Non-Competition Clauses

Sometimes employers require an employee to sign an employment agreement containing a non-competition clause or covenant. Ordinarily the employee is in contact with customers or clients of the employer, or deals with patent or copyright information, usually referred to as proprietary information.

The employer does not want the employee to leave or go to work for a competitor and take the customers, clients or proprietary information to a competitor.

The Employee and Non-Competition Clauses

Balanced against the employer's desire for protection, the employee needs to get another job after leaving that employer. The easiest and most remunerative job would be in the same field, with the same job title, doing the same work. Therefore, by necessity the employee needs to work for a competitor in order to utilize his knowledge, experience and skills.

The State of California Law & California Courts

California Business and Professions Code § 16600 states that any agreement that restrains an individual from working is unenforceable as a matter of law. While California courts will protect an employer against unfair competition and misappropriation of trade secrets, they will not enforce a restrictive covenant preventing an employee's right to work.

This area of the law is under contract law which is governed by state law. California has very good protection for employees and may hold that the non-competition clause is invalid if it is overly broad or restrictive. Therefore, where the lawsuit is filed and whose state law is used can be critical.

California courts hold that if the employee is in California and files the case in California before the employer files in another state, then California will retain jurisdiction. If this were to be an issue, the employee should file first in California in order for the California courts to rule on the issue.

Further Information