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An employer normally has an employee sign a non-compete in order to protect their own interests. If an employee is able to pursue the same profession on their own terms, it could potentially take a lot of business away from the employer but is well within the worker’s rights. 

Mara Law Firm would like to discuss the validity of a non-compete agreement in California and what legal recourse is available to you. Never sign anything or assume a contract you already signed is valid until you speak with our legal team. 

What is a Non-Compete Agreement?

A non-compete agreement is a “restrictive covenant” which prohibits one party from taking certain actions against the other party. In the case of a non-compete, the employer restricts the actions of an employee.

A non-compete is intended to protect the employer’s business. A non-compete will restrict an employee’s ability to pursue employment in the same field after leaving the position with the current employer. 

The agreement also bars an employee from discussing confidential information or trade secrets with anyone outside of the company. A trade secret is a practice that gives a company its edge over other competitors. 

A non-compete is also designed to protect the business’s good name, known as the employer’s “goodwill.” If an employee leaves and starts a competing business, this can hurt the employer’s reputation.

What is Required for a Non-Compete to be Enforceable?

The conditions of a non-compete must be reasonable and have limited restrictions. The terms cannot be vague or overly expansive. If a non-compete does not meet these criteria, then a court will simply not enforce it.

The courts look at several factors when determining if a non-compete is enforceable, such as:

  • Is the non-compete necessary to protect an employer’s general business interest, such as confidential business information?
  • Does the non-compete have a reasonable time limitation?
  • Is the non-compete limited to a specific geographic location?
  • Is the non-compete supported by consideration? (A fundamental requirement in every contract—the employee receives a benefit in exchange for agreeing to not work for the employer’s competitors upon leaving)

A reasonable time limit will depend on each court’s preference, customarily between six months to two years. Some courts consider anything longer than one year to be invalid.

The geographic location in a non-compete is usually defined by miles within a radius. The radius must be limited. For example, a contract may be considered valid if it prohibits an employee from working in a specific city or the same region where the employee previously worked. 

Considerations in a Non-Compete Agreement

Out of all restrictive covenants, an employee non-compete agreement is considered the most restrictive.  

Major issues that are taken into account include:

  • Restraints on trade and employment: a non-compete agreement cannot go against the interest of public policy, which acknowledges that employees are able to move about freely within the free market.
  • Protecting the legitimate interests of the employer: an employer has his or her own legitimate interests, which are entitled to protection.
  • Protecting the freedom to contract: states value the rights of people to freely enter into contracts.
  • Laws vary widely from state to state: state legislation and case law determine if a state enforces non-compete agreements; courts in each state vary on how they enforce non-competes.

Are Non-Compete Agreements Enforceable in California?

In California, non-compete agreements between an employer and employee are unenforceable. Non-competes cause workers to feel that they cannot pursue other opportunities, squandering competition within the free market. 

As an employee, it is within your rights to refuse to sign a non-compete agreement. If you do refuse, your employer is not allowed to fire you. If you have been fired for refusing to sign a non-compete, speak with an employment law attorney to discuss your next legal steps.

There are exceptions when a non-compete is allowed, including:

  • Selling a business: someone selling a business may be prohibited from opening a business in the same geographic location as the original business.
  • Limited liability companies: a non-compete may be enforced when a shareholder sells their shares in a business.
  • Partnerships: a non-compete agreement is allowed if a partnership is dissolved.

Can I Seek Damages for Signing a Non-Compete in California?

If your employer had you sign a non-compete, you might be entitled to receive legal compensation for your losses, referred to as damages.

As an employee, if you have to go to court regarding a non-compete agreement, you will be able to receive reimbursement for your attorney’s fees. This does not apply to your employer, even if the court rules in his or her favor.

Unlike other lawsuits, you cannot receive compensatory or punitive damages. In the case of a non-compete agreement, if your employer prohibited you from re-entering the workforce following your employment, you can take legal action under the Unfair Competition Law. The Unfair Competition Law prohibits unfair business practices in the state of California.

Under the Unfair Competition Law, you may be able to request an injunction. An injunction is a writ or order issued by the court telling a party to do a certain task (mandatory) or refrain from doing something (prohibitory). If you have lost money or property or have suffered any economic losses, this can be an avenue for legal relief.

Is There a Time Limit for Suing My Employer?

Under California’s Unfair Competition Law, you have four years upon discovering an illegal business practice to bring a lawsuit against your employer.

This time limitation, known as a statute of limitations, is put into place so that vital evidence can be preserved. When too much time has passed, key evidence may not be readily available in order to win your case.

Contact a California Labor Law Firm Today

As an employee, you are not always made aware of your employment rights. If you have been asked to sign a non-compete agreement or have already signed a non-compete, the attorneys at Mara Law Firm are available to answer any questions you may have. Contact us today to schedule your free consultation.

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This page has been written, edited, and reviewed by a team of legal writers following our comprehensive editorial guidelines. This page was approved by attorney David Mara who has more than 20 years of legal experience in employment law.

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