United States laws aim to promote fair competition among businesses. You might remember learning in history class about the rise of mega-corporations and the laws to prevent monopolies. Despite this, it is possible for people to sign legally binding contracts that prevent businesses from competing with each other, and case law shows many instances of the courts enforcing these contracts. Are non-compete agreements fair? The short answer is that it depends. One the one hand, it is unfair to learn a company’s secrets specifically for the purpose of setting up a competing business in much the same way that insider trading is unfair. On the other hand, it is also unfair to restrict a former employee’s work opportunities. Non-compete clauses in employment contracts are a frequent occurrence; in fact, employers use them more often than is necessary. Before you sign a non-compete agreement or an employment contract that contains non-compete provisions, contact the Irvine non-compete agreement lawyers at HKM Employment Attorneys LLP.
Why Do Employers Ask Employees to Sign Non-Compete Agreements?
Non-compete agreements can be free-standing, or they can be articles or provisions of a larger employment contract. When an employee signs a non-compete agreement, the employee promises not to engage in business activities that harm the employer during the employment relationship or after it ends. In some cases, the non-compete clause simply states that the employee will not compete with the employer, but in other cases, the non-compete agreement is a lot more specific about what the employee is not allowed to do. In some cases, the non-compete agreement specifically requires the employee not to set up a business that directly competes with the employer, not to poach clients from the employer, and not to recruit former coworkers from the employer’s company to work for the employee’s new company. In other instances, the non-compete provisions prohibit the employee from taking a job with one of the employer’s existing competitors.
One of the main reasons that employers ask employees to sign non-compete agreements is to protect their intellectual property that would not otherwise be protected by copyright, patent, or trademark laws. It is possible to trademark a logo, but not a business model.
What is the Difference Between a Non-Disclosure Agreement and a Non-Compete Agreement in Irvine?
Some employment contracts include non-disclosure clauses in addition to or instead of non-compete clauses. A non-disclosure agreement (NDA) prohibits the employee from revealing certain types of information about the employer after the employment relationship ends. Therefore, both NDAs and non-compete agreements can prevent former employees from revealing trade secrets. NDAs cannot, however, control where and with whom an employee seeks a job after the end of the employment relationship. Pursuant to the Silenced NO More Act of 2021, California law prohibits employers from using NDAs to stop former employees from speaking out about employment discrimination that they have experienced.
Is it Fair for Your Employer to Insist That You Sign a Non-Compete Agreement in Irvine?
Whether or not it is appropriate and fair for your employer to ask you to sign a non-compete agreement depends on the industry and your job description. Non-compete agreements are most appropriate in highly specialized jobs or upper-level management positions. In other words, they are most appropriate when the employee has direct knowledge of the company’s business decisions or of products or services that it is developing. Even when it is reasonable to include non-compete provisions in an employment contract, the non-compete clause should not be overly restrictive. If it prohibits the employee from working for competing companies or opening a new business, it must specify the geographic area and the time limit. For example, if you work for a dog grooming company, the non-compete clause might stop you from opening a dog grooming business within the city limits of Irvine within a year of the end of the employment relationship. It would be truly unreasonable for the employer to make the employee never work as a dog groomer anywhere after they stop working for the employer.
In September 2021, President Biden issued an executive order urging the Federal Trade Commission to penalize companies that required employees to sign unfairly restrictive non-compete agreements. At the time of issuance of the executive order, non-compete agreement overreach was widespread; approximately 20% of U.S. workers without four-year university degrees had employment contracts that included non-compete provisions. Restrictions such as “you’ll never work as a home health aide in California again” are contrary to fair competition and counterproductive in terms of reducing unemployment rates. If you think that the non-compete agreement that you signed (because the alternative was not having a job) was unfair, or if you are wondering whether you should agree to the non-compete provisions a prospective employer is proposing, contact the Irvine employment lawyers at HKM Employment Attorneys LLP.
Resolving Legal Disputes Related to Non-Compete Agreements in Irvine
Your employment contract should contain provisions about how to resolve disputes arising from the contract, including disputes related to non-compete clauses. Some contracts grant jurisdiction to the state of California to resolve disputes related to the employment contract, while other contracts require the parties to resolve their disputes through arbitration. While arbitrators are supposed to be unbiased, mandatory arbitration clauses in employment contracts limit an employee’s options, especially if it is the employer who chooses the arbitrator. Mandatory arbitration is not the same as when parties to a business dispute mutually decide that they would rather bring their case to arbitration instead of having a judge decide. If you have questions about an arbitration agreement you have already signed or about an employment contract that requires arbitration as the sole form of dispute resolution, contact the Irvine employment lawyers at HKM Employment Attorneys LLP.
Contact HKM Employment Attorneys, LLP About Non-Compete Agreements in Irvine
HKM Employment Attorneys, LLP represents employees in disputes about employment contracts, including disputes related to non-compete agreements and non-compete provisions within employment contracts. Contact the employment lawyers at HKM Employment Attorneys LLP in Irvine, California to set up a consultation.