Non-compete agreements, or non-compete clauses, have long been used by employers as a means to protect trade secrets and business interests. However, in California, these agreements are subject to strict limitations.
When it comes to non-compete agreements, the state has enacted some of the most stringent laws in the country. Those laws protect employees’ rights to advance their careers and limit an employer’s ability to impose undue restrictions on future employment opportunities.
In this article, we will first discuss how California’s employment law addresses non-compete agreements. Then, we will discuss steps an employee can take when a non-compete agreement is being enforced.
Non-Compete Agreements and California Law
Non-compete agreements are contractual provisions designed to protect the interests of the business owner. Such agreements restrict employees, after leaving a job, from working for competitors or starting a competing business within a certain timeframe and geographic area.
Although a Federal Court ruling struck down the US Federal Trade Commission’s attempt to impose a nationwide ban on non-compete agreements in 2024, California has repeatedly taken the matter into its own hands, seeking to promote a free and competitive labor market. Thus, under California Business and Professions Code Section 16600, non-compete clauses are typically void and unenforceable – regardless of where and when the contract was signed.
Additionally, in 2024, Assembly Bill 1076 extended California’s restrictive approach to non-compete agreements. This bill makes it explicitly unlawful to include a non-compete clause in an employment contract. Further, an employee cannot be required to enter a non-compete agreement that does not satisfy specified exceptions.
Exceptions to the General Rule
While California has taken a strong stance against non-compete agreements, there are limited circumstances under which such clauses may be acceptable:
- The sale of a business: When an owner sells a business, the buyer may include a non-compete clause in the sales contract to protect the business’s interests. This clause can prevent the seller from immediately operating a competing company that could diminish the original company’s value.
- The dissolution of a partnership or LLC: In some cases, when individuals dissolve a business partnership or limited liability company, certain non-compete provisions may be enforceable under limited circumstances.
- To protect trade secrets: Employers may enforce restrictions involving the use or disclosure of trade secrets if these are clearly defined and comply with California law.
The group of exceptions is narrow and must be carefully worded and enacted if they are to hold up if the non-compete clause is disputed.
What to Do if a Non-Compete Agreement Is Being Enforced
Though non-compete agreements in California are generally unenforceable and void, many employers continue to have their employees sign them. If a former employer is attempting to enforce a non-compete agreement, there are a number of steps you can take to protect your career.
Reach out to an employment attorney
It is advisable to seek legal counsel in the event an employer is attempting to hold you to a non-compete agreement that is void under California law. Disputes over non-compete agreements can be complicated. An attorney well-versed in employment law can determine the validity of the agreement you signed, explain your legal rights and options, and advocate on your behalf.
If your previous employer alleges that you have breached a non-compete contract or provision, your lawyer can help you prepare a well-grounded defense. This may mean demonstrating that the agreement was not enforceable.
Negotiate a release or modification
Depending on the circumstances, it may be possible to negotiate a release or modification of the non-compete agreement. Employers generally wish to avoid a lengthy legal battle and may be willing to come to a mutually agreeable solution to the altercation.
Come to the negotiating table prepared to provide a compelling argument for why the non-compete agreement should be waived or modified. It may also be necessary to make compromises or concessions to come to an amicable consensus.
Document your efforts to resolve the conflict
When contesting a non-compete agreement, it is important to document your efforts. Retain a record of communications and correspondence of any kind with your former employer, as well as notes from any meetings or negotiation sessions.
Such documentation will serve as valuable evidence of your good faith efforts to address the non-compete agreement and work through any disagreements. Additionally, in the event that judicial action becomes necessary, you will need to demonstrate that you took tangible measures to resolve the issue.
Take legal action
If a previous employer is determined to enforce an invalid non-compete agreement, you may need to consider taking legal action. This could involve filing a lawsuit to challenge the enforceability of the agreement or seeking a court order to invalidate the agreement, depending on the circumstances.
Your employment attorney can assess the facts of your case and guide you through the legal process – thereby putting California’s employment statutes to work on your behalf.
Turn to Tenacious California Employment Attorneys to Uphold Your Rights
Successfully navigating non-compete agreements in California can be a complex and stressful process. In the event of a dispute over a prior non-compete agreement, your career may be on the line. If this is the situation you are facing, you need experienced and trustworthy legal representation.
The dedicated attorneys of Allred, Maroko & Goldberg are proud to focus on employee rights. Our legal team has a clear understanding of the state’s legal landscape and employees’ options for resolving all matters of employment disputes – including those that arise from non-compete agreements.
Don’t let a potentially void or unenforceable non-compete clause derail your life. Call the legal team at Allred, Maroko & Goldberg at (253) 583-4919 or fill out our online contact form for a confidential case review. Learn what our aggressive and determined employment lawyers can do for you.