This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

French Distribution Law

Article 17 of the national inter-professional agreement provides that “for the performance of the prohibition, the employer shall pay to the sales representative a special monthly financial consideration the amount of which will be equal to two-thirds of a month if the duration exceeds one year and a half and one-third of a month if the duration is less than or equal to one year […]” and “the mont …

Financial consideration.

The post-contract non-compete clause imposed on the sales representative must not only meet the ordinary legal conditions but also the requirements of the national inter-professional agreement (ANI). The clause must thus be limited in time  and/or in space , and be necessary to protect the legitimate interests of the undertaking . A non-compete clause including a repurchase clause in favor of the sales representative , or a clause preventing the sales representative from working, even when not as a VRP, for an undertaking competing with his former employer , cannot be regarded as indispensable for the protection of the employer's legitimate interests. On the other hand, a clause that does not prohibit the VRP from canvassing, for the account of another employer, potential clients other than those he previously met with, is valid . Pursuant to Article 17 of the ANI, the non-compete clause cannot exceed a maximum of two years as of termination of the contract . The provision also specifies the conditions of territorial restriction which are limited to “sectors and classes of customers that the commercial representative was in charge of visiting at the time of the notification of the termination of the contract” . A non-compete clause which prevents the sales representative from selling to any person having placed an order through him is therefore null and void since it is more restrictive than the ANI which restricts its scope to the area that had been granted previously to the representative . On the other hand, a non-compete clause must be interpreted strictly and cannot extend its effects to territories canvassed in the course of the contract by the sales representative, but not mentioned in the clause . The clause which prevents the sales representative from directly representing his employer's suppliers is not a non-compete clause .

Lastly, it has been held that a clause in an employment contract whereby the employer may, after termination of the relations, impose a non-compete obligation on the sales representative is null and void  since it is contrary to the terms of Article 1174 of the Civil Code which provides that “an obligation is void where it was contracted subject to a potestative condition on the part of the one who binds himself”. The invalidity of the non-compete clause which is potestative requires the employer to compensate for the harm arising out of the uncertainty in which the VRP has been placed rather than paying him a financial consideration .

Cass. soc., 22 October 1997, LawLex200200004586JBJ: a non-compete clause is valid notwithstanding the absence of geographic restriction where it is limited to two years, it is intended to protect the legitimate interests of the undertaking and it does not undermine the sales representative's freedom to work.

Cass. soc., 11 May 1994, LawLex200200004489JBJ: a non-compete clause imposed on the sales representative is null and void where it is not limited in space; 7 June 2006, LawLex200600001377JBJ: the non-compete clause imposed on the sales representative which merely prevents him from carrying out the activity in the formerly canvassed area and from contacting the classes of customers that previously canvassed, is lawful.

Cass. soc., 26 November 2008, LawLex200900002685JBJ.

Cass. soc., 12 February 2002, LawLex200200004551JBJ.

Cass. soc., 28 November 2007, LawLex200700001973JBJ.

Cass. soc., 7 April 1998, LawLex200200000490JBJ: a non-compete clause with a repurchase clause in favor of the sales representative cannot be regarded as indispensable to the protection of the employer's legitimate interests; 15 January 2002, LawLex200200004546JBJ: the non-compete clause laid down on the sales representative must be indispensable for the protection the legitimate interests of the undertaking.

Cass. soc., 7 April 1998, LawLex200200000490JBJ.

Cass. soc., 18 December 1997, LawLex200200006098JBJ: a non-compete clause may validly prevent the sales representative from carrying out any activity in a competing undertaking where it is necessary to protect the legitimate interests of the undertaking and does not prevent the employee from finding a new job.

Cass. soc., 7 March 2018, LawLex201800000401JBJ.

Cass. soc., 11 October 1990, LawLex200200004491JBJ: the non-compete clause laid down on the sales representative the duration of which is greater than that fixed by the collective bargaining agreement remains valid within the limits stipulated by that agreement.

