Non-compete agreements have become increasingly common in many states across the United States. However, in California, non-compete agreements are unenforceable, except for a few limited exceptions. If you’re considering a job change in California, learn your rights and the limitations of non-compete agreements under California law.
What is a non-compete agreement?
A non-compete agreement is a contract between an employer and an employee that restricts the employee’s ability to work for a competitor or start a competing business for a certain period of time after leaving their current job. These agreements are often used by employers to protect their trade secrets, confidential information, and customer relationships.
Non-compete agreements typically include provisions that prohibit employees from soliciting or working with the employer’s customers or clients and from using or disclosing the employer’s confidential information. In California, non-compete agreements are generally unenforceable, except for a few limited exceptions.
Are non-compete agreements enforceable in California?
California has a strong public policy in favor of competition and employee mobility, making non-compete agreements largely unenforceable under California law. Business and Professions Code Section 16600 explicitly 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.”
However, there are a few limited exceptions to this rule, such as when selling a business or when an employee has access to trade secrets. In these situations, the non-compete agreement must be reasonable in scope and duration and must not place an undue burden on the employee’s ability to work.
Are there exceptions?
There are a few limited exceptions to the general rule that non-compete agreements are unenforceable in California.
Sale of a business
One exception is when a non-compete agreement is part of the sale of a business. In this situation, the seller can agree to not compete with the buyer for a limited period of time and within a limited geographic area. The non-compete agreement must be reasonable in scope and duration, and it must be necessary to protect the buyer’s goodwill or the value of the business.
Partnerships
Another exception is when partners in a partnership agree to a non-compete agreement. In this situation, the non-compete agreement must be reasonable in scope and duration and must not place an undue burden on the departing partner’s ability to work.
LLCs
Limited liability companies (LLCs) are also subject to a limited exception for non-compete agreements. Members of an LLC can agree to a non-compete provision as long as it is reasonable in scope and duration and does not impose an undue burden on the departing member’s ability to work. However, this exception is limited to members and does not extend to employees of the LLC.
Can I be sued?
If you violate a valid and enforceable non-compete agreement, you can be sued for breach of contract. However, if the non-compete agreement is unenforceable under California law, then you cannot be sued for violating it.
Even if you think the non-compete agreement is unenforceable, you should still learn about employment law in California to determine your legal rights and options. In some cases, employers may still try to enforce non-compete agreements, and an attorney can help you understand your legal options and defend your rights.
Additionally, even if the non-compete agreement is unenforceable, employers may still have other legal claims against you, such as for misappropriation of trade secrets or breach of fiduciary duty, so it’s important to be aware of your legal obligations and responsibilities when leaving a job.
Are non-solicitation agreements different?
Non-solicitation agreements are different from non-compete agreements. While non-compete agreements prohibit employees from working for a competitor, non-solicitation agreements prohibit employees from soliciting the employer’s customers, clients, or employees for a certain period of time after leaving the company.
Under California law, non-solicitation agreements are generally enforceable, as long as they are reasonable in scope and duration and do not impose an undue burden on the employee’s ability to work. However, non-solicitation agreements that are too broad or too long may still be considered unenforceable under California law.
Non-solicitation agreements can also be subject to strict scrutiny under California law, and employers must show that they have a legitimate business interest in enforcing the agreement.
If you are subject to a non-compete or non-solicitation agreement, consult with an experienced employment law attorney to understand your legal rights and options. An attorney can help you determine whether the agreement is valid and enforceable, and can advise you on how to protect your rights when leaving a job.
Overall, it’s important for employers and employees alike to understand the legal landscape surrounding non-compete and non-solicitation agreements in California, in order to ensure compliance with the law and avoid potential legal disputes.
