A non-compete agreement is a contract between an employee and an employer that states that the employee cannot enter into direct competition with the employer while they are employed there. A non-compete agreement may state that the employee cannot compete against their employer for a specific time frame after leaving. Some Riverside, California employers require employees to sign non-compete agreements as a condition of employment.
Before you sign an employment agreement, especially one with a non-compete agreement, you should discuss it with an employment attorney. Many non-compete agreements are not legally valid, especially when the employee does not have an equity stakeholder interest in the business.
You may have a right to bring a legal claim against your employer for requiring you to sign a legally invalid non-compete agreement. Even if you are an equity stakeholder, it is in your best interest to ask an attorney to look over your non-compete agreement to make sure you are not giving up too many rights.
Many Non-Compete Agreements are Illegal and Unenforceable in California
California courts have taken a strong stance against non-compete agreements. Generally, non-compete agreements are illegal and unenforceable, so it is important to consult with a non-compete attorney to determine if your specific non-compete agreement is enforceable or not.
Non-compete agreements prevent employees or workers from providing services and specific Industries or working with specific clients. For example, an employee may agree not to work for a competitor company even after the employee quits or is terminated from their position. There are two main purposes of a non-competition clause:
- Protecting the Integrity of a company so they do not put time and money into an employee only for them to take those skills to a competitor
- Making employees more reluctant to quit because they would be prohibited from working for a competitor company for a specific period of time
Non-Compete Agreements Protect Proprietary Information
Generally, a non-compete agreement will specify a time frame during which the employee is prohibited from working for a competitor. Some clauses in non-compete agreements specify a geographic area the employee is prohibited from working within after leaving the company.
This usually means the protection of a company’s proprietary information or interest. The non-compete agreement may protect the company’s marketing plans, trade secrets, business practices, contracts, sales strategies, or other important business information that the employer desires to keep confidential from their competitors.
Determining Whether a Non-Compete Agreement is Legal
In most cases, state law will govern whether an employment contract is enforceable. The forcibility of non-compete clauses varies from state to state. However, most states only enforce non-compete clauses when it is necessary to protect the employer. Most non-compete agreements are not enforceable under California Business and Professions Code 16600.
This section of the code makes overly broad non-compete agreements legally void. The state of California has aimed to promote the public policy of giving employees freedom and mobility to find work elsewhere without the fear of legal repercussions from their former employers.
While these types of restrictive clauses may not carry any legal weight in California, many employers choose to put them in their contracts anyway. Doing so can cause confusion among employees who may need to be made aware that their employer will not be able to enforce the specific clause. As a result, employers may follow the terms of the non-compete agreement, jeopardizing their careers because they are concerned that their former employer will retaliate against them.
In other cases, an employee may stay in a current employment position they want to leave or turn down other work opportunities because they feel trapped by their non-compete agreement. Taking time to discuss the agreement with an attorney can give you the freedom you need to pursue other options.
Enforceable Non-Compete Agreements in California
Some states permit reasonable non-compete agreements and employment contracts. California employers are prohibited from using a choice of law provisions to force employees to abide by a non-compete clause in another state jurisdiction.
For example, if an employer tries to interpret the employment agreement according to another state’s law that allows non-compete agreements, a California court will likely rule against the employer. However, there are specific instances in which non-compete agreements are legally permissible in California employment contracts, including the following:
- Sale of a Business: When a business owner sells their business, the buyer and seller of the business can lawfully agree that the seller will not compete with the business in the same geographic area of the business.
- Partnership: When a business partner leaves a business, both parties can legally agree that the existing partner won’t continue the business in the same geographic area.
- LLCs: Whenever a member of a limited liability company (LLC) leaves a business, both parties can legally agree that the existing partner will not continue the business in the same geographic area.
Even when these limited exceptions apply, a court will reject a non-compete agreement if the geographic area in the clause is not limited. Similarly, they will strike down the agreement if it does not set a specific time period to which the terms apply.
The Benefits of Working with a Skilled Attorney
When a non-competition issue arises, employees will benefit from competent legal counsel. These types of cases can be complex; as an employee, your career and future may be on the line. For example, suppose your employer is trying to enforce a non-compete agreement that is not legally valid. In that case, an attorney can help you protect your right so you can pursue other employment opportunities.
Even if your employer threatens to sue you for working for one of their competitors after you leave, you should remember that a judge will likely dismiss your case unless it falls into one of California’s narrow exceptions.
Discussing your case with an employment attorney can help you understand your rights and options so you can make an informed decision about your employment. Do not hesitate to contact HKM Employment Attorneys to schedule an initial consultation with one of our skilled Riverside employment attorneys.