Cass. soc., 30 March 1994, LawLex200200004488JBJ: the non-compete clause imposed on a sales representative cannot be extended to areas that he has not canvassed in the course of the performance of the contract; 15 January 2002, LawLex200200004542JBJ; 14 November 2007, LawLex200700001883JBJ: a non-compete clause the geographic scope of which exceeds the territorial formerly devoted to the sales representative is null and void.

Cass. soc., 12 February 2002, LawLex200200004543JBJ; 22 January 2003, LawLex200300000866JBJ.

Cass. soc., 5 April 2006, LawLex200600001154JBJ.

Conditions of validity.

Article 17 of the national inter-professional agreement provides that “for the performance of the prohibition, the employer shall pay to the sales representative a special monthly financial consideration the amount of which will be equal to two-thirds of a month if the duration exceeds one year and a half and one-third of a month if the duration is less than or equal to one year […]” and “the monthly special financial consideration no longer has to be paid in case of breach by the sales representative of the non-compete clause, without prejudice to any damages that may be claimed from him”. The non-compete clause must therefore necessarily have a financial consideration and fix a time limit for the exemption granted by the employer . Initially, the existence of a financial consideration was not imposed under penalty of invalidity. Since a series of judgments issued in July 2002 , financial consideration is a condition of validity of the non-compete clause . However, the fact that the non-compete clause does not include a financial consideration is not sufficient to result in its invalidity where the sales representative's contract refers to Article 17 of the collective bargaining agreement . In effect, the financial consideration in the non-compete clause stipulated by the collective bargaining agreement of sales representatives automatically applies where the contract of employment refers thereto . Such a reference had to be express  until the Court of Cassation overturned the requirement, enshrining the principle that a VRP cannot be deprived of financial consideration merely because the contract does not stipulate it or refer expressly to the inter-professional agreement (ANI) .

The non-compete indemnity only applies if the dismissal takes place after at least three months of activity . The sales representative is not bound to justify any harm suffered to claim payment of the financial consideration , which is not affected by the conditions of the termination of the contract of employment . It must therefore be paid in case of resignation , retirement of the sales representative - either voluntary  or at the employer's initiative  - dismissal for real and serious cause , or redundancy . The amount of the financial consideration may however be reduced by half in case of resignation , but not in case of dismissal for gross misconduct . A non-compete clause which halves the financial consideration in the event of the VRP's resignation is now null and void . Likewise, the cessation of activity of the employer before the expiry of the non-compete clause does not undermine its payment to the sales representative who has not been exempted from it, or has not asked to be released . The payment of the financial consideration is not subject to the sales representative's possibility of effectively competing with his employer . In all events, the amount of the financial compensation fixed by the court cannot be less than that resulting from the method of calculation referred to in Article 17 of the national agreement . Where the calculation of the financial consideration is based on the monthly remuneration over the last twelve months, it does not include the allowance in lieu of paid leave .

The breach of the non-compete clause by the representative incurs his liability with respect to the employer. A breach, even temporary, of the non-compete clause by a sales representative is thus sufficient to exclude the benefit of the financial consideration . Thus, the sales representative must be deprived of the financial consideration where immediately after the termination, he breaches his commitment , in particular by canvassing the same sector of activity in favor of a competitor  or by creating a competing undertaking and by trying to create confusion in the customers' mind . On the other hand, the mere application by a sales representative to join a competing company , the solicitation of a similar job , or the canvassing of his territory by his spouse , does not deprive the sales representative of his financial consideration. Likewise, the sales representative must receive compensation because of the nullity of the non-compete clause that the employer has imposed on him, even though he has breached it . In effect, the existence of a voidable non-compete clause necessarily causes harm to the VRP even if he has been able to immediately free himself from it . However, the trial courts cannot award compensation for the loss relating to the non-payment of the financial consideration when the action for damages brought by the VRP was based solely on the nullity of the clause, that they have held to be valid . 

Cass. soc., 20 May 1998, LawLex200200004584JBJ; 13 July 2005, LawLex200500007357JBJ: the employer must pay the sales representative the financial consideration of the non-compete clause even if it is not expressly provided for, where the contract provides for the application of the status of VRP; 5 April 2006, LawLex200600001153JBJ.

Cass. soc., 10 July 2002, LawLex200200000509JBJ, LawLex200200000508JBJ, LawLex200200000507JBJ.

