French law allows an employer to subject an employee to a non-compete obligation after the termination of his/her employment under certain conditions. However, in practice, an employer may realize at the time of the termination that an employee will actually not be in a position to constitute a threat to its interests even if he/she is recruited by one of its competitors. In such case, it is therefore understandable that the employer will wish to release itself from its obligation towards the employee and in particular to avoid payment of the financial consideration which would otherwise be due.
In this respect, case law admits that an employer can unilaterally waive application of a non-compete obligation provided that such possibility is contained in the employment contract or the applicable collective bargaining agreement. However, it is generally provided that such waiver must occur within a certain time limit.
In this context, what happens when an employment contract provides that the employer may waive the non-compete undertaking at any time after the termination of an employee?
In a recent decision of the Supreme Court dated 2nd December 2015, an employee resigned from his position. He was subsequently recruited by a competitor of his former employer and challenged the validity of the non-compete obligation contained in his employment contract since the employment contract entitled the employer to waive the non-compete provision at any time.
The Court of Appeal found in favor of the employee and ruled that the entire non-compete clause was null and void. The employer argued before the Supreme Court that only the provision allowing the employer to waive the clause should be declared as null and void. Such distinction proved to be important as, in this case, the employer did not waive the clause so that if the validity of the other provisions of the non-compete obligation was to be upheld, the employer could claim damages on the ground that the employee had not complied with his obligation.
However, such argument was not accepted by the Supreme Court which held that the non-compete obligation as stipulated in the employment contract must be fully annulled since the extensive possibility to waive it had placed the employee in an uncertain position as to the extent of his freedom to work. The solution enforced by such ruling seems however to depart from previous decisions of the Supreme Court which tended to consider that such type of provision should only not be given effect rather than actually declared null and void. Employers must therefore remain very careful with respect to the wording of the non-compete clauses they wish to enforce as the entire clause may be annulled if the provisions concerning its possible waiver are not compliant with legal rules, even if such ability to waive is not used by the employer.