Understanding Non-Compete Agreements

In general, a non-compete agreement (NCA), or non-compete clause (NCC), is an agreement where one party agrees not to enter into or start a similar profession or trade that is in competition with the other party. Usually, the party agreeing not to enter, or “compete,” in another profession is the employee, and the other party is their employer. The main purpose of NCA’s is to prevent someone from working for a competitor following employment with someone else. The argument companies make in their favor is that they may have certain special information or techniques that they don’t want competitors to get ahold of—or, they don’t want another company to be able to take advantage of the training they gave their former employee.

Although fairly standard in many employment contracts, these clauses and agreements are particularly problematic in California where the courts have consistently held them invalid and therefore unenforceable. The courts believe it is essentially a person’s “right” to seek any and all gainful employment. So what else is there to know? Let’s discuss.

What’s not allowed?

As above, the California courts have consistently held that NCA’s are invalid and unenforceable. This means that, even if you sign an employment agreement where an NCA would seemingly prevent you from working for a competitor if you ever stop working for your current employer, they cannot actually stop you from doing so based on your agreement to the clause.

Sometimes, companies will try to reword their NCA’s so as to make it seem like they are allowable. Examples include when a company adds words like “voluntarily” in reference to the employee giving up their right to working for a competitor in the future or they try to include a provision where they agree to pay their employee in full for the time the NCA forbids them to work for another employer. However, the courts have consistently struck down any and all forms of NCA’s regardless of their wording or any “benefits” being offered.

Are there any exceptions?

Sometimes, they are allowed if the NCA is enforceable only for the duration of the employee’s employment. This means that if a person is an employee of a company and agrees to this type of non-compete, then they can’t work for a competitor organization during the course of their employment. Essentially, a valid non-compete may apply only to prevent employees from moonlighting at a competitor while they are fully employed by the party seeking to have the NCA enforced.

Speak with an experienced employment law attorney.

If you are a California employer with questions about a non-compete agreement, Integrated General Counsel can help. We have experience with all forms of NCAs in California and want to work with you every step of the way. Contact IGC today!

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Written by Integrated General Counsel

Our focus includes handling a variety of corporate matters and also includes litigation in state and federal courts. Our current practice includes providing transactional services and representing a variety of small and medium-sized companies as their outsourced general counsel.