Hedi Slimane is really living the dream. The designer just won a court case against his former employer Saint Laurent and its parent company Kering to collect checks in the amount of $13 million for doing absolutely whatever he wants. From personal experience, we're going to guess ordering in pizza and playing Xbox.
The short version is that Saint Laurent decided to not apply Slimane's non-compete, according to Reuters. This freed Slimane up to design his own line or design for another house—both of which were rumored after his departure. However, in a shocking twist, Slimane took Saint Lauren to court and insisted that the company keeps his non-compete agreement in place.
We got a New York-based lawyer (who asked to remain anonymous because she is currently assigned to a similar case) to explain the case and answer the many questions we were left with. Mainly, how, why, and, uh, how can we get the same deal?
How does something like this happen? Why is Slimane able to argue that his non-compete should be applied?
So, obviously this is an interesting case. I would say the vast majority of cases that go to court about a non-compete restriction have gone the other way. It’s the employee trying to get out of the restriction, but he’s trying to have the restriction applied so that he can get his money.
My gut feeling of what happened was that Yves Saint Laurent, or whoever the employer was according to the terms of the contract, just said, "Oh, don’t worry about it. We’re not going to enforce this [non-compete]. So go ahead and enjoy your freedom." It’s possible that they never even communicated that to him.
And if that’s the case, then he’s totally within his rights um to turn around and bring him to court and say, "When I negotiated this contract with you originally a few years ago, this was the benefit of the bargain. When I signed this agreement with you, I knew I had this financial safety net when I left, no matter what reason I left. And it wasn’t a requirement that I actually have the attention to compete against you. A quid pro quo is that I don’t do anything and you pay me."
So, maybe they didn’t bring it up because they thought this would be seen as a positive in his eyes?
Exactly. So maybe they thought they were being too clever by half because apparently the last time he left a fashion house, he went underground for a while. And maybe they thought they were having their best and thinking he was going to repeat his mysterious past behavior. So there was a very low likelihood of him competing anyway, so they might as well try and save a couple million bucks. But, unfortunately, that's not what they agreed with him.
How does the money play into this? Because he has to not compete for a certain amount of time, they have to pay him? Exactly. So I would say in most countries, and definitely in this case as well, if you want to have a non-competition restraint in an employment agreement that's enforceable—meaning that after a person leaves their company, if they go and try and set up shop somewhere and compete with you or work for one of your competitors that you could actually sue them and take them to court—there has to be some consideration for that because otherwise, it's against public policy and I think that's what a court would say.
So, in France, I think in the last decade in a half or so, their Supreme Court essentially has said that you can have an enforceable non-competition provision in an employment agreement, but that there's certain requirements. There has to be a reasonable threat to the company. There has to be a reasonable scope, meaning that you can't tell someone they can't go out and do anything. Like, if someone works for a tech company, right? You can't you can't prevent them from going into fashion afterwards because that has no effect on your business. It also has to be for a reasonable time period, which in France is probably about one or two years, and there also has to be financial compensation.
So if the $13 million has not played into this, then the entire restraint would have been unenforceable in the first place. The $13 million is what they were willing to pay him to not compete against Yves Saint Laurent or Kering when they entered into the contract initially.
So is there a very like practical way to explain this? Like, when I read about it, it almost sounds like he's cashing unemployment checks, in a way.
And that’s kind of what it is. In a practical level, that's what it is. But if you think about it from a legal perspective or probably policy perspective, these clauses are actually very important when high-level people negotiate their employment agreements with companies. Because everyone acknowledges there's no indentured servitude, nobody is a slave, so most people don't have employment agreements with a term, meaning you're at-will, you can leave if things aren't working out or if you find another opportunity in another space.
So, it's not really severance, it's not. If you think about it on a practical level it sounds like that because he can sit at home and keep collecting the paychecks. But really, he's being paid to not go out and screw around with their brand or potentially hurt their earnings or their revenue because he has the power to do that because apparently he's very successful. So, if he wanted to he could open up his own line, and so the payment is actually in consideration for that. It's payment for him to sit on his hands.
And he wants that basically because he wants to sit on his hands.
Exactly. I don't really know what he's planning on doing. He seems like kind of a mysterious guy, but it seems like he has no intention of competing anyway, and I'm not exactly sure what the company's argument is, but it's kind of irrelevant because when they entered into the original contract, it's not a requirement that when he leaves he has the intention to compete. All that matters is that he sits on his hands, and in consideration for doing so, they give him the $13 million.
Why does the company not want to apply the non-compete in this case?
My guess is that they did a cost-benefit analysis and they just decided the risk of him competing, and the risk of him hurting the business is probably far outweighed by making a $13 million payout, especially if it was going to be paid in the lump sum. That's a significant sum of money for a company to just pay out.
Kering is appealing the ruling. What do you think its chances are there?
I can't really speculate about that because I don't know French law. But I can tell you it is a very employee-friendly legal environment, and I can tell you that if they did not actually enter into a written waiver agreement, my money is on Slimane winning this. Because the original contract apparently was quite clear. And he is basically asking that the contract the company agreed to sign way back when be enforced as written.