Cass. soc., 10 November 1998, LawLex200200004468JBJ.

Cass. soc., 15 January 2002, LawLex200200004545JBJ: the reduction by half of the financial consideration of the non-compete clause cannot apply in case of retirement.

Cass. soc., 21 June 1995, LawLex200200004486JBJ: the financial consideration of the non-compete clause has to be paid even in case of forced retirement of the sales representative by the employer.

Cass. soc., 9 October 1990, LawLex200200004563JBJ: the reduction by half of the amount of the financial consideration attached to the non-compete clause may only take place in the event of the resignation of the sales representative, but not of dismissal.

Cass. soc., 19 October 2005, LawLex200600000091JBJ.

Cass. soc., 24 October 1990, LawLex200200006156JBJ: a resigning sales representative is entitled to only half the amount of the financial consideration of the non-compete clause.

Cass. soc., 4 March 1992, LawLex200200006083JBJ: the financial consideration of the non-compete clause cannot be reduced in case of dismissal for serious misconduct.

Cass. soc., 3 July 2013, LawLex201300001092JBJ.

Cass. soc., 11 June 2003, LawLex200300002512JBJ.

Cass. soc., 13 July 2007, LawLex200500007358JBJ.

See previous case law according to which the financial consideration is not a condition of validity of the non-compete clause imposed on the sales representative: Cass. soc., 11 May 1988, LawLex200400000785JBJ.

Cass. soc., 3 November 2010, LawLex201000001229JBJ.

Cass. soc., 19 January 2012, LawLex201200000141JBJ.

Cass. soc., 31 March 1993, LawLex200200006087JBJ.

Cass. soc., 22 October 1997, LawLex200200004586JBJ.

Cass. soc., 30 January 2002, LawLex200200004550JBJ; 21 June 2006, LawLex200600001533JBJ.

Cass. soc., 5 May 2004, LawLex200400001640JBJ; 30 June 2006, LawLex200400001664JBJ: creation by the sales representative of a competing activity in the area referred to in the non-compete clause.

Cass. soc., 13 January 1998, LawLex200200006046JBJ.

Cass. soc., 12 May 2004, LawLex200400001167JBJ.

Cass. soc., 4 June 1998, LawLex200200006050JBJ.

Cass. soc., 7 December 2011, LawLex201100001947JBJ; Cass. soc., 20 November 2013, LawLex201300001677JBJ.

Cass. soc., 2 November 2005, LawLex200500009950JBJ.

Cass. soc., 20 November 2013, LawLex201300001677JBJ.

Cass. soc., 20 December 2017, LawLex201700002139JBJ.

Cass. soc., 5 April 2006, LawLex200600001153JBJ; 4 April 2007, LawLex200700000427JBJ.

Cass. soc., 6 January 2010, LawLex201000000003JBJ.

Cass. soc., 18 March 2016, LawLex201600000645JBJ; 6 October 2016, LawLex201600001656JBJ.

Cass. soc., 13 November 1994, LawLex200200004568JBJ.

Cass. soc., 5 January 1995, LawLex200200006157JBJ.

Cass. soc., 30 April 2003, LawLex200300002074JBJ.

The employer can dispense with payment of the financial consideration by waiving the application of the non-compete clause “provided that [the VRP] is informed by registered letter with acknowledgment of receipt within fifteen days following notice of the termination” (ANI, Article 17) . Only the employer may exempt the sales representative from performing the non-compete clause . His wish to waive the non-compete clause imposed on the sales representative must be clear and unambiguous  and cannot result from the fact that the dismissal letter does not remind the sales representative to comply with that obligation . The waiver is possible only if a clause of the employment contract expressly provides for it . However, in the absence of any contractual provisions to that effect, where the court recognizes the VRP's right to financial consideration for the non-compete clause in application of the provisions of the national inter-professional agreement, it cannot at the same time refuse the employer the benefit of the provisions relating to the option to waive the clause . To be applied, the provisions of the contract must be more favorable for the employee than the provisions of the national inter-professional agreement . This is the case for the clause pursuant to which an employer undertakes to inform his sales representative of his intention to have the non-compete clause applied within fifteen days following the termination .

