Designer Hedi Slimane has commenced legal proceedings against the owners of fashion house Yves Saint Laurent (Kering) following his exit earlier this year. In the context of the recent call for evidence in the UK, this case highlights some interesting differences in the French approach to non-compete clauses.
When he left employment, Hedi was released from a non-compete clause in his contract which may otherwise have prevented him from working competitively for a period of time after his employment ended. The media reports he is claiming that he should not have been released from the non-compete clause because under French law this clause would have entitled him to financial compensation. Compensation would have been based on a percentage of his salary and other rights such as paid holidays during the period when he could not compete - and for Hedi this compensation must have been very attractive to have led to this litigation.
This raises an interesting distinction: unlike French law, under UK law there is no requirement to compensate an employee financially in order for the restriction to be fair or enforceable. UK businesses often include non-compete restrictions in employment contracts and they can be enforceable if they were valid and reasonable at the time they were entered into and even if there is a financial loss to the employee.
Employees with significant power to damage a business, particularly those in sales and other client facing roles, will often have lengthy non-compete clauses for perhaps 6 months or a year, depending on all the circumstances without any requirement to compensate them. If Hedi had been working in the UK, he would have been pretty pleased the clause had been dropped!
However, the role of non-compete clauses in the UK is currently being scrutinised. In 2014, a report by The Social Market Foundation recommended banning non-compete clauses from employment contracts on the basis that they can act as a barrier to workers leaving a business to start their own business in the same field. In a call for evidence, launched in May this year, the Government are looking at “whether there are reasons for believing that non- compete clauses written into employment contracts are stifling innovation, particularly for start-up businesses”.
In my view, a flat ban on such clauses is overly simplistic and unlikely. Non-compete clauses provide important protection for a business and there are many circumstances when enforcing these clauses against an employee becomes necessary. However, it could be that we see a move towards the French model where a deterrent, such as financial compensation, is used to regulate the use of non-compete clauses.
Caroline Glacken is an Employment Lawyer and Senior Associate at Constantine Law Limited, London.