What California employees need to know about non-compete agreements

On Behalf of | Apr 18, 2017 | Blog |

If a business’s profits depend on trade secrets, it is not unreasonable for the business to want to keep those secrets. Some businesses try to prevent their secrets from being spread by legally preventing their employees from telling those secrets, even after the employees have left their company. This type of legal arrangement is known as a non-compete agreement.

California is home to many businesses. In fact, the state of California is one of the world’s largest economies. It even has a larger economy than some developed nations. Even though a lot of these businesses would like to restrict their employees’ ability to share trade secrets, California law takes a hard stance on non-compete agreements.

California non-compete agreements

A non-compete agreement is a legal agreement made between an employer and an employee and is generally used to prevent the employee from sharing trade secrets with business competitors during or after their employment.

The state of California has, in effect, banned these agreements in the interest of employees. However, some companies have tried various ways to get around California state laws. Some common methods include,

  • Using “choice of law” provisions, which give companies based outside of California the option to follow the laws of another state wherein non-compete agreements are legal.
  • Attempting to justify non-compete agreements because of the “inevitable disclosure doctrine” which states that an employee who ends up working for a competitor will inevitably disclose trade secrets.

California courts have denied all of these measures in order to preserve an employee’s freedom to work with whomever they want. There are, however, some non-compete restrictions for employees.

Non-compete restrictions

  • Moonlighting

The main restriction employers are allowed to enforce on their employees is a non-compete agreement while they are actually employing the worker. This means that an employee cannot moonlight with a business’s competitor because it would mean sharing trade secrets that could hurt their primary employer’s business.

  • Business partners and shareholders

If business partners and shareholders have made a prior agreement, they can be prevented from competing against their limited liability company after they have sold their personal share. This does not apply to most employees, except to specify that an employee cannot be made a shareholder just to get around non-compete restrictions.

These issues can become complicated, but California low is generally on an employee’s side. If you find yourself in a situation wherein you think your employer may have overstepped their legal bounds, it is recommended that you seek out the services of an experienced legal professional. They will be able to work with you to get the justice you deserve.