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

How do I hire a lawyer to draft a noncompete agreement in California?
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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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Employment

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Asked on Jul 25, 2023

Noncompete agreement and public policy?

I recently accepted a job offer with a new employer who asked me to sign a noncompete agreement. I am concerned that the agreement may not be in line with public policy and wanted to get a professional opinion from a lawyer to make sure I am not putting myself in a difficult situation.

Merry K.

Answered Aug 8, 2023

If you are in Washington State, where I'm licensed, as opposed to D.C., please let me know what kind of help you are looking for - have you already signed the agreement? I've been a WA State attorney for nearly 38 years, and specialize in employment law.

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Employment

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Asked on Jun 4, 2023

Noncompete agreement and industry restrictions?

I recently signed a Noncompete Agreement with my current employer. I am looking to explore other opportunities in my industry and want to know what restrictions my noncompete agreement might have on me. I am interested in understanding the limitations of the agreement and if there are any potential implications of taking a job in the same industry.

Danielle G.

Answered Jul 11, 2023

In order to ascertain the limitations and implications, you would need to review the specific language of the agreement. If the non-compete is very broad, it's possible it would not be enforceable. In New York, for a non-compete agreement to be enforceable, it must be for a reasonable period of time and limited geographic scope. It also must protect the employer's legitimate interest. For example, the restrictions must protect confidential information or specialized skills you gained while on the job, or some other legitimate interest. If the agreement goes beyond those limitations, a court could find the non-complete to be unreasonable and unenforceable, in whole or in part. As to what restrictions your specific non-compete imposes (and the reasonableness of those restrictions), you would need to look at the specific language in the agreement. If you are unsure about the limitations, you should seek advice of counsel to help decipher the extent it would apply to your industry in general, and the likelihood it would be enforceable in court.

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Asked on Apr 15, 2021

Can I work for a competitor with my current noncompete?

I have ended my non competent consulting agreement with my current employee and I have an offer to work as an employer “not as consultant” with a competitor company to my privious employees so can I work as an employee without any problem? The consultant agreement says the following: Under any circumstances the consultant shall not engage directly or indirectly either as a principal agent , consultant,stock holder , partner or in any other capacity whatsoever have any other relationship with any business which compete with the company in USA.

Jane C.

Answered Apr 16, 2021

I suggest that you have an attorney review the entire agreement. It is hard to comment reading a paragraph taken out of context. From the limited facts you present, it seems that you cannot accept this job offer without violating the terms of the non-compete. Disclaimer - This information is provided for general informational purposes only. No information contained in this post should be construed as legal advice and does not establish an attorney-client relationship.

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Asked on Jul 4, 2023

How does a noncompete agreement work?

I am an employee at a small business and I have recently been asked to sign a noncompete agreement. I am not sure how these agreements work and what rights I have as an employee. I am also concerned about the restrictions that could be placed on me if I sign the agreement. I want to make sure I understand the implications of signing the agreement before I do so.

Nancy B.

Answered Aug 4, 2023

In its simplest terms, a noncompete agreement in an employment context is an agreement that says you will not compete with your former employer if you ever stop working for them. It typically forbids things like: + Working for a competitor + Starting a company that sells the same services/products as your employer + Recruiting employees from your current employer after you have left that employment. One thought is that this could be requested shortly before letting an employee go just to protect the company from competition but I hope that is not the case here as it seems like an unfair use of the noncompete agreement ability in Georgia. The issues are usually the geographical scope (for example within 15 miles of Dalton, Georgia), the time period (one or two years is usually sufficient and courts do not favor long noncompete agreements), and the consideration (such as a new job - which is not applicable in your case, or more compensation). Regards, Nancy A. Burnett

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Noncompete Agreement

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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?

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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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