Non-Compete Clauses for Employees

Video Summary of Non-Compete Clauses for California Employees

Here is a writeup of a talk we posted to Youtube about employee rights regarding non-compete clauses.

We get numerous calls about non-compete clauses– primarily in the Silicon Valley area – but also across the rest of the state and in most every industry. California, currently, is the only state that does not allow non-compete agreements. A non-compete agreement generally requires that the employee agree:

  • Not to compete with a specific geographical range – such as 100 miles, Canada/
  • Not to compete for maybe one, two, or even up to five years

The agreement not to compete applies to the industry in which you’re competing or just left

California law says that we’re not going to restrict anyone’s right to earn a living in their profession.

There are a few exceptions. An example is for people who buy and sell entire businesses. Part of the goodwill is agreeing not to compete against the business or entity that just bought your company.

The starting point for evaluating non-compete agreements in California is that they are “suspect.”

One issue is whether a California court should honor any out-of-state decision that validates a non-compete clause.

Causes of Action

In addition to defending claims by employers that employees can’t compete, we consider causes of actions – claims that employees can file against their employee:

  • Labor Code 970 prohibits employers from getting you to move from another state to California or from one location to another based on false pretenses.
  • Labor Code 972 provides for double damages when Section 970 is violated.

Employers who seek to enforce a non-compete agreement may be civilly liable for the cause of action of “interfering” with your right to earn a living. There are two parts to an interference claim.

  1. An expectancy of future employment. It’s more formally called interference in prospective economic advantage. This requires some additional independent act in addition to the interference itself. Examples include
    1. Trying to sell the new employer on the fear of the non-compete agreement
    2. A possible defamation claim
  2. Interference with your new contract (the employment relationship with the new employer). This occurs when the old employer demands that new employer not hire you. Employers try to enforce non-compete agreements when you obtain new employment because they fear you’ll take customers, trade secrets, or other matters. Interference with new employment contracts deserves a high level of protection. This means you don’t need to show any other illegal act – just the interference itself.

If you’re being threatened with a non-compete agreement or asked to sign one, please call Stephan Danz and Associates. Call Stephen Danz & Associates to discuss your rights at (877) 789-9707. Se Habla Espanol.