

If the employee is exempted from work during the notice

period and if the employer has the contractual option

to waive the non-compete, the latter must immediately

let the employee know whether the non-compete is

going to be waived (French Supreme Court, Employment

Division, 22 June 2011, 09-68.762).

An employee exempted by their employer from working

the notice period may take up a new job during the

notice period, even though the employment contract is

not terminated. In this situation, if the non-compete has

been waived, the employee may therefore immediately

compete. If the non-compete is not waived, it applies as

soon as the employee physically leaves the company.

25. If the answer to the question above is

“yes”, will the inclusion of a clause such as

Standard document, Restrictive covenant

clauses: International: clause 2.4 (which

reduces the period of the restriction by the

garden leave period) increase the likelihood

of the restriction being enforceable?

See Question 24.

Potential future employer

26. Is the requirement for the employee to

give any person making an offer to them

a copy of these restrictions, as set out in

Standard document, Restrictive covenant

clauses: International: clause 2.5, permitted

and enforceable in your jurisdiction?

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Restrictive covenant clauses Q&A: France

This requirement is quite unusual.

It is unlikely to be enforceable, given that it could be

considered an unlawful restraint on the employee’s

freedom to work.

27. Is the requirement for the employee to

tell their employer the identity of any person

and business concern making an offer to the

employee, as set out in Standard document,

Restrictive covenant clauses: International:

clause 2.5, permitted and enforceable in

your jurisdiction?

This requirement is quite unusual.

It is unlikely to be enforceable, given that it could be

considered an unlawful restraint on the employee’s

freedom to work.

Separate legal advice

28. Is it common practice to include

the wording of Standard document,

Restrictive covenant clauses:

International: clause 2.6 in restrictions in

your jurisdiction (that is, stating that the

parties have entered into the restriction

having obtained separate legal advice)

so as to increase the likelihood of the

restriction being enforceable?

No, it is not common practice to include this wording,

nor for employees to obtain separate legal advice before

signing their employment contracts.

It will not have the effect of increasing the likelihood of

the clause being enforceable.

Severability

29. Is a severability clause as set out in

Standard document, Restrictive covenant

clauses: International: clause 2.7 likely

to be valid and enforceable in your

jurisdiction?

No, it is not common practice to include a severability

clause like this under French law.

Where a non-competition clause does not meet the

conditions of validity set out in Question 8, it is, in

principle, void. A severability clause cannot have

the effect of making the judge enforce one speciﬁc

restriction (for example, the geographical scope only).

That being said, regardless of the inclusion of a

severability clause, the judge can “blue pencil” the

clause to moderate any covenants deemed excessive,

for example by reducing their scope or duration.

Transfer of a business

30. Is Standard document, Restrictive

covenant clauses: International: clause

2.8 (requiring the employee to enter

into a corresponding agreement with

any new employer on the transfer of the

employer’s business) common practice

and likely to be enforceable in your

jurisdiction?

No, it is not common practice to require the employee

to enter into a corresponding agreement with any

newemployer on the transfer of the employer’s

business.

This type of provision is very unlikely to be enforceable,

given that it imposes important commitments on both

the employee and the new employer, impeding their

freedom to contract with other employers and leaving

the employee’s situation uncertain as to the extent of

their freedom to seek work following termination with

the new employer (because the competitors, trade

secrets and business connections of the new employer

may different to those of the existing employer) (see

Question 1).

31. On the transfer of a business in

your jurisdiction, will any agreement

(containing restrictive covenants) entered

into between the original employer and

the employee transfer to the new employer

automatically?

Yes, where the employees are automatically

transferred as a result of the transfer of a business,

the employment contract continues with the new

employer under the conditions in force at the

transferor’s establishment at the time of the transfer

(Article L.1224-1, French Labour Code; French Supreme

Court, Employment Division, 15 October 1997, n°95-

42.454). The restrictive covenants are therefore

transferred to the transferee.

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Restrictive covenant clauses Q&A: France

32. If the answer to the above question

is “yes”, will any post-termination

restrictions that automatically transfer

continue to relate to the original

employer/the transferor’s business (that

is, because this was the entity that the

subject matter of the restrictions applied

to at the time the agreement was entered

into)?

Yes, any post-termination restrictions that automatically

transfer continue to relate to the original employer’s

business.

To enhance the protection, the restrictive covenant

could be amended to mirror all the transferee’s business

activity.

Where the employment contract transfers with the

employee’s consent (that is, not automatically), we

therefore recommend including an adapted version

of the restrictive covenant to match the transferee’s

business activity in the document effecting the transfer

of the employee. This document must be signed by the

transferring employee.

This may prove difﬁcult in an automatic transfer as

it would require the employee’s consent. However,

in practice, we recommend amending the restrictive

covenant in this way upon the transfer, if possible.

