Employee Non-Compete Agreements In California Explained

Employee Non-Compete Agreements In California Explained

Non-compete agreements between employees and employers are pretty much unenforceable in California. What is a non-compete agreement? It’s a restrictive covenant, enforceable (in theory) for a specific length of time, that forbids an employee from going to work for a competitor.

The use of employee non-compete agreements is, to say the least, controversial. It places relatively unreasonable restrictions on an employee. A non-compete clause is usually unenforceable when pursued by an employer. Even if the employee signed it. The employer’s business would have to be able to show actual damage caused by the employee’s breach. The employer would have to prove that a legitimate business interest was protected by the non-compete agreement. However, in the court’s eyes, earning a living is a right that every employee is entitled to, so they often tend to side with the employee.

Non-Compete Agreements – How They’re Treated in California

Technically, an employee cannot be terminated by an employer even if the employee refuses to sign a non-compete agreement. Some companies try to enforce something called a non-solicitation agreement, possibly as a counter attempt to control their employee’s actions but to not much avail.

The Business and Professions Code Section 16600 governs both non-solicitation and non-compete agreements. In three limited circumstances, California allows non-compete agreements, however:

• A sale of interest or goodwill in a business
• A partnership dissolution
• A limited liability company dissolution or sale

California doesn’t allow non-compete agreements other than the three just listed.

Non-Compete Agreements from Out-of-State

Another problem may arise if another state is brought into the equation (i.e., another state made the agreement, or a choice of law provision is included, which is governed by another state’s laws). If, however, it violates California’s public policy, they will not enforce choice of law provisions.

No Protection for Employers?

If an employee leaves and then tries to take the customers from the former employee, does an employer have any protection in California? The courts have to be convinced of a couple of things before they will provide injunctive relief against trade secrets misappropriation. This is according to the Uniform Trade Secrets Act. The courts must be convinced of two things:

• Trade secret misappropriation is threatened or occurring
• A true trade secret is actually involved

If indeed, an employer can prove that harm was caused by a former employee breaking the non-compete agreement willfully and intentionally, the former employer may have a case and it may be decided in their favor by the court.

How can an employer protect trade secrets? Here are some suggestions:

• Restrict facility access. Require visitors, while on the premises, to be accompanied by a staff member. Make sure visitors sign in and out, as well.
• To prevent computer-stored information stealing and access to it, use hard-to-guess passwords. Change them frequently.
• Have nondisclosure agreements signed by suppliers and other parties to whom you must disclose trade secrets.
• Have nondisclosure agreements signed by employees.
• Stamp a document with a trade secrets legend if it is embodied in a document.
• Everything is on a need-to-know basis. If someone doesn’t need to know, don’t tell them. Disclose secrets only to staff members who must have that kind of information.

Is a Former Employer Threatening You Due to A Non-Compete Agreement?

If you feel you have been threatened by a former employer who insists you abide by a non-compete agreement, do not hesitate another moment to contact the professional attorneys at Sirmabekian Law Firm. Perhaps an employer is threatening to fire you if you don’t sign a non-compete agreement. Either way, we will aggressively defend your rights and handle your legal claim, regardless of the company’s size.

We tirelessly fight for the rights of California’s working individuals with attorneys who are dedicated, knowledgeable, and experienced.

Contact us today to discuss your case with a free consultation.