The non-competition clause is a well-known contractual mechanism designed to protect a company's interests by limiting the freedom of a former partner, employee or co-contractor, to compete with it. While most practitioners are familiar with general conditions and limits of validity One aspect of these clauses that is often underestimated is the existence of specific regulations in addition to ordinary law. In certain areas, the legislator has intervened to prohibit these clauses outright or to regulate them very strictly. Navigating between these general and special rules is a complex exercise in which the assistance of a specialist is essential. lawyer specialised in competition law can be decisive. The aim of this article is to provide details of these exemptions, which are an essential part of the analysis of the non-competition obligation in the workplace.
The principle of specific non-competition provisions
Before examining the specific cases, it is necessary to understand the rationale behind the legislator's intervention. Why create specific rules when a general framework already existed?
Objective: to protect certain freedoms or activities
The existence of special regulations is no accident. They are designed to protect interests deemed to be overriding or fundamental freedoms that could be threatened by an overly broad application of the principle of freedom of contract. For example, the aim is to guarantee freedom of establishment for a professional, to preserve the competitive dynamic of a market or to protect the party deemed to be economically weaker in a contractual relationship. These provisions aim to establish a fairer balance than that which might result from simple negotiation between the parties, by laying down non-negotiable safeguards.
Coexistence with ordinary contract law
These special rules do not systematically replace ordinary law; they are linked to it. A non-competition clause inserted in a contract governed by specific regulations must not only comply with those regulations, but also with the conditions of validity laid down by general case law (protection of the legitimate interests of the company, limitation in time and space, and financial compensation for employees). Specific regulations act as an additional filter. A clause may be perfectly valid under the general criteria, but fall under a special prohibition. This superimposition of standards illustrates the diversity of sources of the non-competition obligation and the need for a case-by-case analysis.
Provisions prohibiting the stipulation of a non-competition clause
In certain areas, the legislator has taken a radical approach by banning all non-competition clauses on the grounds that they infringe a fundamental freedom.
Commercial leases and despecialisation (article L.145-15 C. com.)
In the case of commercial leases, the protective status gives the lessee the right to "despecialise". They can decide to change or expand their business. To ensure that this right is effective, article L. 145-15 of the French Commercial Code states that agreements prohibiting the lessee from transferring his lease or the rights he has under this chapter to the purchaser of his business or company are deemed to be unwritten, regardless of the form they take. By extension, a non-competition clause that would have the effect of limiting the freedom of the purchaser of the business, and therefore the transferability of the lease, would be rendered ineffective. Similarly, a clause that thwarted the right to despecialise would be unlawful. The aim is to allow the transfer and development of the business, a key element in economic life. For more details on the management of this contract, it may be useful to refer to the rules governing the fact of managing your commercial lease on a day-to-day basis.
Co-ownership regulations (article 8 of the 1965 Act)
A co-ownership by-law may impose restrictions on the exercise of commercial activities in private lots, but these restrictions must not be assimilated to an arbitrary non-competition clause. According to article 8 of the law of 10 July 1965, the regulations may not impose any restrictions on the rights of co-owners other than those justified by the "purpose of the building". Thus, a clause prohibiting the exercise of a commercial activity similar to another already present in the building would be deemed unlawful if the purpose of the building (for example, mixed residential and commercial use) does not impose such a restriction. Case law ensures that the co-ownership regulations do not become a tool for protecting specific commercial interests to the detriment of entrepreneurial freedom.
Legal and judicial professions (collaborating lawyer, salaried notary)
Freedom of establishment and free choice of client are cardinal principles for the legal professions. For this reason, strict ethical rules prohibit non-competition clauses in certain contracts. For example, a lawyer's partnership agreement may not contain such a clause. The purpose of this prohibition is to ensure that young lawyers are free to set up their own practice and develop their own clientele without hindrance. Similar logic applies to other regulated professions, such as salaried notaries, for whom the law provides that any agreement contrary to freedom of establishment is deemed unwritten.
Former provisions on small distributors (ex-article L.442-6 C. com.)
It is interesting to note that the law is evolving. The former article L. 442-6 of the French Commercial Code (now repealed and amended) prohibited the direct or indirect imposition of a minimum resale price on a product or service. In the past, this approach was used to penalise clauses which, under the guise of non-competition, sought to restrict the commercial freedom of small distributors. Although the text has changed, the spirit of protection against restrictive competition practices remains, illustrating the legislator's constant desire to clean up commercial relations.
Provisions governing the stipulation of a non-competition clause
More often than not, the legislator chooses to regulate the non-competition clause by setting the conditions for its validity. The freedom of the parties is then severely limited.
The commercial agent contract (article L.134-14 C. com.)
The status of commercial agent is highly protective. A post-contractual non-competition clause is possible, but it is confined within a very precise framework by article L. 134-14 of the French Commercial Code. To be valid, it must :
- Be in writing.
- Concern the geographical area and, where applicable, the group of people entrusted to the agent.
- Relate only to the type of goods or services for which the agent was acting.
- Not last more than two years after termination of the contract.
If one of these conditions is not met, the clause is null and void. The legislator has thus defined what constitutes an acceptable balance between the protection of the principal and the freedom of the agent.
Affiliation agreements and the Macron law (article L.341-2 C. com.)
The "Macron" law of 6 August 2015 introduced specific provisions for distribution contracts that include a post-contractual non-competition clause, aimed in particular at franchise or concession networks. Article L. 341-2 of the French Commercial Code lays down strict cumulative conditions for the validity of this clause after the end of the contract. It must :
- Concern goods and services in competition with those in the contract.
- Be limited to the land and premises from which the operator carried on its business during the contract.
- Be essential to the protection of the substantial, specific and secret know-how transmitted.
- Its duration must not exceed one year after the expiry or termination of the contract.
This provision is fundamental for distribution networks, as it has a major impact on the protection of their concept after the departure of a member. The problems associated with termination of the franchise contract are directly affected by this legal framework.
The liberal collaborator (law 2005-882)
The status of the self-employed associate, created by the law of 2 August 2005, represents a delicate balance. The collaboration contract must stipulate the terms and conditions of its termination, on pain of nullity, and must guarantee the associate the possibility of building up a personal clientele. In this context, a non-competition clause is conceivable, but it must be strictly proportionate to the legitimate interests of the partner and must not interfere excessively with the partner's freedom of establishment. Its limitation in time and space must be reasonable, and it is often assessed very strictly by judges, who ensure that it does not constitute a disguised ban on practising.
Consequences of non-compliance with these regulations
When a non-competition clause is stipulated in breach of a specific legal provision that prohibits or regulates it, the penalty is generally severe. In most cases, the law provides that the clause is "deemed unwritten". This sanction is stronger than simple nullity. It means that the clause is deemed never to have existed, without the need for a judge to declare it null and void. The rest of the contract remains in force, with the unlawful clause removed. The contracting party who was bound by this clause therefore regains full and complete freedom to compete, without any formalities. If the application of the unlawful clause has caused him harm, he may also bring an action for damages.
The relationship between non-competition clauses and specific regulations is a technical area that requires a precise analysis of each contractual situation. An error in the drafting or assessment of such a clause can have significant financial and commercial consequences. To secure your contracts and defend your rights, the services of a an expert law firm is an essential asset.
Sources
- Commercial Code (in particular articles L.145-15, L.134-14, L.341-2)
- Law no. 65-557 of 10 July 1965 establishing the status of condominiums in built-up areas
- Law no. 2005-882 of 2 August 2005 in favour of small and medium-sized enterprises
- National Internal Rules of the Legal Profession (RIN)
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