Group companies

33. At the start of Standard document,

Restrictive covenant clauses: International:

clause 2.1, is the inclusion of wording that

the employer is taking the beneﬁt of the

restrictive covenants “for and on behalf

of any Group Company” likely to enable

the interests of group companies to be

protected in your jurisdiction?

A restrictive covenant is designed to prevent the

employee from competing directly or indirectly with their

former employer, not the group to which it belongs.

As a result, the restrictive covenant cannot be to the

direct beneﬁt of the group company, regardless of

the inclusion of such wording. However, referring to

“Group Companies” in the covenant does not invalidate

it. It could indirectly protect the group company’s

interests if the other companies in the group carry on

a similar activity to that of the employer company, as

their interests would fall within the protection of the

legitimate interests of the employer.

34. If a clause seeking to include the

interests of group companies in relation

to any restrictions is permitted in your

jurisdiction, would the interests of the

following entities be protected:

• Subsidiaries?

• Parent company?

• Other companies in the group?

Any of these companies can be protected to the extent

that a legitimate interest exists (see Question 33).

35. Is Standard document, Restrictive

covenant clauses: International: clause2.9

(requiring the employee to enter into

a separate agreement with any group

company in respect of the restrictions)

common practice and likely to be

enforceable in your jurisdiction?

No; restrictive covenants are agreed on between the

employer and the employee. It is not common practice

to require an employee to enter into a separate

agreement with any group company in respect of the

post-termination restrictions, and this is unlikely to be

enforceable.

36. Is there any third-party rights

legislation in your jurisdiction that would

enable any group company to enforce

restrictive covenants that are entered into:

• in the initial contractual terms of employment

between the employer and the employee; or

• in a separate agreement containing the restrictions

between the employer and employee (for example,

a termination or settlement agreement)?

There is no third-party rights legislation in France that

would enable a group company to enforce restrictive

covenants, regardless of whether the covenants

were agreed in the employment contract itself or in a

separate agreement (see Question 1).

Only the parties themselves should be able to enforce

them, notably to claim compensation in the event of a

breach of the covenant.

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Restrictive covenant clauses Q&A: France

Consideration

37. In your jurisdiction, at the time of

entering into these restrictions, does the

employer need to provide consideration to

the employee?

No, the employer does not have to provide any

consideration at the time of entering into the

covenant.

38. If consideration is required, what can

this consideration be in your jurisdiction?

N/A.

39. If it is permissible in your jurisdiction

for the restrictions to apply to any group

company, will that entity need to provide

separate consideration from that provided

by the employer when the employee

entered into the restrictions?

No separate consideration is required.

40. What are the consequences in your

jurisdiction if the employer does not

provide any consideration to the employee

when they enter into restrictive covenants

(for example, will the restrictive covenant

be void and unenforceable)?

N/A.

Compensation

41. In your jurisdiction, is the employer

required to provide compensation to the

employee in relation to the restrictive

covenants (for example, payments for the

period of restriction)?

Yes; under French law, a non-competition clause that

does not include an obligation for the employer to pay

the employee ﬁnancial compensation is void (French

Supreme Court, Employment Division, 30 June 2004,

n°01-47.082).

The ﬁnancial compensation must be provided for in

the employment contract or the separate non-compete

agreement (French Supreme Court, Employment Division,

15 November 2006, n°04-48.599).

The ﬁnancial compensation cannot be paid before the

termination of the employment contract (French Supreme

Court, Employment Division, 7 March 2007, n°05-45.511).

Only the amounts paid after the termination of the

employment contract can be taken into account in

assessing the lawfulness of the clause (French Supreme

Court, Employment Division, 22 June 2011, n°09-71.567).

42. If the employer is required to pay

compensation to the employee, how

much is payable?

The amount of the ﬁnancial compensation must be

agreed on by the parties in the employment contract or

the separate non-compete agreement.

The applicable CBA may provide for minimum

compensation.

Compensation is generally proportional to the employee’s

salary and to the duration of the prohibition of competition.

A paltry ﬁnancial consideration for the non-competition

clause in an employment contract is equivalent to no

consideration at all.

As an illustration, ﬁnancial compensation ranging

from 30% to 50% of an employee’s monthly salary

is generally regarded as reasonable, whereas

compensation equivalent to 2.4 months’ salary for

a period of 24 months has been deemed insufﬁcient

(French Supreme Court, Employment Division, 15

November 2006, n°04-46.721).

Financial compensation cannot vary depending on

the way an employee’s employment was terminated.

For example, the non-competition clause cannot

provide that the ﬁnancial compensation paid in case

of resignation would be different from that awarded in

case of dismissal (French Supreme Court, Employment

Division, 21 October 2020, n°19-18.928).

43. If the employer is required to pay

compensation to the employee, when is

the compensation payable?