The waiver cannot take place before the notification of the termination defined by the ANI as “the resignation letter, or the dismissal letter, or the letter acknowledging the termination, or the letter of early termination of the fixed contract, or the letter of non-renewal of a renewable fixed-term contract”. The meeting prior to dismissal cannot be assimilated to the notification of termination . The waiver must necessarily be made by registered letter with acknowledgment of receipt in accordance with the provision of Article 17 , but may be notified in the dismissal letter .

The time-period for waiver or exemption starts from the receipt of the sales representative's letter of acknowledgement of the termination, and not of the dismissal taking place later . Accordingly, a waiver declared by the employer more than four months after the termination of the sales representative's contract of employment does not produce any legal effect  and the financial consideration must be paid . Likewise, where the employer has waited for the notification of the legal decision terminating the contract of employment before releasing the sales representative from the non-compete clause, he must pay the financial consideration where he officially requested that the employee leave the company more than one year previously . On the other hand, the employer does not have to reiterate the waiver within fifteen days of the notification of termination where the letter of dismissal states that the non-compete clause is waived . Furthermore, when the termination of the contract is due to the intention of the VRP to assert his/her right to retire, the starting point of the waiver period of application of the non-compete clause is the date the VRP notifies said intention to the employer, even if there are uncertainties as to the effective date the person's retirement rights are applicable .

Cass. soc., 13 March 2001, LawLex200200004449JBJ.

Cass. soc., 4 April 2007, LawLex200700000427JBJ.

Cass. soc., 22 January 2001, LawLex200300000733JBJ.

Cass. soc., 8 June 2005, LawLex200500007456JBJ; 14 October 1998, LawLex200200004472JBJ: the starting point of the period of waiver by the employer of the non-compete clause imposed on the sales representative is the day of receipt of the dismissal letter rather than the date on which it was sent; 23 March 2010, LawLex201000000378JBJ: The period during which the employer may exempt the sales representative from performing the non-compete clause starts - when the latter has taken due note of the termination of his contract of employment by reason of facts that he holds against his employer - as from receipt by the employer of the notification that the employee has taken due note of the termination. 

Cass. soc., 13 March 2006, LawLex200600000862JBJ.

Cass. soc., 16 November 1983, LawLex200200006226JBJ: the financial consideration of the non-compete obligation imposed by a sales representative has to be paid where the clause has not been waived within fifteen days following termination.

Cass. soc., 31 January 2007, LawLex200700000354JBJ.

Cass. com., 26 September 2012, LawLex201200002112JBJ.

Cass. soc., 21 June 2017, LawLex201700001108JBJ.

Cass. soc., 30 May 1990, LawLex200200006092JBJ.

Cass. soc., 16 September 2009, LawLex200900003556JBJ.

Cass. soc., 17 February 1993, LawLex200200004490JBJ: where the right to waive the non-compete clause is not included in the contract, the waiver is ineffective and the employer is required to pay the financial consideration to the sales representative; 10 December 1997, LawLex200200004483JBJ: an employer cannot waive the performance of the non-compete clause imposed on the sales representative where this right is not included in the contract of employment; 20 May 1998, LawLex200200004584JBJ.

 Cass. soc., 13 March 2019, LawLex201900000375JBJ.

Cass. soc., 4 May 1993, LawLex200200006048JBJ: the clause of a contract of employment which postpones this time-period to the expiry of the contract is regarded as less favorable than the provisions of Article 17 and will be set aside in favor of the provisions of the national inter-professional agreement.

Cass. soc., 30 October 2000, LawLex200200004454JBJ.

Cass. soc., 10 February 1998, LawLex200200004477JBJ: the waiver of the non-compete clause laid down on the sales representative cannot be notified in the course of the prior meeting, i.e. before the termination.

Cass. soc., 13 March 2001, LawLex200200004449JBJ: the exemption from performance of the non-compete obligation laid down on the sales representative must necessarily be made by registered letter with acknowledgment of receipt.

French Distribution Law

602. Financial consideration.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

602. Financial consideration.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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