In France, a valid noncompete clause in an employment contract must provide for the payment of financial compensation to the departing employee, as long as the employee remains bound by and complies with the clause’s terms and conditions. But when must the payment of compensation commence? Earlier, perhaps, than you might have thought.
If the employee’s contract contains a noncompete clause, and the employer provides “garden leave,” that is, gives termination notice to the employee but excuses the employee from working during the notice period, then the noncompete clause kicks in from the last effective date of work, not from the actual termination date. This means that the noncompete amount must be paid during the notice period, even though the employee is already receiving his or her full salary.
Consider the following example:
- An employee has a 12-month noncompete clause, to be paid at 50 percent of his or her average wage.
- The employer gives the employee three months’ notice of termination on March 31, 2015, but excuses the employee from work.
- The actual termination date is June 30, 2015.
Here, the employer will be obligated to pay the employee’s full salary during the three-month notice period of April, May, and June—plus 50 percent of the employee’s average wage during that same period for the noncompete. (In other words, 150 percent of the employee’s salary must be paid for 3 months). Then, as of the termination date, an additional nine months of noncompete related compensation will be due the employee at 50 percent of the employee’s average wage.
If the employee is not paid the noncompete amount during the non-working notice period, then because the employee is not working, he or she is no longer required to maintain a duty of loyalty to the employer (even though the employee is still on full salary!) and is free to work for a competitor. If the employee is not paid the noncompete amount owed during a non-working notice period, and chooses not to work for a competitor during that time , the employee can claim that the entire noncompete is no longer valid, even if the employer was prepared to pay for the non-compete post-termination.
Rebecca L. Marks is of counsel in the Boston office of Ogletree Deakins and a member of the International Practice Group.