Central to the success of every business is its strategy to stay ahead of the competition. Part of that includes finding, empowering and retaining top talent – keeping them away from other companies. It’s why so many businesses ask critical workers to sign non-compete agreements. If that individual leaves, they won’t empower the competition in doing so.
California, however, has notoriously strict restrictions on non-compete agreements. So what is actually feasible for a business looking to protect its interests here?
Narrow exceptions to the non-compete ban
California law declares that any contract limiting someone from “engaging in a lawful profession, trade or business of any kind is void.” In essence, non-compete agreements are banned and the courts will not view them as enforceable. This occasionally holds true even if there is a choice-of-law provision specifying the agreement should follow another state’s laws.
There are a few exceptions. However, they are narrow in scope. Non-compete agreements may be enforceable for:
- Current employees looking to moonlight
- Situations where someone who is buying a company wants to prevent the seller from competing with a new business
- Business partners or LLC members who mutually agree to not compete should they leave or the company be sold
So how do I protect my business?
A non-compete can be effective in some circumstances, but it is important to remember it is only one tool. Businesses have a range of legal options to help them protect their interests.
For example, just because a former employee did not sign a non-compete agreement doesn’t mean they can go around sharing trade secrets and confidential information with a new employer. Similarly, a former worker attempting to skirt intellectual property regulations as part of a new career step may also run afoul of the law.
California businesses are not powerless. While these cases may be complex, often requiring a dedicated business law firm intent on finding a solution, pursuing them can provide a layer of protection to concerned entrepreneurs. Whether it is through well-planned litigation or dispute resolution, businesses can get the support necessary to see things through.
