Legal Question in Business Law in California

Re: No competition clause question

Covenants not to compete do exist in California; however, they are narrowly construed, must be in writing, and must be signed by the person to be bound. Even where a valid covenant not to compete exists, it cannot restrict one's right to engage in one's business forever, or to a such a broad geographic area.

Re: No competition clause question

California Business & Professions Code section 16600 states that: "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." However, a former employer might instead claim a departed employee took off with trade secrets, and request an injunction to bar their use.

Re: No competition clause question

Check out my article at http://www.legalwarriors.com/new_page_5.htm

The question is actually more complicated that simply whether you signed a non-compete agreement. Generally, the answer is that no, a non-compete agreement in California is not going to be enforceable. There are, however, certain exceptions to that rule.

However, the important point relates to whether you are using your contacts with the former customers (gained while employed by your former company) to benefit your new company.

I would be happy to consult with you to discuss your issues. There are potential serious consequences to being on the receiving end of a lawsuit in such a situation.

J. Caleb Donner

DONNER & DONNER

LEGAL WARRIORS �

325 E. Hillcrest Drive, Suite 242

Thousand Oaks, CA 91360

Tel: 805-494-6557

Fax: 805-494-0990

email: [email protected]

website: www.legalwarriors.com

Re: No competition clause question

The three prior answers are all correct, but each describes a separate aspect of your problem without pulling it all together.

There are three legal principles involved here, two of which bear upon your situation and one which doesn't.

The first is that expressed in the B&P Code and it covers the right of an individual to pursue his or her occupation. It says, in effect, that your former employer cannot prevent you from engaging in your occupation with another, future employer. Period. This is quite absolute.

The second concept involves the protection of trade secrets and other forms of intellectual property. Information about an employer's clients and customers is very frequently given trade secret status by the courts (and trade secrets are a form of intellectual property). There is also a statutory trade secrets act.

Obviously, a mere list of banks is not a trade secret or any other kind of secret. Anyone can look it up in any number of sources. But when an employment agency that specializes in recruiting bank executives amasses a bunch of data about who does the hiring, what football teams they root for, their favorite Scotch, their wife's birthday, etc. at Bank X, this kind of information is valuable and is protected when an employee of recruiter A goes to recruiter B. If he makes use of this, he can be sued, whether or not he has signed anything -- it's considered a form of theft.

Finally, a "covenant not to compete" is USUALLY a clause in a contract for the sale of a business, and not found in an employment agreement. If such a covenant were written into a California employment agreement, it would 99% of the time be illegal and could even render the entire agreement unenforceable! The proper place for a covenant not to compete is in a contract for the sale of a business, in which part of the selling price may fairly be deemed consideration for the seller's promise not to open a new business doing the same thing for a certain period of time and within a certain distance. Such clauses are legal if reasonable, but this entire concept (non-compete clauses) has nothing to do with either changing employers or stealing trade secrets.

So, the bottom line is that you can change employers but you cannot take any of your former employer's property with you, including info about business leads that was developed by the former employer OR by you while on the former employer's payroll.