California Noncompete Agreement: What's Included and Enforceability

Quick Facts — Noncompete Agreement Lawyers (California)

Is a Non-Compete Agreement Enforceable in California?

No. California is one of the three states in the United States that prohibits the enforcement of non-compete agreements. California statutes explicitly state that any contract that restrains a anyone from engaging in a lawful profession, trade, or business is void.

The purpose of a non-compete agreement is to prevent a worker from engaging in a similar business after leaving a company. Non-compete agreements are meant to protect an employer’s business interest, but these restrictive contracts can often place an unfair burden on employees who are looking for work. For this reason, many states place restrictions on these contracts, or like California, ban them all together.

Can My Employer Stop Me from Going to Work for a Competitor in California

No. An employer cannot stop an employee for going to work for a competitor in California. California statutes protect employees by prohibiting any kind of contract that would restrict an employee from working in their chosen industry.

It should be noted however, that even though California prohibits non-compete agreements, confidentiality agreements are enforceable. This means that if an employee signs an enforceable confidentiality agreement, then leaves the company to work for a competitor, they will still be bound by the confidentiality agreement.

Confidentiality agreements often protect a company’s trade secrets, customer lists, documents, and proprietary information. The employee will be prohibited from sharing any of this information at their new job.

Can a Non-Compete Agreement be Used for the Sale of a Business in California?

There are only two circumstances in which a non-compete agreement may be used in the state of California:

  1. Selling a business. When a business owner sells the goodwill of a business, a non-compete agreement can be used to prevent the seller from carrying on a similar business. State laws specify that the non-compete is for the goodwill of a business so the contract needs to use the term “goodwill” to be enforceable.
  2. Dissolution of a partnership. When partners dissolve a business, the parties can agree to sign a non-compete agreement that prohibit each other from opening a new, similar business in the same area.

To be enforceable in these two circumstances, the non-compete agreement must include a specified duration and a specified geographic location. The contract needs to be reasonable in scope and cannot be too broad.

Unlike other states, California does not permit blue penciling. Courts cannot edit contracts to make an unenforceable contract enforceable.

How Long Does a Non-Compete for the Sale of a Business Last in California?

The maximum term that courts have ruled reasonable for a non-compete agreement for the sale of a business in California is five years. Non-competes can be longer or shorter than five years, but if a court determines that the duration is in anyway unreasonable, the contract may be deemed invalid and unenforceable.

Why Does California Not Allow Non-Compete Agreements?

California dos not allow non-compete agreements because the state recognizes the importance of allowing workers to pursue a career that allows them to earn a living and provide for themselves. Non-compete agreements can be overly restrictive and impose an undue burden on employees who are seeking new employment.

When an employee works in a specific industry, they gain knowledge, skill, and experience in that industry. An employee could spend years learning their trade and non-compete could potentially limit their ability to find a job that fits their skillset.

Furthermore, non-compete agreements often discourage workers from seeking new opportunities that could provide better pay, flexibility, or working conditions. If an employee fears legal repercussions, they might believe that their only option is to continue to work for their current company.

Frequently Asked Questions

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I am a business attorney and former in-house corporate attorney with more than a decade of experience helping companies navigate contracts, commercial relationships, day-to-day operations, and disputes. My practice includes drafting, reviewing, and negotiating commercial agreements, licenses, leases, vendor and service agreements, and other business arrangements. Licensed in Nevada, California, New York, and Texas, I also hold an Executive MBA. My goal is to serve as practical, long-term outside counsel to small businesses and entrepreneurs that value responsiveness, sound judgment, and advice grounded in commercial realities - not merely technical legal answers. I handle disputes when necessary, but much of the value I bring lies in identifying issues early, preserving business relationships, and preventing avoidable conflicts. I do not bill separately for routine phone calls. I want clients to feel comfortable calling before a small concern becomes an expensive problem, and I am always happy to have an initial conversation to see if the fit is right for you. www.linkedin.com/in/maxkelner

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Employee Rights

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New York

Asked on Dec 5, 2024

Can my employer enforce a non-compete agreement I signed even though I was not provided any additional compensation or benefits in return?

