Non-Competition Agreements Are Generally Void In California
Companies cannot enforce non-competition agreements signed by employees who work in California.
In California non-compete agreements are automatically void as a matter of law except for a small set of specific situations expressly authorized by statute which occur most commonly when equity stakeholders in businesses agree not to compete with their businesses. Persons with an “ownership interest” can agree to non-competition clauses and be held to them. This rule is set out in California Business and Professions Code Section 16600. Very few employees have ownership interests and therefore their companies cannot enforce non-competition agreements in California.
Q: “Yes, but I signed the contract with a company based in New York (or any other state), so it’s enforceable, right?”
A: Wrong. Virtually every other state allows businesses to condition employment on non-compete clauses but if the employee was working in California for the company, then California law controls and the non-competiton agreement is unenforceable.
This page focuses on non-competition agreements. While they are generally not enforceable in California, non-disclosure agreements are enforceable.
What’s the difference between a non-disclosure agreement and a non-competition agreement?
The customer lists, business practices, business plans, and much of the information which one uses to run a business are all trade secrets. Keeping that information confidential and out of the eyes of a competitor or the public is legal. To protect trade secrets and other proprietary data companies may require all employees to sign confidentiality agreements, also known as non-disclosure agreements or “NDA’s.” These are agreements that should be signed on the first day of employment by every employee who has access to any proprietary data. A copy should also be included in an employee handbook.
Beverly Hills Business Attorney Galen Gentry can help you protect your business. Whether yours is a start up or a going concern we can help minimize lawsuit exposure, draft employee contracts, buy-sell agreements, non-disclosure agreements and incorporate your business. With 25 years of experience and the highest rating for legal skills and ethical conduct from avvo.com and martindale.com, Galen can work with you to avoid costly legal problems through proper planning. If you are in trouble we can litigate your matter. Galen is a member of the Multi-Million Dollar Advocates Forum which includes only those attorneys who have won multi-million dollar verdicts at trial. Call for a free, no obligation consultation. Serving clients in Southern California including Los Angeles, Beverly Hills, Santa Monica, Hollywood, The San Fernando Valley, Glendale, Pasadena, Ventura County, Orange County and Long Beach