In many states a non-competition or non-solicitation agreement in a contract is enforceable if it is reasonable. California, however, generally prohibits non-compete and non-solicitation agreements between an employer and its employees.
This article will answer some important questions relating to these issues.
1. What Makes Non-competition and Non-solicitation Agreements between an employer and employees illegal in California?
The California Business and Professions Code, Section 16600, states: “Except as provided in this chapter, every contract by which anyone is retrained from engaging in a lawful profession, trade or business of any kind is to that extent void.”
This applies both to agreements prohibiting former employees from working for a competitor and agreements preventing former employees from soliciting customers or clients.
2. What are the statutory exceptions to the general rule that non-compete and non-solicit agreements are invalid?
There are three statutory exceptions to the general rule: If you are the owner of a business, a partner in the business or a member of an LLC, then you can agree not to compete against the business if it is sold or if you leave the business.
3. Can I contact customers after I leave? What if I use confidential information after I leave?
Yes, generally you can contact customers on behalf of a competing business because the non-solicit provisions of your agreement are void. However, in engaging in competition against your former employer, you need to be careful not to use confidential or trade secret information. For example, you may have had access to a customer list with confidential information about that client’s products and pricing.
If you utilize information that is arguably a trade secret of your former employer, then you run the risk of violating your agreements relating to trade secret that are separate from non-compete or non-solicit agreements. You can compete, but that doesn’t mean you can use confidential information.
4. What if my new employer lets me go because my old employer says I have a noncompete?
A new employer could be liable for a wrongful termination claim if they let you go based on an unenforceable noncompete. For example, in a case considered by the California Court of Appeals, Silguero v. Creteguard, Inc. (2010) 187 Cal App 4th 60, a woman named Rosemary Silguero was terminated from her new employment based on a non-compete agreement with her previous employer. She filed a wrongful termination claim that she was terminated for a reason that was contrary to public policy, and she won.
If you are an employee with a non-compete or non-solicitation agreement with a former employer, you may want to discuss your options with an attorney. If you are a business that is considering how to navigate issues relating to non-compete, non-solicitation and trade secrets, you may also benefit from one on one legal advice.
Please contact David Knecht, at davidknechtlaw.com for a consultation.
