201611.29
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The non-competition clause under Luxembourg law

The non-competition clause under Luxembourg law

In terms of competition, is there a distinction to be made as to whether the employment contract has ended or not?
The distinction to be made is as follows: although an employment contract does not always expressly contain a non-compete clause, it is a principle that contracts must be executed in good faith under Article 1134 of the Civil Code .
It follows that during the execution of the contract, a party must abstain from any act that deliberately prejudices its co-contractor. Prohibition which arises from the duty of loyalty that each party must respect.
It is therefore forbidden for the employee to engange in acts of competition towards the employer during the performance of his contract.
It is for example prohibited to lure the clientele of its employer by using unfair means for a future activity or to integrate a competing company. This includes, for example, an employee informing the customers of company A, for which he is still working, that he will soon be working for a company B while encouraging them to follow him.
One recent case-law has dealt with the case of an employee who, on the pretext that she was the only person to speak Portuguese and designated to deal with the Portuguese clientele of the company, had the clients sign a transfer document in addition of informing them of her future departure (CSJ, 20/04/2015, 40806). The employer was awarded damages.
Can the employee prepare a competing company during the performance of his employment contract?
There is still a possibility for the employee to prepare a future activity. The obligation of loyalty does not prevent the employee, even though he is still in contractual relations, from preparing a future activity which the employer may consider to be a competitor, provided however, that he begin the activity in question only after the termination of his employment contract (CSJ, 02/02/2012, 35965).
Everything here is a case-by-case assessment. The judge wll have to make a distinction between simple preparatory ations, which are merely the projection of a future activity and acts constituting unfair competition, such as, for example, the actual beginning of the activity in addition to a client poaching.
In such cases, the employee is liable for any loss or damage suffered by the employer should he commit an intentional and deliberate act.
It should be noted that this is all a question of good faith to be assessed for the employee.
The same possibility of preparing a future activity exists  even more during the notice period.
What happens when the employment contract comes to an end?
The employee is absolutely free to work for a competitor even in the presence of a non-compete clause.
According to Article L. 125-8 of the Labor Code, the non-compete clause in an employment contract is that by which the employee refrains, for an determined amount of time following his departure from the company, from engaging in similar activities so as to not prejudice the interests of his/her former employer by operating a competing business.
From this legal definition, it follows that Article L.125-8 of the Labor Code refers exclusively to the case of an activity as an individual entrepreneur. This article only addresses the assumption of a person who refrains from operating a competing personal business at the end of his employment relationship.
From this we must deduce that the non-competition clause is ineffective in the event that the former employee holds shares in a competing company. The person of the employee and that of the company of which he would be a majority shareholder are to be considered as separate legal entities, and if there were to be competition, that competition would emanate at most from the company, so that a claim for damages and interests directed against the employee and based on a non-competition clause would be unfounded.
Can all employees be subject to a non-compete clause?
Under Article L.125-8 (3) of the Labor Code, the non-competition clause shall be considered as not written when the wage or annual salary paid to the employee at the time of his departure does not exceed a level determined by the grand-ducal regulation (6,817.07 euros at index 100, grand-ducal regulation of 11 July 1989, article 6).
The non-competition clause must be written, it must relate to a clearly identified professional sector and must be limited in time. The duration of the non-compete obligation can not exceed a period of 12 months beginning on the day of the termination of the work relations.
The non-compete clause must also be geographically limited according to the sector concerned.
Finally, it should be pointed out that only the employee can invoke the nullity of the non-compete clause in court. According to the case-law, regarding the legal framework of the non-compete clause, it was not the intention of the legislator, concerned about protecting the employee, to place, the employee and the employer on the same level.
Etude GIABBANI

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