Legal Eagle: Non-Compete Agreement

Straight-forward legal tips for Military and Veteran Business Owners

By Kelly Bagla, Esq.

NON-COMPETES IN CALIFORNIA ENFORCEABLE OR NOT?

Many people have heard of a non-compete agreement, but may not completely understand what it means. In fact, some people sign non-compete agreements as terms of their employment without even realizing it. A singed non-compete is not only important for employees to understand, it’s very important for those employees to understand who decide to start their own business at a later date. A non-compete is a type of legal agreement that forbids an employee from going to work with a competitor of their current employer or starting a competing business. These agreements exist to protect company secrets, however, it is important for employees and those who later want to start their own business to know whether or not a non-compete is enforceable in California.

A non-compete is a restrictive covenant that is used to restrict an employee’s actions once they are no longer working for a company. Namely, they restrict where and how a former employee will work, effectively keeping them from working for a competitor. Usually, these agreements are in place for only a limited amount of time and not utilized as a permanent restriction.

Non-compete agreements are controversial, as they are very restrictive and prevent employees from certain actions if they want to avoid legal trouble. However, these agreements are very difficult to uphold in court because the employer must show that the employee caused damages as a result of breaching the noncompete agreement. An employer would need to prove that the non-compete agreement protects a legitimate business interest, though courts have generally held an unfavorable view of non-compete agreements that infringe on a former employee’s right to earn an income.

According to the California Business and Professions Code Section 16600, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” In other words, non-compete agreements are not enforceable in California. However, that does not mean that an employee will not be wrongfully presented with one or told that they have to sign one as a condition to their employment. Employers may try to say that there are extenuating circumstances in place for them to enforce a non-compete agreement, but these arguments are usually rejected by California courts.

As of January 1, 2017, non-compete agreements in California must operate under these rules:

• Employees can void any non-competes that require a court outside of California to decide disputes. In other words, the company cannot enforce an employee’s non-compete agreement in a state that allows these agreements.

• Employees are able to void contract with illegal non compete terms.

• Only California courts are able to rule on noncompete issues within the state, and the courts can only do so using California law.

• Employees are able to receive compensation for their attorneys’ fees if they have to go to court to defend themselves in a non-compete dispute. Employers cannot seek attorneys’ fees from the employee, even if the employer wins.

Becoming a business owner, you control your own destiny, choose the people you work with, reap big rewards, challenge yourself, give back to the community, and you get to follow your passion. Knowing what you’re getting into is smart business because the responsibility of protecting your family and yourself falls on you.

For more information on how to legally start and grow your business please visit my website at

www.golegalyourself.com

Disclaimer: This information is made available by Bagla Law Firm, APC for educational purposes only as well as to give you general information and a general understanding of the law, and not to provide specific legal advice. This information should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

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