Employers in California frequently ask employees to sign non-compete agreements as a condition of employment. This is very common among salespeople or account representatives because companies are rightfully concerned that these employees will build a relationship with an important client, and that the client might later be persuaded to follow the employee to a new company. The problem with this is that non-compete agreements in California are illegal. Specifically, Business and Professions Code §16600 states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
California has essentially made a policy choice of encouraging competition and labor, and so employer efforts to prevent competition are generally void. For example, if you are a salesperson for an advertising company and decide to join a competitor, there is usually nothing wrong with trying to recruit your former clients to the new company. The same holds true if you start your own advertising company and wish to draw from your former clients as potential business.
That said, it would be illegal to reveal “trade secrets” to a competitor, and so much of the litigation surrounding non-competes relates to whether some piece of information is a “trade secret.” Employers frequently argue that their “client list” is a trade secret, so it is still important to be cautious in determining whether to contact former clients if you have moved to a competitor. You should certainly avoid taking a rolodex from a firm as you depart, or downloading contact information from the company’s computer. However, so long as the names and contact information of the clients are publicly known or could be obtained readily from other sources, it would be very hard for an employer to successfully argue that its client list was a “trade secret.”
If your employer insists that you sign a non-compete, it will almost certainly be unenforceable, so just signing the agreement doesn’t mean the non-compete has any actual merit. However, it may be enforceable in other states where the laws are different, so this has to be kept in mind if you move to an out-of-state competitor.
If you refuse to sign a non-compete, and your employer fires you as a result, then you will have a very strong wrongful termination case because the Court of Appeals has held that such a termination violates the public policy of the State of California. If you have a concern about how a non-compete agreement was handled in California, please contact the experienced employment attorneys at Carlin & Buchsbaum.
Employers in California continue to draft contracts with non-compete provisions, even though this is an unenforceable contract term. Nevertheless, this creates legal issues that need to be navigated in a knowledgeable way. The lawyers at Carlin & Buchsbaum, LLP can help you with any issues that arise.