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Restrictive Covenants

Frequently Asked Questions: Are Non-compete Agreements Legal?  (revised 2016) 
The company I work for had me sign a non-compete,  is this legal?

Forcing you to sign a noincompete agreement in this state likely violates California's public policy.  Noncompete agreements are void and unenforceable under our Business & Professions Code Section 16600, and have been for many decades. The exceptions are related to the sale of a business, a partnership interest - which won't be discussed here.

So, my company can't enforce the non-compete against me; right?

Typically that's true. However, because employers know that noncompetes are not supported by California law many of these agreements contain other types of restrictive provisions subjecting special benefits (like deferred compensation) to forfeiture clauses. Additionally, some agreements expressly name the laws of another state* as controlling in judging the validity and enforceability of the noncompete.  These tactics may or may not prevent you from lawfully competing in this state, but you'll need the help of an employment law attorney to understand your risks. 

   *Effective January 1, 2017, new Labor Code Section 925 goes into effect and prohibits clauses in employment or separation agreements which require the employee subject themselves to out-of-state laws that conflict with California's protections, or submit to the laws, arbitration and courts of another State.  This applies for agreements entered into, modified, or extended on or after January 1, 2017; older agreements are grandfathered.

So why do other websites say non-competes are completely unenforceable?

See the paragraph above.  Many commentaries about non-competes don't appreciate the practical reality that few are designed as simple non-compete agreements.  What's more likely is the agreement contains non-solicitation, non-disclosure, non-interference clauses, a choice of laws provisions, and worse - monetary "clawbacks". Often, very skilled lawyers will draft these agreements for employers, with the exclusive venue for disputes in another state. 

So what can my employer do to me if I ignore the agreement and compete?

If it's a simple CA non-compete agreement - usually not much, assuming you don't have restricted stock or other retained incentives that may be forfeited.  If there are parts of the agreement that may be valid, or if the agreement is enforceable under the law and courts of  another state, you may have a battle or race to the courthouse, unless you escape under Labor Code Section 925 (above).  Employer attempts at enforcement can get expensive for the employee, time consuming, and may interfere with your new career and/or employer - regardless of whether your former employer prevails.  Suffice to say, don't assume it's meaningless.  Battling or extracting yourself from a lawsuit or injunction can be expensive.  

Are non-soliciation clauses virtually the same thing as non-competes?

No.  Non-solicitation agreements and clause are most often a prohibition on you engaging in employee raiding, i.e. encouraging the employer's employees to quit and join you elsewhere.  If properly drafted, these are enforceable.    

What can I do about a questionable non-compete?

The best advice is to have the agreement reviewed by a qualified attorney.  If it's a simple agreement, it will likely cost you very little develop a strategy.  If the agreement has complexities you'll be much better off understanding the options and alternatives available to you - including specific strategies to limit your risks.    

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