The mere fact that an employee leaves with the customer file of his former employer in the context of the creation of a competing company constitutes an act of unfair competition

Cass. Com., 7 December 2022, n°21-19.860

In a judgment handed down on 7 December 2022 and published in the Bulletin, the Court of Cassation clarified that the possession of confidential information on a competitor’s business obtained by former employees during the performance of their employment contract constitutes an act of unfair competition.

Mere possession is sufficient, as the victim company does not have to show that the information was exploited by a wrongful means.

***

First of all, it is necessary to review the facts of the case

In this case, two former employees of FONCIA, carrying out a property management activity, created a competing company, VALHESTIA.

Considering that this new company had been guilty of acts of unfair competition committed in particular through the intermediary of its former employees, FONCIA summoned the company created by the latter in order to obtain recognition of these acts of unfair competition and to be awarded damages.

In a judgment dated 14 May 2019, the Meaux Commercial Court partially upheld FONCIA’s claims and ordered the competitor to pay it damages for the material loss resulting from the loss of turnover suffered.

By judgment of May 25, 2021, the Paris Court of Appeal reversed the judgment of the Commercial Court and dismissed all of FONCIA’s claims.

The Court of Appeal considered in particular that:

  • The factof having, during the execution of the employment contract, carried out some preparatory acts for the constitution of the company VALHESTIA […] does not constitute a fault attributable to the employees concerned of which the company VALHESTIA would have become an accomplice“;
  • and above all that the “simple transfer of information, one of which was very old, even before the plans to create the company VALHESTIA, cannot be considered as wrongful in the absence of proof of their exploitation by a wrongful means on the part of the former employees of the company FONCIA.”

The Court of Appeal thus ruled that the mere fact that the former employees had, before leaving FONCIA, retrieved the customer files, i.e. the list of residences managed by FONCIA as well as the e-mails of the members of the syndicate councils of these residences, was not sufficient, in the absence of proof of the exploitation of this information by a wrongful means, to characterise an act of unfair competition.

In a judgment dated 7 December 2022 and published in the Bulletin, the Court of Cassation quashed the appeal judgment in all its provisions.

While the first ground of appeal is in line with the rules applicable in this area, the second constitutes a real contribution.

Indeed, with regard to the first plea, the Court of Cassation simply recalls that ” it is an act of unfair competition for a company in whose creation the employee of a competitor has participated to start its activity before the end of the employment contract between them ” the Court of Appeal was criticised for not having investigated whether such an act was not constituted by the sending by VALHESTIA of a contract proposal to a client of FONCIA.

With regard to the second plea, the Court of Cassation, in an opinion based on Article 1240 of the Civil Code (formerly 1382), points out that :

The mere fact that a company in the creation of which the former employee of a competitor participated, holds confidential information relating to the activity of the latter and obtained by this employee during the performance of his employment contract, constitutes an act of unfair competition “.

The Court of Cassation thus considers that the Court of Appeal, in holding that the transfer of customer files to the competitor company through the intermediary of former employees was not reprehensible in the absence of proof of the exploitation of these files by a faulty means, violated the provisions of Article 1240 of the Civil Code.

The Court of Appeal had in fact added a condition not required by the text.

The Court of Cassation has thus affirmed the principle that the competing company created by the employee is guilty of unfair competition by the mere fact that the latter left with his former employer’s customer file.

This clarification by the Court of Cassation is welcome as it protects the interests of the former employer company in the face of the lack of loyalty and discretion of its former employees.

It is to be hoped that it will have a dissuasive effect on employees not covered by a non-competition clause who must be aware that, in the absence of such a clause, their freedom of work and establishment ends where unfair competition begins.

It might be useful to know the position of the Social Chamber on this point.

However, insofar as the Conseil de prud’hommes is only competent to deal with facts of unfair competition when they occurred before the termination of the employment contract or, if they occurred afterwards, if they are directly linked to the latter, it is not certain that the latter will ever have to give a ruling on this subject (Cass. Soc., 30 June 2010, n°09-67.496).

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