We are often asked about using non-compete agreements. What many
California employers don't realize - non-competes are
illegal in California. The California courts have used
Business and Professions Code Section 16600 to prohibit non-compete
agreements. Section 16600 provides that “every contract
by which anyone is restrained from engaging in a lawful profession,
trade or business of any kind is void.”
In November 2001, a California Court of Appeal upheld a $1.26
million award for an account manager terminated because she refused
to sign a non-compete agreement. In Walia v. Aetna Inc., the court
said the termination constituted wrongful discharge in violation
of public policy, making damages available to the fired employee.
While non-compete agreements are not valid in California, this
does not mean employers are without protection. The best approach
is to be proactive, and examine what the employer can do to keep
the employee from leaving in the first place.
However, employers also should know that:
- Agreements not to reveal trade secrets are fully enforceable
- Employers may make bonuses conditioned upon retention of employment
for a specified period of time, or require repayment of certain
expenses if employees accept other employment within a certain
- Employers should review all employment agreements, handbooks
and policies and remove any non-compete provisions.
- Employers should not include non-compete language in offers
- Employers can and should uniformly enforce policies related
to disclosure of trade secrets.
If you have any questions about this topic, or any other HR related
topic, please feel free to call upon us.