Shareholder Noncompetes in France

Big happenings in France (well… in the world of noncompetes, anyway).

In France, noncompetes arising our of an employment relationship are similar to those in other European countries that enforce noncompetes. They must be limited in time, space, and scope; necessary to protect a legitimate business interest; and supported by consideration (generally, a significant percentage of gross compensation) – during the restricted period. (This type of noncompete is frequently referred to as a “garden leave” agreement.)

According to a detailed article by Jérôme Bignon of Bignon Lebray in Lexology, on March 15, 2011, the French Supreme Court expanded application of these requirements beyond noncompetes arising from an employment relationship to noncompetes arising from a shareholder agreement. Specifically, the case involved an employee who was bound by a noncompete as part of a shareholder agreement, rather than simply as part of his employment agreement. The court treated the noncompete in the shareholder agreement in the way that it would have treated the noncompete had it arisen solely in a standard employment arrangement.

Mr. Bignon questions whether this decision heralds tighter controls on the use of noncompetes in France. The real test will come when the court is called upon to apply these requirements to a noncompete arising from the sale of a business.