Can A Non-Compete Agreement Be Enforced Against You?

Non-compete agreements are highly controversial agreements, in that they can severely restrict your ability to earn a living for yourself when you leave your current place of employment. Still, many employers will put one in front of you, expecting you to sign them, as a condition of employment. But can they do that, and are non-compete agreements enforceable?

What is a Non Compete Agreement?

A non-compete agreement is an agreement that when you leave your current employment–no matter how you leave, either by your own will or whether involuntarily (that is, you are fired or released), that you will agree that you will not work for another employer in the same field, profession, industry, or violation as your current employer.

The restriction usually will prevent you from working in your chosen field or profession, for a specified amount of time, and within a specified geographic region or radius.

A non-compete agreement can mean that you are unable to work in the area that you know how to work in; it can effectively leave you unemployed, for a significant amount of time, no matter how your current employment may have ended.

Not Enforceable in California

The good news is that unlike many other states, non-compete agreements are generally not legal in California, and courts usually will not enforce them against employees who seek new employment.

Some Exceptions

There are two major exceptions where a non-compete agreement can be enforced.

One is where someone is selling you a business. If someone sells you a business, it is reasonable for you to expect that with your purchase, the person selling you the business won’t continue to compete with you.

Part of the sale of the business may include exclusivity in a territory or geographic region, or the promise that the seller won’t undermine the value of the business purchase, by continuing to do business against you.

The same applies when a business partner, shareholder or member leaves a business; the business can require that the departing member not compete with the business (so long as the departing member gets compensation or some form of consideration, as part of leaving the company or LLC).

Trade Secrets

The other exception has to do with trade secrets. In some cases, a noncompete that seeks to protect a business’ trade secrets can be enforced. However, the employer seeking to enforce the noncompete would have to show that you have trade secrets, or could potentially use or misappropriate the employer’s trade secrets.

This is a common excuse for using non-competes; many employers will say their non-compete is valid to protect trade secrets, when in reality no real trade secrets are actually involved.

Even where non-compete agreements are allowed, they are construed very narrowly. Courts won’t allow noncompete agreements that restrict the ability to work in too large of a geographic region, or which last for too long.

Contact the San Jose employment law lawyers at the Costanzo Law Firm today for questions about any agreements you may have signed, or if you have a contract dispute with your employer.

Sources:

oag.ca.gov/news/press-releases/attorney-general-bonta-reminds-employers-and-workers-noncompete-agreements-are

contractscounsel.com/b/non-compete-california