California’s public policy is very protective of employees when dealing with restrictions on employment contracts. In fact, California almost exclusively prohibits the use of Non-Compete Agreements.
What is a Non-Compete Agreement?
A non-compete agreement prevents employees from engaging in direct competition with their employer in a given industry, either during or after their period of employment. This includes both working for a competitor in a later position or starting a business in the same field.
So what does a non-compete agreement look like in practice? Well, for example, a company, like McDonalds, trains its employees, like Jane, to make valuable creative contributions to its product line. If Jane had signed a valid non-compete agreement, she would be restricted from taking McDonalds’ training, knowledge, and expertise learned and practice on that job to another employer, like Burger King.
In general, noncompete agreements are not enforceable in California. Even if the employer is based in another state in which noncompete agreements are enforced, California employees are not subject to these terms.
What about if the employee continues working in the same industry?
The question then arises as to how this not to compete situation looks for employees who work in the same industry for competing companies. How does the non-compete agreement or lack thereof in California play out here?
Well, another kind of agreement in employment contracts exists, called the Non-Solicitation Agreement.
These agreements allow employees to continue working in the same industry at a different company, but prevent the employee from using customer lists and other protected knowledge or trade secrets from their previous employer.
In the recent years, there has been a handful of cases before the California courts on whether non-solicitation agreements are valid. At this time, the courts have detailed that these types are agreements are a restraint on employment, which goes against California public policy arguments against imposing restrictions on competition and opportunities for employees. Accordingly, non-solicitation agreements are improper restraints on employees’ rights to practice their chosen profession and therefore, invalid.
As a result, employers may not include a non-solicitation agreement that would restrict employees from moving to a different company in the same industry and using the skills and knowledge they gathered from the previous company.
If you are having troubles with an employer or restrictive agreements on your employment, contact our office at (858) 926-5797 or through our online contact form.