Non compete agreements, also known as restrictive covenants, are contractual agreements between an employer and an employee that prohibits the employee from working for a direct competitor or starting a similar business for a certain period of time after leaving the company. These agreements are generally used to protect the employer`s trade secrets, confidential information, and customer relationships. However, are non compete agreements legal in California?
The short answer is yes and no. In California, non compete agreements are generally unenforceable except in certain limited circumstances. According to California Business and Professions Code Section 16600, any contract that restrains an individual from engaging in a lawful profession, trade, or business is void.
There are limited exceptions to this rule, such as when an owner of a business sells the goodwill of the business and agrees not to compete with the buyer. Additionally, some industries, such as the entertainment industry, have historically been able to use non compete agreements to protect trade secrets and confidential information.
Another exception is for partnerships and limited liability companies (LLCs), where restrictions on competition are allowed when a partner or member leaves the firm. However, these restrictions must be reasonable in scope and duration and must not unfairly restrict the departing member`s right to work and earn a living.
It`s important to note that while non compete agreements may be unenforceable in California, employers are still free to use other methods to protect their confidential information and trade secrets. For example, employers can use nondisclosure agreements and confidentiality agreements to protect sensitive information.
If you are an employee who has been asked to sign a non compete agreement, it`s important to seek legal advice before signing. If you sign a non compete agreement without fully understanding the scope and impact of the agreement, you could find yourself limited in your ability to find work in your chosen field after leaving your current employer.
In conclusion, non compete agreements are generally unenforceable in California except in certain limited circumstances. If you have questions about a non compete agreement or need help enforcing or challenging a non compete agreement, it`s important to seek legal advice from an experienced attorney.