Are non competes illegal in California? The short answer is, yes and no. While non compete agreements are generally unenforceable in California, there are certain exceptions and nuances to be aware of when it comes to these contracts.
What is a non compete agreement?
A non compete agreement is a contract in which an employee agrees not to enter into competition with the employer after the employment relationship ends. These agreements typically prohibit the employee from working for a competitor or starting a competing business for a specified period of time and within a defined geographic area.
Why are non competes generally unenforceable in California?
California has a strong public policy in favor of employee mobility and freedom to pursue their chosen profession. As a result, non competes are generally considered void and unenforceable in the state. California Business and Professions Code section 16600 states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
When are non competes enforceable in California?
While non competes are typically unenforceable in California, there are some exceptions where they may be upheld by the courts:
- If the non compete is part of the sale of a business and the buyer has a legitimate interest in preventing the seller from competing against the business.
- If the non compete is part of a dissolution of a partnership or LLC and is necessary to protect the goodwill or other business interests of the partnership or LLC.
What are the consequences of including a non compete in an employment contract in California?
If a non compete agreement is found to be unenforceable in California, the employer may face legal consequences, including potential claims for damages by the employee. Employers should be cautious when including non compete provisions in employment contracts to avoid costly litigation.
Do non competes apply to all employees in California?
Non compete agreements are generally unenforceable for most employees in California, regardless of their job title or level within the company. However, certain categories of employees, such as salespeople or key executives, may be subject to more restricted non compete agreements to protect trade secrets or other proprietary information.
Can employers in California use other types of restrictive covenants instead of non competes?
Employers in California can use other types of restrictive covenants, such as non-solicitation agreements or confidentiality agreements, to protect their legitimate business interests without running afoul of the state’s laws on non competes. These agreements must be carefully drafted to ensure they comply with California law.
What should employees do if presented with a non compete agreement in California?
If an employee in California is presented with a non compete agreement, they should review the terms carefully and consider seeking legal advice to understand their rights and obligations under the contract. Employees have the right to negotiate the terms of a non compete agreement or refuse to sign it if they believe it is overly restrictive.
How are non competes regulated in other states compared to California?
While California has some of the strictest laws regarding non competes, other states have varying regulations on the enforceability of these agreements. Some states enforce non competes more readily, while others have restrictions similar to California. It is important for employers and employees to be aware of the specific laws in their state regarding non compete agreements.
In conclusion, while non compete agreements are generally unenforceable in California, there are exceptions and nuances to consider. Employers and employees should be mindful of the state’s laws on non competes and seek legal advice when necessary to ensure they are complying with California’s regulations.