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When can California companies enforce non-compete agreements?

| May 29, 2019 | Firm News |

Laws tend to affect broad groups of people, which is one reason why lawmakers use broad language and courts have the power to interpret that language. Each area of the law has its own complexities. For example, employment law has to balance the protections that keep employers from taking advantage of employees with protections for companies that assume risk by hiring staff members.

Sometimes, the balance has to fall in a way that protects individual rights over the rights of a company. California’s approach to non-compete agreements seems to fall into that category. Although many states recognize non-compete agreements, which are documents that prevent an employee from working with a direct competitor after leaving a company, California does not.

Effectively, the state has banned non-compete agreements and will not enforce them in court. If you are an employee, you may wonder if there are circumstances in which you could face legal action. If you are an employer, you may wonder if there are times when a non-compete agreement could still protect you.

Companies can still request that staff sign those agreements

Some companies operate in many states and will have an employee sign the non-compete agreement as part of a standard work contract even though it won’t work in California. Other companies based out of California who know the contracts are not enforceable may still include them in the hope of deterring unscrupulous employee behavior.

The idea here is that employees may worry about needing to defend against a non-compete agreement and will therefore take steps to avoid violating one that they signed as part of their employment terms. However, the company will not necessarily be able to take the steps it outlines in the contract, such as seeking legal intervention for a former employee’s violation.

Just because a company can have someone sign it doesn’t mean the courts will enforce it. It’s important for both employers and employees to understand that these contracts won’t hold up if a case goes to court.

There are still laws that protect companies from unscrupulous employees

One of the reasons that California could do away with non-compete agreements is because there are other ways to protect an employer without infringing on the rights of employees. Specific examples of those protections would include intellectual property laws, such as trade secret protections.

Although you can’t stop an employee from working with a competitor, you can hold them or the company that hires them financially accountable if they engage in corporate espionage and steal your secret formulas, processes or customer list.

Business law is complicated, regardless of whether you are an employee or an employer. Partnering with a California law firm that understands both sides of business and employment law can help you develop better practices for protecting yourself and your rights.