Has the Mauritian Supreme Court painted a new picture of the law governing the validity of restrictive covenants in employment contracts
Time and again, the Mauritian Supreme Court has stated that the three prerequisites for the validity of restrictive covenants in employment contracts are that:
- they must be limited in time and space;
- they should not be too wide in scope so as to prevent the employee from earning a living; and
- their maintenance must be essential to protect the legitimate business interests of the employer.
However, in the recent decision in Mauvilac Industries v Anseline, the Supreme Court, after quoting previous case law confirming that the validity of a restrictive covenant must be gauged in light of the three aforementioned conditions, went on to add that: “in addition, it is now generally recognised that for restrictive trade covenants to be valid, they must make provision for financial compensation.” To support this, the Supreme Court cited judgments of the French Supreme Court that state that any post termination non-compete clause must be accompanied by financial compensation.
Although the Supreme Court in the Mauvilac case found that the non-compete clause in question was too broad and that the employer had not pinpointed the business interests that it was seeking to protect, the absence of a financial compensation was also relied upon to find that the clause was invalid.
The same French judgments were referred to by the Mauritian Supreme Court in the earlier case of OFIM Immobilier Ltd v Bellouard F D M. In this case, the Mauritian Court declined to follow French case law and held that the French Supreme Court relied on provisions of the French Code du Travail – foreign to Mauritian law – to come to this conclusion.
Still more interesting, the Supreme Court in the Mauvilac case relies on an appeal judgment of the Supreme Court (Sew Kwan Kan & Another v Happy World Centre) as regards the three aforementioned prerequisites. In the latter case, the Supreme Court mentions the French Supreme Court judgments, which had added the fourth condition of financial compensation under French employment law, but does not analyse whether financial compensation is a prerequisite under Mauritian law.
It will be very interesting to see how the Mauritian courts will interpret non-compete clauses in the future, especially where the clause would be valid by reference to the three aforementioned conditions, but is not accompanied by an adequate financial compensation.
The judgment in the Mauvilac case is a reminder that restrictive covenants in employment contracts must always be cautiously drafted as the courts are likely to impose a high burden on employers to prove the validity of same.
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