Noncompete Agreement in California: Is It Enforceable?
A noncompete agreement, also known as a covenant not to compete (CNC), is a legal contract used by employers to prohibit employees from working for a competitor or starting a competing business after leaving their current job. Such agreements have been a hot topic for debate in California for years. While many states allow noncompete agreements, California has a unique law that restricts the use of CNCs. So, are noncompete agreements enforceable in California? Let`s find out.
What Is a Noncompete Agreement?
A noncompete agreement is a legal contract between an employer and an employee that restricts the employee`s ability to work for a competing business. The agreement typically includes a timeframe during which the employee cannot work for a competitor and a geographical area where the agreement applies. The purpose of a noncompete agreement is to protect the employer`s trade secrets and other confidential information. Employers use noncompete agreements to prevent employees from sharing their secrets with competitors or starting a competing business after leaving their current job.
Noncompete Agreements in California
Unlike many other states, California has a strict policy when it comes to noncompete agreements. 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.” In other words, noncompete agreements are generally unenforceable in California.
There are a few exceptions, however. For example, noncompete agreements are allowed in the sale of a business, where the buyer needs protection from the seller`s competition. Additionally, California allows employers to use “nonsolicitation agreements” that prohibit employees from soliciting their former employer`s customers or employees.
Even though noncompete agreements are not enforceable in California, some employers have tried to get around the law by including them in employment contracts. This practice has resulted in many lawsuits, and courts have consistently ruled that noncompete agreements are unenforceable in California, whether they are part of an employment contract or a separate agreement.
What Should You Do?
If you are an employer in California, it is essential to understand the state`s laws regarding noncompete agreements. While you cannot prevent your employees from working for a competitor, you can take other measures to protect your business`s confidential information. For example, you can include confidentiality clauses in your employment contracts to prevent your employees from sharing your trade secrets with competitors. You can also use nonsolicitation agreements to prevent your employees from soliciting your customers or employees after leaving your company.
If you are an employee in California, you should be aware that noncompete agreements are generally unenforceable in the state. However, you should still be careful when leaving your current job to ensure that you are not violating any other agreements, such as nonsolicitation or confidentiality agreements.
Conclusion
Noncompete agreements are a complicated issue in California. While the state has strict laws that generally make these agreements unenforceable, there are some exceptions. As an employer or employee, it is crucial to understand California`s laws regarding noncompete agreements and take appropriate steps to protect your business`s confidential information. If you have any questions or concerns, it is always best to seek legal advice.