The employer can only pay compensation after the

termination of employment.

The compensation is generally payable at the end of

each month for which the restriction applies.

44. Is the employer able to waive any

restrictive covenants at the time of

termination in your jurisdiction? If so,

how can the employer do this?

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Restrictive covenant clauses Q&A: France

The employer can waive the non-competition clause

unilaterally only if this option is provided for in the

non-compete clause or, failing that, in the collective

agreement to which the contract of employment refers.

Otherwise, the employee’s agreement is required

(French Supreme Court, Employment Division, 22

February 2006, n°04-45.406 and 17 February 1993,

n°89-43.658).

The employer must comply with the terms of the

waiver set out in the employment contract or CBA (for

example, the clause will provide for a speciﬁc time

limit during which the non-competition clause can

successfully be waived or a speciﬁc procedure to follow

to waive the clause, for example by sending a registered

letter with acknowledgment of receipt). In any event,

the waiver must be unequivocal, and the employee

must be individually notiﬁed of it (French Supreme

Court, Employment Division, 30 May 1990, n°87-40.485,

21 October 2009, n°08-40.828 and 21 October 2020,

n°19-18.399).

A waiver releases the employer from the obligation to

pay the employee the compensation provided for in

the non-competition clause, unless the clause itself

or the relevant CBA provide otherwise. In return, the

employee is released from their obligations under the

clause.

An employer that does not follow the required

waiver process, or that waives some but not all of the

obligations, will not be released from the obligation

to pay the ﬁnancial compensation (French Supreme

Court, Employment Division, 13 October 1988, n°58-

43.261).

45. Will the employer still have to pay the

compensation during the post-termination

period of the restriction even if the

employee ﬁnds alternative employment

that does not breach the restrictive

covenants with the employer?

Yes. The entitlement to compensation is based on:

• Termination of the employee’s employment.

• Compliance with the non-competition clause.

• The absence of a waiver of the restriction by the

employer.

The employer will therefore still have to pay the

compensation during the post-termination period

of the restriction if the employee ﬁnds alternative

employment, provided that they have complied with

the non-competition prohibition.

46. If the employer is able to waive the

restrictive covenants, what amounts

may be payable to the employee (for

example, is the compensation still

payable to the employee in full or a

reduced sum)?

When the employer successfully waives the restrictive

covenants, it is released from the payment of

compensation, unless the non-compete clause

itselfor the relevant CBA provide otherwise (see

Question 44).

Execution and other formalities

47. Do restrictive covenants have to be in

writing in your jurisdiction to be valid and

enforceable?

Statutes or case law do not expressly state

that restrictive covenants have to be in writing.

However,such a requirement is often set out in the

CBA, and for evidentiary reasons a written document

is necessary.

To be valid and enforceable, restrictive covenant will

have to meet the conditions set out in Question 8. A

verbal contract of employment cannot meet these

conditions.

Case law has considered that it was inferred that an

employee hired under a verbal employment contract

was not bound by any non-competition clause (French

Supreme Court, Employment Division, 21 January 1987,

n°84-40.673).

48. What execution and other formalities

are required for restrictive covenants

to be valid and enforceable in your

jurisdiction?

No execution or other formalities are required, but

French courts often consider that the employee’s written

signature on the document demonstrates their consent

to the non-compete.

49. In your jurisdiction do the restrictive

covenants need to be registered or require

any formal approval?

No.

10 Practical Law

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Restrictive covenant clauses Q&A: France

General

50. Are any of the restrictive covenant

clauses set out in Standard document,

Restrictive covenant clauses: International

not legally valid and enforceable or not

standard practice in your jurisdiction?

Clause 2.1(c) is not standard practice under French

law and is likely to be considered both unlawful and

unenforceable, given that it may constitute an unlawful

restraint to freedom to work (see Question 10).

The restriction set out in clause 2.1(f) is rarely

encountered in practice, because there would be other

legal recourses available without having to justify a

contractual breach (see Question 8).

Clause 2.4 is irrelevant to French law, since the concept

of garden leave does not exist, and the restrictive

covenant will be deemed to apply on departure of the

employee if they are exempted from working their notice

period (see Question 24).

Clause 2.5 is not standard practice in France. It could

be considered an unlawful restraint on the employee’s

freedom to work, and is unlikely to be enforceable (see

Question 26 and Question 27).

Clause 2.6 is rather unusual and does not correspond to

local practice (see Question 28).

Clause 2.8 is unusual and likely to be found invalid, as it

imposes too great a commitment on both the employee

and the employer, impeding their freedom to contract and

leaving the employee in a situation of uncertainty as to the

extent of their freedom to seek work (see Question 30).

Clause 2.9 is not common practice and is unlikely to be

enforceable, as a restrictive covenant can only be to the

direct beneﬁt of the employer (as opposed to any group

company) and because an employee cannot be forced

to enter into subsequent separate agreements with a

group company (see Question 33 and Question 35).

