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Is a Non-Compete Agreement Enforceable in California?

November 21, 2023 Legal Team

In California, non-compete agreements are generally not enforceable. The state recognizes that restricting an individual’s ability to pursue employment opportunities can hinder professional growth and innovation.

Is a Non-Compete Agreement Enforceable in California?

What is a Non-Compete Agreement?

A non-compete agreement, also known as a covenant not to compete (CNC), is a legal contract between an employer and an employee or a business and an independent contractor. Its primary purpose is to restrict the individual’s ability to engage in competing activities against the employer or business for a specified period and within a defined geographic area after the employment or contractual relationship ends. Non-compete agreements are often used to protect a company’s trade secrets, confidential information, and client relationships. 

California Law on Non-Compete Agreements

California’s Business and Professions Code Section 16600 is a critical legal provision that explicitly addresses the enforceability of non-compete agreements in the state. The statute declares, “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” In other words, non-compete agreements are generally void except in specific situations, such as the sale of a business or the dissolution of a partnership, and even in these cases, the restrictions must be reasonable. The statute firmly prohibits agreements that restrict an individual’s ability to pursue employment opportunities after leaving a company, emphasizing the importance of fostering a dynamic and competitive business environment.

The Trade Secret Exception

While non-compete agreements that restrain employees from engaging in a lawful profession, trade, or business are generally prohibited, employers can take measures to protect their trade secrets. Employers can enforce non-compete clauses or other restrictive covenants if they are reasonable and necessary to protect legitimate business interests, such as trade secrets, proprietary information, or confidential business practices.

However, it is crucial to note that even in cases involving trade secrets, California courts closely scrutinize the terms of non-compete agreements. The restrictions must be reasonable in scope, both in terms of duration and geographic area, to be enforceable.

Can I Be Fired for Refusing to Sign a Non-Compete Agreement?

California employers cannot terminate an existing employee solely for refusing to sign a non-compete agreement. If your employer attempts to fire you for this, it is considered wrongful termination. As a result, you have the legal grounds to pursue a claim and challenge the termination. 

How Can an Attorney Help?

If you have been fired over a non-compete agreement, an Orange County Wrongful Termination Attorney can provide valuable assistance in several ways:

Reviewing the Non-Compete Agreement

An employment lawyer will thoroughly review the non-compete agreement to assess its validity, enforceability, and compliance with state laws. 

Evaluating Circumstances of Termination

Your lawyer will examine the circumstances surrounding your termination to determine whether it was lawful. They can provide you with a clear understanding of your rights and legal options. 

Negotiating with the Employer

Your lawyer may engage in negotiations with your former employer to seek a resolution that is favorable to you. This could involve discussions about reinstatement, severance pay, or other mutually agreeable terms.

Filing a Lawsuit

If necessary, your attorney can file a wrongful termination claim against your previous employer. 

Defending Against Non-Compete Enforcement

If your former employer attempts to enforce the non-compete agreement against you, your lawyer can mount a legal defense. This may involve arguing that the agreement is overly restrictive, not reasonable, or in violation of California law.