Non Compete Agreements

Many times an employer will have an employee sign a non-compete agreement (sometimes called a “covenant not to compete” or a “do not compete”) when the employee is hired.   These agreements are contracts between an employer and an employee whereby the employee agrees not to directly compete with the ex-employer when the employee leaves the company, even if the employee is fired. 

In other words, the employer tries to prevent the employee from going to work for a direct competitor, or from contacting customers of the former employer to solicit business. The sole purpose of these contracts is to protect the employer.  The employer tries to stop the former employee from using his or her knowledge, skills and abilities to compete against their former employer, and make a living.

In most cases non-compete agreement are not enforceable in California.  The California Business and Professions Code provides 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." To read the full text of the relevant Code sections (Cal. Business and Professional Code  16600 et seq.) go here.

In most cases California Courts have relied on this code section to invalidate any agreement that seek to prevent an employee from accepting work from any of her former employer's clients or competitors.  This is good news for California Employees. 

There are some areas of concern for employees.  Generally a former employee cannot use information taken from their past employer which is proprietary or is a trade secret.  The issue that comes up most frequently is whether or not a company’s client lists or pricing schemes are “trade secrets.”  Additionally business owners who sell their stock to another for valuable consideration cannot directly compete against the person who purchased the business.  This is an area of law that can be confusing.  If you have a question about using information you have from your former employer please call Gienapp Law, APC at (619) 234-3054 to discuss. 

Although non-compete agreements are generally not legal, many companies require their employees to sign them in order to deter an employee from competing or using his or her knowledge, skills, and abilities after leaving. If you have been asked to sign a non-compete it is most likely not enforceable, or at least much more limited than it appears.

If you have any questions regarding a non compete agreement that you have been asked to sign, call Gienapp Law, APC to discuss.  Tel. (619) 234-3054.