Non-Competition Clauses in California

Non-compete agreements are illegal in California. An experienced business attorney can cite California Business and Professions Code section 16600 which provides:

Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.

There are two exceptions. A business lawyer can draft a non-compete agreement which is enforceable for partnerships and when someone is selling their ownership interest in a company.

If one of the owners of a business sells all of his ownership interest in the business, the goodwill of a business or a substantial portion of the business assets including goodwill, the buyer may require a non-competition agreement. Partners and members of limited liability companies may enter non-competition agreements if one of them leaves the business or they dissolve the partnership.

Other means by which California business owners can protect their interests
California business owners do have options, through nondisclosure agreements and protecting their confidential information. They just cannot prevent an employee from working for a competitor.

Nondisclosure agreements and protecting confidential information
Even though California law does not allow you to prevent a former employee from going to work for a competitor or competing with your business himself or herself, you may require employees to sign a nondisclosure agreement, or NDA. The NDA creates a confidential relationship that prevents a former employee from disclosing information such as financial data, client lists, and trade secrets.

Protecting the viability of your business begins with understanding your rights and potential liabilities. Reed Aljian and Justin Daily, experienced business attorneys, provide counsel on all business matters. For a free initial, no-obligation consultation, call (949) 861-2524 for an appointment.