California is one of eight largest economies in the world, with more money flowing in and out of commerce in this state more than in many countries. Part of the reason that California is the home for so much business and industry is the way California law treats employees and workers.
Noncompetition agreements, or non-compete clauses, are contract provisions that set out to make sure that one party (generally an employee) agrees not to compete against or pursue similar business in the same field as another party (most often the employer) after the termination of the work contract. Noncompetition agreements provide a way for employers to protect themselves against investing time and money in a future business rival who will use the trade secrets, confidential information and general skills and knowledge against them.
In the state of California, these agreements are usually not valid. Competition is healthy for the economy, so the California legislature has ruled that nearly every type of noncompetition agreement is automatically void since it as a restraint on trade. The business statute specifically says, “”every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” Cal. Bus. & Prof. Code § 16600. If your employment contract contains language attempting to stop you from opening your own business in the same industry as the company for which you work, it will be difficult for your employer to enforce those terms. Many of even the largest companies mistakenly include noncompetition language in their standard employment contracts, but a Los Angeles employment lawyer will tell you – they are usually non-enforceable.
There are ways for businesses to protect your confidential information from misuse by former employees, such as nondisclosure agreements. Inside knowledge like customer lists, business plans, and other trade secrets are subject to legal protection. Certainly, some noncompete agreements are enforceable. If you have signed a noncompete agreement and want to know your options with regard to moving to a new employer or starting a business, you should contact a Los Angeles employment attorney to discuss what to do next.