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Understanding options regarding non-compete agreements

On Behalf of | Jul 13, 2017 | Contract Disputes, Labor And Employment Law |

Employers typically have new hires execute contracts and critical documents right away to ensure the company gets protected under law. Modern contracts often include special policies on social media.

For example, your contract could limit employees’ abilities to speak about your company on social media or even with mainstream media journalists. For many employers in California, non-compete agreements have long represented valuable means of protecting a company’s trade secrets and other sensitive information. A non-compete agreement limits what business pursuits former employees can engage in.

In most state, as long as a non-compete agreement is specific in terms of both employment limits and timeframe, the agreement can get enforced by the courts. In California, however, the courts generally refuse to uphold or enforce any kind of non-compete agreement, no matter how carefully drafted it was.

These agreements prevent employees who quit or get fired from working for a competitor or starting their own business with the experience, contacts and information they gleaned from working for your company. California state restrictions constitute an effective ban on the use of non-compete agreements.

California courts generally don’t uphold non-compete agreements

In general, courts in California simply don’t enforce or uphold non-compete agreements. There are actually regulations in place that ban their use by employers. If your company is based in another state, you can still have your employees execute one at the time of hiring. It’s important to note that legally, these clauses or agreements cannot get enforced in California. The most you can hope for from a non-compete clause is that it serves as a deterrent for mobility-minded employees.

Some companies who have California offices or facilities but are based in another state may believe that this out-of-state status makes their non-compete agreement legal and binding. California courts have rejected that concept, often referred to as “choice of law provisions.” Basically, employers operating in more than one state have tried to utilize the laws in the state where the conditions are more favorable. California courts have determined that it is the state where employment takes place, not the location of the business headquarters, that matters.

Trade secrets are still protected under law

Just because California bans non-compete agreements doesn’t mean you have no options for recourse in cases of obvious theft of trade secrets or even corporate espionage. Theft of intellectual material is still a crime, and depending on the circumstances, a former employee could face legal repercussions for stealing or sharing your company’s secrets. Those options will vary dramatically, depending on the situation.

Having a strong working knowledge of California intellectual property laws and employment laws can help protect your company and its operations from unscrupulous behavior by employees.



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