Are you a victim of unfair competition from an employee? You can take action!
The Cour de Cassation recently handed down a ruling concerning an employee still in post who had committed acts of unfair competition (Cass. Com. December 7, 2022 n° 21-19.860).
This is an opportunity to take stock of this concept and of the possibilities of action to obtain compensation in case of prejudice.
What is unfair competition?
In the course of their professional activities, everyone enjoys two fundamental freedoms: the freedom to undertake and the freedom to compete, but within certain limits.
It is indeed forbidden to disrupt free competition by unfair practices.
Unfair competition is the act of making excessive use of one’s entrepreneurial freedom, by resorting to procedures that are contrary to the rules and customs, thereby causing damage.
In concrete terms, unfair competition includes various acts defined by the jurisprudence:
- imitation or confusion.
Unfair competition may be perpetrated by competitors of the target company who have no connection with it, but is often perpetrated by people who have access, or have had access, to privileged information.
It is common for such acts to be committed by former employees, or even employees still in post.
In such cases, the practices usually observed are more akin to disorganization, characterized in particular by the canvassing or misappropriation of customers, the wrongful hiring of employees (or poaching), or the misappropriation of confidential information.
Unfair competition by a current employee
During the employment relationship, employees are bound by an obligation of loyalty.
While they may sometimes, under certain conditions, engage in another professional activity, they may not compete with their employer, otherwise they may be guilty of unfair competition, and risk disciplinary action up to and including dismissal for serious misconduct, or even gross misconduct in the event of malicious intent on the part of the employee.
In the above-mentioned ruling, the Cour de Cassation considered that unfair competition was characterized by the fact that a company set up by an employee who was still in post canvassed customers of the company of which he was an employee before the end of his employment contract, and by the fact of holding confidential information relating to the activity of this company.
The Court made it clear that the mere possession by the employee’s new company of confidential information relating to the first company’s business, which had contributed to the creation of the new competing company, constituted an act of unfair competition.
Unfair competition by a former employee
The situation may of course be different if the employee is no longer in post, and their employment contract did not include a non-competition clause in force at the end of the contract.
Hence the interest that this type of clause can present, which can be usefully completed by a confidentiality clause. To learn more about the non-competition clause and its conditions of validity, you can also consult our article on the subject.
In the absence of a non-competition clause, the former employee is free to engage in a competing activity, provided this is not done under unfair conditions.
For example, if the victim company suffers a commercial disturbance, a disorganization or if the new activity of the former employee generates confusion in the mind of the clientele, unfair competition could be characterized and legitimize legal action.
What actions can be taken?
If the facts were committed by an employee who is still working, this type of behavior is of course a fault that may justify a dismissal.
If the employee is no longer in post, it is possible to take legal action to hold them liable, and their new employer, if they have acted on behalf of another company.
It will of course be possible to ask the court to order the person responsible to cease the disturbance under penalty.
It is also possible to consider filing a simple criminal complaint with the public prosecutor. In certain situations, it may be possible to bring a civil action.
How do I put together a case?
To hold an individual or legal entity liable for unfair competition, it is necessary to demonstrate a fault, a loss, and a causal link between the fault and the loss suffered.
The burden of proof lies with the plaintiff, i.e. the company claiming to be the victim of unfair competition. Proof of unfair competition must be obtained, which is not always easy.
Evidence can be characterized by the transfer of customer files or other confidential information by e-mail or SMS.
In some cases, it may also be appropriate to call in a bailiff, who will be able to establish the existence of unfair competition.
It’s a good idea to consult a lawyer to build up a file and help you deal with the situation, so you can react in good time.
Whether the acts constituting unfair competition emanate from a current or former employee, the strategy will need to be adapted.
We invite you to make an appointment with us, so that we can offer you appropriate support. Our meetings can be held face-to-face or by videoconference. You can make an appointment directly online at www.agn-avocats.com.
AGN AVOCATS – Employment Department
09 72 34 24 72