When you hire a new employee, you have them sign a non-compete agreement to protect your company’s trade secrets from competitors. But one of your former employees just resigned and started immediately working for your leading competitor. What legal action can you take against your past-employee for breaking their agreement?
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California’s business laws are complex, and misunderstanding the laws can greatly compromise your business. Before you make any decisions based on legal principles, contact an attorney who can inform you of your rights and ensure that you are acting within the law.
California and non-compete agreements
Along with a handful of other states, California does not enforce non-compete agreements. You cannot lawfully prevent your employees from working any job after they leave your employment.
Even if your company is headquartered in a state that recognizes non-compete agreements, you cannot enforce agreements with your California employees.
This may seem incredibly unfair. After all, you trained your employees in the industry, and shared company secrets with them. But California is protecting the employee’s best interest, not yours. They want to keep California residents gainfully employed. Unfortunately, this allows your employees to learn all they can from you and immediately turn to your competitors, or start a competing business of their own.
California’s non-compete ban applies to almost all situations, but there are a few notable exceptions:
1) The non-compete ban does not extend to current employees. You are able to prevent current employees from taking a second job within the industry or with a competitor.
2) Once a business owner sells his ownership to a new owner, they cannot compete with the business in a way that would harm its value.
3) Business partners and members of a LLC can mutually agree that they will not compete after they leave their business.
Remember, California’s courts will almost always side with past employees in regards to non-compete agreements. Speak with your attorney to learn your rights as an employer, and work with them to determine the best ways to protect your company’s property and privacy.