Non-competition clause: when the employer must waive within 8 days

Picture the scene: you are the owner of a small shop in Nice, rue de la Buffa. You hire a competent salesperson, with a non-competition clause (prohibition from working for a competitor after leaving). One day, he resigns. You are relieved: you will not have to pay the non-competition compensation if you release him from his obligation. But be careful: you have 8 days to do so. Eight days from when? From the notification of the notice period (the period of work after the resignation) or from the actual termination of the contract? This question was already decided by the French Supreme Court in 1977, and the answer is unequivocal: the period runs from the notification of the notice period, even if the employee performs a reduced notice period. In this article, I will tell you about this case, dissect the judges' reasoning and give you practical tips to avoid being caught out.

The facts: a story that happens every day

We are in the 1970s. Mr. Crouillebois (yes, that's his real name) works for a company. He resigns by letter dated 16 October, received on 17 October by the employer. The applicable collective agreement provides that the employer can discharge itself from the non-competition compensation by releasing the employee from the prohibition, provided it informs them in writing within eight days following the notification of the notice period. Mr. Crouillebois remains in the employer's service until 27 October: this period constitutes a reduced notice period (10 days instead of, say, one month). The employer, thinking it was doing the right thing, notifies its waiver of the non-competition clause on 25 October. That is 8 days after receipt of the resignation letter (the 17th). But is it within time? The French Supreme Court will say no: the 8-day period runs from the notification of the notice period, that is, the date on which the termination becomes effective, i.e., 17 October (date of receipt of the resignation). Yet, 25 October is 8 days after the 17th, so in principle within the time limit? Not so simple: the Court considers that the period of work from 17 to 27 October constituted a notice period. However, the collective agreement said that the period runs from the notification of the notice period. Here, the notification of the notice period occurred on 17 October (receipt of the resignation). So the employer had to waive by 25 October at the latest? Yes, but it did so on the 25th, i.e., on the very last day. But the Court considers that the period had already expired? No, it says the employer acted on the 25th, i.e., within 8 days. Yet, it dismisses the appeal, why? Because the lower courts had found as a fact that the employee did not intend to perform the notice period (he worked until the 27th, but it was a reduced notice period). In reality, the decision is a bit confusing, but the principle is clear: the 8-day period runs from the notification of the notice period, not from the actual termination. If the employee performs a notice period, the starting point is the notification of the notice period (date of resignation). If the employee does not perform the notice period, the starting point is the actual termination (date of actual departure). In this case, the employee performed a reduced notice period, so the starting point was the notification of the notice period. The employer complied with the time limit, but the Court upheld the lower courts' decision that the employer had not waived within 8 days following receipt of the resignation. In short, the decision is a specific case, but it illustrates the strictness of the deadlines.

The reasoning of the court — explained

The French Supreme Court relies on the interpretation of the collective agreement. This provides that the employer can discharge itself from the non-competition compensation by releasing the employee from the prohibition, provided it notifies them in writing within eight days following the notification of the notice period. In the event of non-performance of the notice period (if the employee does not work during the notice period), the period runs from the actual termination of the contract. The lower courts found that the employee resigned on 16 October, that the resignation was received on 17 October, and that he worked until 27 October, constituting a reduced notice period. They deduced that the starting point of the period was receipt of the resignation (17 October), the date of notification of the notice period. The employer notified its waiver on 25 October, i.e., 8 days later. But the courts considered that this was not within the time limit, because the period expired on the evening of the 25th? Or they considered that the notification had to be made within 8 days following the notification of the notice period, and that the 25th was the 8th day, but perhaps the notification was made after the deadline? The decision is unclear. What should be remembered is that the Court validates the lower courts' reasoning: the period runs from the notification of the notice period, not from the actual termination, when the employee performs a notice period, even a reduced one. In other words, the employer cannot wait until the end of the notice period to waive the clause; it must act as soon as the resignation is received. This is a strict interpretation, favourable to the employee, which prevents the employer from playing for time.

What this means for you — practically

For employers, this decision means they must be reactive. As soon as they receive a resignation from an employee subject to a non-competition clause, they have 8 days to waive the clause and thus avoid paying the compensation. This period runs from the notification of the notice period (date of receipt of the resignation letter) if the employee performs their notice period, even partially. If the employee does not serve a notice period, the period runs from the actual termination (last day worked).

Let's take a concrete example: you are the manager of a real estate agency in Mougins. Your agent resigns on 1 March. He serves his 3-month notice period until 31 May. You must waive the non-competition clause before 9 March (8 days after 1 March). If you wait until 10 March, you will have to pay the compensation, even if you release him later.

For employees, this is a protection: the employer cannot delay its decision. If it does not release you within 8 days, you are entitled to the non-competition compensation if you comply with the prohibition.

If you are in this situation, you must check your collective agreement. Some agreements provide for different deadlines. In the absence of a clause, the employer can waive at any time, but it must do so expressly and before the employee enters into a new contract.

Four tips to avoid this type of dispute

• Consult your collective agreement from the outset: Check the clauses relating to non-competition and the waiver deadlines. Some agreements impose very short deadlines, like 8 days, others one month.
• Notify your waiver in writing by registered post with acknowledgement of receipt: In the event of resignation, send a recorded delivery letter within the time limit. Keep proof of the date of posting.
• Calculate the deadline precisely: The starting point is the date of notification of the notice period (date of receipt of the resignation) if the employee performs their notice period, or the date of actual termination otherwise. Do not count the days including the starting day, unless the agreement provides otherwise.
• If in doubt, consult a lawyer: Non-competition clauses are strictly interpreted. A lawyer lawyer can advise you on your obligations and help you draft the waiver.

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Further reading: related case law and developments

The case law of the French Supreme Court is consistent on this point: the period for waiving a non-competition clause is strictly interpreted. In a decision of 10 July 2002 (No. 00-43.777), the Court reiterated that the employer must waive within the period provided by the agreement, and failing that, it is liable to pay the compensation. Another decision of 18 January 2011 (No. 09-42.140) specifies that the waiver must be express and unequivocal. The trend is therefore protective of the employee: an employer who does not comply with the formalities or deadlines loses its right to avoid paying the compensation. In the future, the courts will probably continue to sanction employers who delay in waiving, especially if the collective agreement is clear.

What you absolutely must remember

FAQ:

1. When does the 8-day period for waiving a non-competition clause start? Answer: From the notification of the notice period (date of receipt of the resignation) if the employee performs their notice period, even a reduced one. If the employee does not serve a notice period, the period runs from the actual termination (last day worked).
2. What happens if the employer waives after the deadline? Answer: It must pay the non-competition compensation to the employee, provided the latter complies with the prohibition.
3. Can I waive verbally? Answer: No, the waiver must be in writing, preferably by recorded delivery letter with acknowledgement of receipt, to prove the date.
4. What should I do if my employer does not release me within 8 days? Answer: You can claim the non-competition compensation if you comply with the prohibition. Consult a lawyer to enforce your rights.
5. Can the collective agreement provide for a different period? Answer: Yes, some agreements set longer or shorter periods. Always check your agreement.

In summary, remember that the waiver period is short and mandatory. Act quickly.

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