Non-compete clause when an executive or senior executive leaves
When an executive or senior executive leaves a company, a non-compete clause can have a direct impact on the next stage of their career.
Can they join a competitor? Start their own business? Carry out the same activity? For how long and within what geographical area? What financial compensation should they receive?
These questions should be assessed before the terms of departure are finalised, in order to understand their legal, financial and professional implications.
As an employment lawyer, I advise executives and senior executives in Aix-en-Provence and Paris on reviewing their non-compete clauses and incorporating them into their overall departure strategy.
What is a non-compete clause?
A non-compete clause is intended to restrict, after the termination of the employment contract, an employee’s ability to carry out certain activities that may compete with their former employer.
It should not be confused with the obligations that apply to an employee while their employment contract is still in force.
For an executive or senior executive whose expertise is closely tied to a particular sector, market or type of client, the clause may have a significant impact on their future career options.
How do you know if a non-compete clause is valid?
The fact that a non-compete clause appears in the employment contract does not necessarily mean that it will be fully enforceable after the employee leaves.
Its validity and scope should be assessed against several criteria.
In particular, the restrictions on the activities concerned, their duration and geographical scope, their justification in light of the company’s legitimate interests, and the financial compensation provided for should all be reviewed.
The analysis should be based on the exact wording of the clause and any provisions applicable to the employment relationship.
What financial compensation applies to a non-compete clause?
The application of a non-compete clause requires financial compensation.
The amount and payment terms should be determined by reviewing the applicable documents, particularly the employment contract and, where relevant, the collective bargaining agreement.
This compensation is a financial component of the departure and should be identified when comparing the different departure scenarios.
It should therefore be included in the overall financial assessment of a departure negotiation.
Can the employer waive the non-compete clause?
Depending on the applicable provisions, the employer may in some circumstances be able to waive the non-compete clause.
However, the conditions and time limits for doing so should be carefully reviewed.
This is particularly important where an executive or senior executive is already planning the next stage of their career: joining another company, continuing to work in the same sector or starting a new business.
It is therefore advisable to clarify what will happen to the clause as part of the discussions surrounding the departure.
Can the waiver of a non-compete clause be negotiated?
When a departure is being negotiated, what happens to the non-compete clause may be one of the issues to consider.
For some executives and senior executives, being released from the restriction may offer significant professional advantages. In other situations, the application of the clause and payment of the related financial compensation may form part of the overall financial terms of the departure.
The strategy therefore depends on the wording of the clause, the executive’s career plans and the other terms of departure being considered.
Can you join a competitor after leaving the company?
The answer depends in particular on whether an applicable non-compete clause exists and on its scope.
The restricted activities, geographical scope and duration of the restriction should be carefully reviewed to determine whether the new career opportunity falls within the scope of the clause.
This review is particularly important before accepting a new position or making a commitment to a competing company.
Can you start a business despite a non-compete clause?
Starting a business after leaving the company should also be assessed in light of the exact wording of the non-compete clause.
Depending on the proposed activity, target clients, geographical area and duration of the restriction, the project may require a prior legal review.
For an executive or senior executive considering starting their own business, the implications of the clause should therefore be anticipated before leaving the company and, ideally, before structuring the new venture.
Including the non-compete clause in departure negotiations
Departure negotiations are not limited to the amount of severance pay.
The departure date, notice period, bonus and variable compensation, management package and non-compete clause may all have significant financial and professional implications.
Whether the clause remains in force or is waived should therefore be assessed in light of the executive’s objectives and incorporated into the overall negotiation of the terms of departure.
When should you have your variable compensation reviewed?
A review may be appropriate as soon as an issue arises regarding the setting of targets, the calculation of variable compensation or the payment of a bonus.
Where a departure is being considered, it is preferable to carry out this review before the departure date and terms are finalised.
This helps identify any amounts that may be due and incorporate variable compensation into the different negotiation scenarios.
An employment lawyer in Aix-en-Provence and Paris
I advise executives and senior executives in Aix-en-Provence and Paris, both in person and remotely, on reviewing their non-compete clauses and assessing the implications of their departure.
Consultations can be conducted in French or English, particularly for international executives and senior executives whose employment contract or career plans have an international dimension.
FAQ
Frequently asked questions about non-compete clauses
Contact domaniewicz avocat
42 Avenue Victor Hugo
13100 Aix-en-Provence
9 Rue Treilhard
75008 Paris
+33 6 23 61 20 01