France: Using files new employees bring to the table may constitute unfair competition
In a decision rendered on the 6th of April 2022, the French Supreme Court ruled that a company may be found guilty of acts of unfair competition where it consents to use the customer files its new employees took with them when they left a competitor’s service.
In this case, two interim work agency employees quit their jobs before being hired by one of their former employer’s competitors. The latter agreed to the use, for its benefit, of files containing confidential information that were created during the employees’ time within their former employer’s ranks.
The former employer brought two sets of proceedings:
- proceedings against the former employees before the Labour Court for an alleged breach of their non-compete obligation,
- commercial proceedings against its competitor, the former employees’ new employer, alleging that its client files were misappropriated and seeking financial relief as a result.
The Court of appeal had based its ruling on the following facts:
- both employees had shared their contacts with their new employer, which resulted in the transfer of a significant number of clients and interim workers from their former employer’s company to their new employer’s company,
- both employees had a sizeable customer index when they were hired by their former employer, however they were only able to exploit and develop said indexes thanks to the company’s infrastructure, which meant that their former employer owned the lists as documents created for its benefit,
- the new employer did not deny having used the former employer’s files.
The French Supreme Court endorsed this reasoning, ruling that the use by the company of files containing confidential information the employees were not entitled to reveal by virtue of their employment contracts amounted to an act of unfair competition.
Therefore, the new employer was sentenced to surrender the contentious files and commercial data as well as pay the former employer 270.000 € in damages.
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Key Action Points for Human Resources and In-house Counsel
It is important to be wary of any information a new employee proposes to bring to the table to ensure that nothing is being unfairly taken away from a competitor.