I recently started a new job and was asked to sign a non-compete agreement as a condition of employment. However, I just found out from a colleague that my employer has been enforcing the non-compete agreement against former employees and preventing them from working in similar roles at competing companies. I am concerned because I was not given any additional compensation or benefits in exchange for signing the agreement, and I believe it may be unfair and potentially unenforceable. Can my employer legally enforce the non-compete agreement even though I did not receive any additional compensation or benefits in return?

Damien B.

Answered Dec 6, 2024

Hello! Generally, New York courts require that a non-compete agreement be supported by adequate consideration. If the agreement is signed at the beginning of employment, the job itself may serve as adequate consideration. However, if the non-compete is signed after employment begins, the employer may need to offer additional benefits, such as a raise or promotion, for the agreement to be enforceable. There are other defenses against enforcement. For a non-compete agreement to be enforceable, it must be reasonable in terms of duration, geographic scope, and the scope of activities it restricts. A court will evaluate whether the agreement is necessary to protect the employer’s legitimate business interests, such as confidential information or customer relationships. If not, a court could rule the noncompete is not enforceable.

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Business Contracts

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Asked on May 21, 2023

Noncompete agreement for consultants?

I am a consultant who is looking to take on a new client, but the client requires me to sign a Noncompete Agreement. I want to make sure that I am not signing away my rights, and that the agreement is fair and reasonable. I am also interested in understanding how this agreement would affect my ability to work with other clients.

Venus C.

Answered May 30, 2023

Hello. I appreciate your concerns about signing a Noncompete Agreement. It's essential to protect your rights and ensure the agreement is fair and reasonable given that a noncompete typically restricts competing activities during or after the term of engagement. Without knowing more about the business relationship and reviewing the actual terms, whether the non-compete is fair, reasonable, or even enforceable remains an open-ended question. Bearing this in mind, if the noncompete is preventing you from taking on other clients during or after the end of your relationship (or both), the scope of this restriction must be reasonable in terms of time, geographic area, and the specific activities it seeks to prevent. For example, does the noncompete specify the types of clients, industries, or geographic areas that are off-limits? What is the duration of the noncompete? If the client breaches your main agreement, will that render your noncompete void and unenforceable? These are just a few general questions that require a thorough review and analysis against Florida non-compete laws. Overall, the ultimate goal is to carefully review the terms to understand how they might impact your ability to take on new clients. If you don’t understand or are unsure about the contractual terms and their legal implications, it's highly recommended you consult with an attorney who can review the noncompete and provide you with personalized legal advice before you sign.

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Asked on Jul 30, 2023

Noncompete agreement and severance packages?

I recently left my job of 5 years, where I had signed a non-compete agreement. I am now negotiating a severance package with my former employer and am unsure of what my rights and obligations are regarding the non-compete agreement. I am seeking clarification on how the non-compete agreement should be handled in relation to the terms of my severance package.

Diane D.

Answered Sep 1, 2023

To be able to answer this question, I would need to see the agreements. No one can answer your question without seeing the agreements.

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Asked on Jul 12, 2023

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I am a business owner who has recently acquired a new partner. We are in the process of drafting a Noncompete Agreement to ensure that neither of us will compete against each other in the same market. We are looking for advice on what should be included in the agreement and how it should be enforced.

Daniel D.

Answered Aug 4, 2023

The one thing to make sure with noncompete agreements is that it is reasonable in terms of duration and the area you cannot compete in. Courts use a reasonableness test to determine whether a noncompete agreement is valid. If provisions are deemed to be unreasonable and fail the test, they could be altered or struck out of the agreement.

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Employment

Noncompete Agreement

Delaware

Asked on Dec 12, 2023

Employee contract, such as non compete/non solicit, could having this contract ever result in criminal/jail time?

If someone accuses you of fraud, because they believe you never had intended to honor your employment contract such as non-compete/non-solicit. Could this ever become a criminal case, resulting in criminal/jail time?

Matthew S.

Answered Dec 16, 2023

No, at worst, it is a breach of a contract which is a civil matter to be handled in civil court.

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