51. Are there any other clauses that would

be usual to see in restrictive covenant

clauses and/or that are standard practice

in your jurisdiction?

It is standard practice under French law to provide

additional explanations regarding the payment of the

ﬁnancial compensation.

Such a clause could be drafted as follows:

”For the entire duration of the non-compete clause,

the employer shall pay the employee a monthly

indemnity amounting to [amount] % of the total

remuneration received over the last 12 months

by the employee for each month that the non-

compete clause applies.”

A penalty clause is sometimes included for the employer

to obtain a lump-sum compensation without having

to prove the exact damage suffered if the employee

breaches their restrictive covenants.

In the absence of a penalty clause, a court will assess

the damages based on the elements brought forward by

the parties.

If a penalty clause is included, a court may increase or

decrease the penalty set out in the clause only if it is

deemed manifestly excessive or derisory.

The penalty clause could be drafted as follows:

”Any infringement of the non-compete obligation

releases the company from the payment of the

ﬁnancial compensation and makes the employee

liable for the reimbursement of any sums received

in that respect.

Any failure to comply with this non-competition

clause will automatically render the employee liable

to pay a penalty to its employer of € [amount],

without the need for a formal notice to cease the

competitive activity.”

Remedies for breach

52. What remedies are available for

breach of restrictive covenants? How long

will each remedy take to obtain in your

jurisdiction?

Where the employee even temporarily breaches the

restrictive covenant, the employer can bring summary

proceedings, to seek an injunction to remedy the

circumstances.

In summary proceedings, the judge has limited power:

they can only prescribe precautionary measures or

measures of reinstatement in order to prevent or stop

the breach, or remedy it. This would include issuing

an injunction ordering the former employee to cease

certain competing actions, or to give an amount of

money as an advance on damages to be claimed in

an action on the merits. Such a decision can only

be obtained if the existence of the non-compete

obligation is not seriously questionable and when the

recurrence and duration of the breach require such an

immediate decision.

They cannot order the judicial termination of the

employment contract concluded with the new employer,

nor a measure obliging a former employee to terminate

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Restrictive covenant clauses Q&A: France

that employment relationship (French Supreme Court,

Employment Division, 30 May 2013 n° 12-14.289).

It is only if the employer brings a full claim on the

merits that the employee may be ordered, subject to a

penalty payment, to terminate the employment contract

concluded in breach of the non-competition undertaking

(French Supreme Court, Employment Division, 16 October

1958, n°57-10.297).

An employee who even temporarily breaches the

contractual non-compete obligation loses the right to

the ﬁnancial compensation associated with the non-

compete.

They may also be ordered to reimburse the sums

received in this respect, except for those paid for the

time during which the obligation was complied with.

The employee may also be ordered to pay compensation

for the damages incurred by their former employer.

In parallel, the new employer will also be liable if it

hired the employee while knowing they were bound by a

non-compete clause. This is because hiring an employee

in violation of a non-competition clause is a tort that

would give rise to liability for the damages incurred,

irrespective of potential unfair competition liabilities.

While summary proceedings are likely to take a few

weeks, securing a hearing on the merits before the

Employment Tribunal can take up to two years.

53. Would a successful party be able to

recover its costs from the losing party

for any successful action for breach of

restrictive covenants?

These decisions are taken by a judge on a case-by-case

basis, and only allow for a very limited recovery.

54. If there are no restrictive covenants

with the employee, can the employer

rely on any other actions or remedies to

protect its business, clients, customers

or conﬁdential information in your

jurisdiction?

Regardless of whether an employee is bound by a

restrictive covenant, acts of unfair competition remain

prohibited (Articles 1240 and 1241, French Civil Code).

While the notion of unfair competition is not deﬁned by

statute, it is considered that wrongful acts which entail

the following consequences are classiﬁed as unfair

competition:

• Disorganisation of the former employer’s business

(for example, a leaving employee hiring all of their

previous colleagues to their new place of work, forcing

the former employer to hire and train new employees).

• Commercial disturbance caused to the former employer.

• Creation of confusion in the minds of the employer’s

customers and/or in the minds of specialists in the

ﬁeld of activity in question.

The former employer may bring an action for unfair

competition against its former employee or against the

new employer. This action must generally be brought

before the judicial court (as opposed to the employment

court).

Judges have full latitude to assess the amount of

damages to compensate for the loss suffered by the

former employer.

Contributor proﬁles

Philippe Thomas, Partner

Dechert LLP

T +33 1 57 57 80 91

E [email protected]

Areas of Practice: Labour and Employment.

Maëlle Chausse, Associate

Dechert LLP

T +33 1 57 57 80 81

Areas of Practice: Labour and Employment.