Are Non-Compete Agreements Permitted in California?

A business lawyer at Gehres Law Group, P.C. can help employees to understand their rights if asked to sign a non-compete agreement and can provide assistance to employers in taking appropriate legal steps to protect their intellectual property and proprietary information. 

Traditionally, employers used non-competition agreements to protect their business interests when they hired employees who had access to sensitive information. To ensure that employees did not take trade secrets to competitors or did not use client lists to start their own competing organization, employers required non-competes to be signed as a condition of employment. These non-competition agreements would prevent employers from engaging in certain behaviors, such as working for a direct competitor within the same geographic area for a certain time period after leaving a position.

In California, non-competes, however, have increasingly been viewed as unlawful restraints on trade and as contracts that are void and against public policy because they restrict the ability of an employer to make a living. While non-competes will still be enforced in certain states throughout the United States, as long as the contracts are limited in time and scope, they are typically wholly unenforceable against employees and independent contractors within the state of California.

California Laws on Non-Compete Agreements

The state of California essentially declared non-competition agreements unenforceable in California Business and Professions Code section 16600. This section of the Business and Professions Code states: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

California courts have aggressively enforced the ban on non-competition agreements, prohibiting employers from enforcing non-competition agreements even in circumstances where disclosure of confidential information is an inevitability for an employee to perform a new job that he has obtained.

The courts in California have also rejected agreements in which California companies attempted to use choice of law provisions in contracts which specify that a different state’s laws would be used to interpret the employment contract, and have refused to enforce agreements in which employers required extended notice for higher level employees under certain circumstances (such as agreements in which an employee would be required to give 90-days notice before resigning). Click here and here for previous discussions on these and related issues.

The strict restrictions in any contract that restrains an employee from performing work after leaving an employer have left companies with few options to take action before an employee goes to work for a competitor after departing employment.

How Can Employers Protect Themselves?

Because employers cannot use non-compete agreements effectively in California to protect their legal interests, employers will need to explore other alternatives. Securing intellectual property protections such as patents, trademarks, and copyrights, can help to protect some types of information, such as by preventing a competitor from using a proprietary (and patented) production process or recipe which is provided to the competitor by an ex-employee.

Non-disclosure agreements which restrict employees from disclosing certain confidential information can also protect an employer from having private information shared with competitors or otherwise misused. And aggressively enforcing trade secrets laws and following the proper process for keeping proprietary information confidential, such as keeping secrets confidential and taking legal action when an employee threatens a breach, can also help to ensure that a company’s information does not fall into the wrong hands. Click here and here for previous discussions on these issues.

Getting Help from A Business Lawyer

Gehres Law Group, P.C. will provide personalized assistance to employees who are asked to sign non-compete agreements, non-disclosure agreements or other contractual agreements related to their employment. We can advise employees on whether a contract they are being asked to sign is legally valid and can provide advice on what types of restrictions the contract will impose upon the employee in the future.

The trusted business lawyer at our firm can also provide assistance to employers who are concerned about how they can protect their confidential information and business interests in light of California’s refusal to enforce non-competition agreements against employees and independent contractors alike. To find out more about how we can help you, give us a call at 858-964-2314 or contact us online today.

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