The latest rumor circulating around Paris - and one that sources close to the matter have told TFL in recent months - is that Raf Simons has a tentative appointment at Calvin Klein on the heels of his departure from Christian Dior this past October. Per WWD, “The industry has been buzzing for weeks that the former creative director of Christian Dior women’s collection was being recruited for a top creative role at the iconic American brand.” According to our sources, Simons would likely replace Francisco Costa, who has been at the helm of Calvin Klein womenswear division since 2003; he originally joined the brand in 2001 after working for Gucci as a design assistant to Tom Ford.
The trade publication went on to note: “But industry sources said not so fast. They said Simons has a stringent, non-compete with Dior, and if Calvin Klein were interested in him, it would be a long time before the company could hire him, barring an early release from his Dior agreement.” While other sources have alleged that Simons has a several year non-compete agreement in place with Christian Dior, courts in the U.S. and abroad have been hesitant to uphold clauses that are not specifically tailored in terms of the length of time and geographical area at issue.
NON-COMPETE AGREEMENTS: THE BASICS
For the uninitiated, non-compete agreements are restrictive covenants, which commonly come in the form of clauses in employment agreements or contracts, and which place terms on the employee once he or she has left the company with which he has entered into the agreement. The non-compete places limits on the type of work the employee may accept upon departing from the company in order to prevent the transmission of valuable trade secret information. Because such agreements tend to place significant limitations on a former employee's ability to earn a living, by legally preventing him from accepting employment with a competing company, courts tend to disfavor them and deem them unenforceable unless they are carefully tailored.
In deciding whether to enforce a non-competition agreement, a court will balance the need to protect the employer's legitimate business interests with any burden that enforcement of the agreement would place on the employee. Non-competition agreements must be reasonable in duration and scope, and the reasonableness of both of these terms tend to vary quite a bit per case.
According to case law in France, where Christian Dior is headquartered and where Raf entered into the contract at issue, in order to be upheld, a non-compete clause must be essential to the protection of the company’s interests, shall be limited in terms of time, territory, activity and shall provide for a financial compensation of the employee during its whole term. The principles set forth by case shall apply unless the applicable collective bargaining agreement provides other specific limitations.
In the U.S., particularly in New York, where Calvin Klein is based, we know that non-compete clauses that last for longer than one year are typically deemed unenforceable. In order to find a non-compete clause valid and enforceable, New York courts apply a three-part reasonableness test. The general rule to determine if an employee’s non-competition clauseis enforceable is if:
(1) it is no greater than is required for the protection ofthe legitimate interest of the employer,
(2) does not impose undue hardship on the employee, and
(3) is not injurious to the public.
As a result, reasonableness varies and the court will look at the specifics of the case at hand in order to make a determination of law.
With this in mind, regardless of how iron clad Simons's non-compete with Dior is, if the court does not deem it to be limited enough - both in terms of duration and geographical scope – it has the power to modify or invalidate the terms, thereby, disallowing it to be upheld. One element that is taken into consideration in determining the validity of a non-compete is just how much proprietary information the ex-employee at issue possesses. At Nike, for instance, they tend to develop designs upwards of three years in advance, requiring that non-compete periods be on the longer side. As we learned in a relatively recent lawsuit that Nike filed against three upper level design directors, who jumped ship to Adidas, the non-compete period for these individual employees was one year.
So, what is a likely timetable for a high fashion creative director, such as Simons? Chances are, its quite a bit shorter than the ones enforced by Nike. Considering the fact that designers – including Simons – have recently shed much light on how little time they have to produce a collection, it seems that Dior and similarly situated houses do not have the luxury of planning/designing too far in advance. Maybe a season or two at most. According to an interview that Raf Simons gave to Cathy Horyn this past year, he noted that two of his recent collections for Christian Dior were both completed in three weeks. For most houses, which churn out two main collections and two pre-season collections, and some with bi-annual couture collections, the model simply is not based on the lengthy time period that Nike observes.
With this in mind, a year or so is likely the extent of Simons’s non-compete period, especially if we counter this with the fact that Calvin Klein’s most upscale collection would likely be deemed to be in direct competition with Dior. More to come ...