By: Nicholas J. Ferraro | June 22, 2021 | Employment Law
Employment agreements are standard in the workplace and seek to protect:
- Intellectual property
- Client lists
- Data
- Trade secrets
- And other valuable assets
They also try to prevent key employees from taking a job with a competitor in the same market.
In many states, employers may require an employee to sign a non-compete agreement as part of their employment contract. However, employees in California don’t have to worry about non-compete agreements; they are not enforceable under California law.
What is a Non-Compete Agreement?
If you sign a non-compete agreement, you agree not to compete with the company when you leave. For example, you might agree not to work for a competitor or open your own company in the same market as your employer.
States that enforce non-compete agreements often require the agreements to be limited in scope. For example, a non-compete agreement might be limited to a geographical area and time frame.
The non-compete agreement was designed to protect an employer’s intellectual property and sensitive information from being taken and used by an employee to the employer’s detriment. Non-compete agreements are used with non-disclosure agreements and other employment agreements to prevent the use of trade secrets by employees who leave the company.
However, the California Uniform Trade Secret Law governs the theft of trade secrets. Therefore, a company can sue an employee for stealing trade secrets without a non-compete agreement.
Will California Courts Ever Enforce a Non-Compete Agreement?
California laws regarding non-compete agreements are very clear. Any contract or agreement that restricts someone from engaging in a lawful profession, trade, or business is void under California Business and Professions Code §16600. This provision includes going to work for a competitor.
As with most laws, there are some exceptions to the general rule. The law allows an employer to protect itself under very limited circumstances.
Situations in which a non-compete agreement might be enforceable include:
- Sellers may be prohibited from conducting business within the same market as the buyer who purchased the seller’s business. A non-compete clause is standard in purchase agreements for business interests.
- An LLC or partnership might be able to enforce a non-compete against a former LLC member or partner.
- Former employees could be barred from giving away trade secrets. Stealing trade secrets is unlawful even if the employee did not sign a non-compete agreement.
It is important to note that a non-compete agreement in the above situations may or may not be enforceable depending on the circumstances of the case.
Can a Former Employee Seek Damages if an Employer Breaks the Law?
Whenever employers break employment laws, employees have the right to seek compensation for damages. Although California law voids non-compete agreements, many employees sign employment contracts and agreements that contain non-compete clauses. Some employers try to bully employees into abiding by the non-compete clauses when they leave the company.
Employees who are forced to sign an unlawful non-compete agreement can file a lawsuit against their employer. For example, suppose an employee is fired or not hired because of the refusal to sign a non-compete agreement. In that case, the employee may seek damages for wrongful termination, employer retaliation, and other causes of action.
Non-Compete Agreements with Out-of-State Employers
Some employers with corporate offices in another state may try to avoid California’s laws for non-compete agreements. They may require employees working in California to sign employment contracts that contain non-compete agreements. The contracts also state that the agreement is governed by the laws of the state in which the company is headquartered.
The agreement could be enforceable under state law where the company is headquartered. However, the courts could declare that enforcing the law would be against public policy. It would be up to the courts to decide.
What Should You Do if Your Employer is Threatening You With a Non-Compete Agreement?
If your employer forced you to sign a non-compete agreement, you need legal advice immediately. Obtaining advice from a non-competes lawyer before proceeding with any course of action is in your best interest.
Employment contracts and agreements can be confusing. They could consist of dozens of pages of small print and legal terms that you may not fully understand. The best way to protect yourself is to hire an employment lawyer to review any employment agreements or contracts before you sign them.
If you already signed a non-compete agreement, contact a California employment lawyer for advice. First, a lawyer reviews the agreement. Then, they analyze the facts of your case and explain your legal options for seeking damages and other legal remedies.
To learn more, call our San Diego law firm at (619) 693-7727 or contact us online.
