Are noncompete agreements enforceable in California?

Public policy in the United States generally favors unimpeded competition. For workers, that translates to a basic freedom to pursue the livelihood of their choice. However, companies frequently try to keep their employees and independent contractors from working for competitors.

Noncompete agreements are required by nearly half of all American companies as a condition of employment, according to a study by the Economic Policy Institute (EPI). They are also common in California, although these agreements are generally unenforceable under state law.

California protects workers from restrictive covenants

Noncompete agreements attempt to bar workers from one company from starting or going to work for a business that competes with their current employer for a specified period after leaving the job.

The EPI study says, nationwide, there is strong evidence that the rise in the number of these agreements has led to weaker wage growth, particularly for those making less than $40,000 per year since advancement is how many workers earn more money.

California’s Business and Professions Code Sec. 16600 protects workers by disallowing most noncompetes after a person leaves the company. The law 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.”

Companies can claim “special circumstances” exist

Many employers in California attempt to get around these protections by claiming noncompete agreements with workers are enforceable in another state where the company is based. However, state Labor Code 925 says these requirements are not valid for employees who primarily live and perform their duties in California.

Protections are extended that even when a company has a reasonable belief that a former employee will use confidential information against the business, it is typically not enough to enforce the noncompete. An experienced employment law attorney can help you understand your rights if an employer demands you sign a noncompete as a condition of your employment or attempts to enforce the provision after you leave the company.