Omid Nosrati

What California law has to say about non-compete agreements

While it used to be that non-compete clauses, sometimes referred to as covenants not to compete or restrictive covenants, were only included in the contracts of high-level executives, employees with specific skill sets or those employed in certain competitive fields likes sales, this is no longer the case.

Indeed, reports indicate more and more workers earning low wages are now being forced to sign off on these provisions, which essentially prohibit them from working in the same field, or starting a competing profession within a specified area and/or for a specified timeframe.

As disturbing as this trend is, employees here in the Golden State can rest easy as California is one of several states that does not recognize non-compete agreements. Here, the rationale is largely that these provisions make it far too difficult for people to secure meaningful employment, thereby increasing the risk that they end up reliant upon state services, and, perhaps more significantly, serve to hinder economic growth.

Interestingly enough, even though California does not recognize non-compete agreements, this doesn't mean that employers won't still insert them into contracts, sometimes even phrasing them in more subtle ways.

By way of example, consider some of the following:

  • Corporate headquarters: Employers will argue that a non-compete agreement is valid given that their corporate headquarters is located in a state that legally recognizes them.
  • Choice of law: Employers will include a "choice of law" provision in the contract dictating the contract is to be interpreted in accordance with another state's law, meaning one that recognizes non-compete agreements.
  • Voluntary surrender: Employers will include provisions dictating that the pursuit of future employment in a similar field, etc. has been surrendered voluntarily in exchange "for consideration received."  
  • Garden leave policies: Employers will require employees to provide extended periods of notice prior to resignation during which they must remain away from work while still being on the payroll.     

While these may seem like valid arguments, all of these attempts to circumvent the blanket ban on non-compete agreements have been invalidated by the state courts.

What all of this serves to underscore is that if you have been fired for refusing to sign a non-compete agreement or refused a job for such reason, you should consider consulting with a skilled legal professional. Indeed, they can explain the law, answer your questions and pursue the necessary solutions.  

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