Legal Question in Business Law in California

Re: No Competition Contract

Like most things in law, it isn't quite that simple.

First, no-compete clauses in business-sale agreements are legal and enforceable if reasonable in scope and duration. If I buy your successful real-estate brokerage, I can (for example) require you to promise not to engage in the real estate brokerage business in the same county for, say, 18 months, with a realistic expectation that this "restrictive covenant" would be enforced.

Employees can also be required not to compete with their employers while employed. Stokes vs. Dole Nut Company (1995) 41 Cal.App.4th 285.

A covenant not to compete after the termination of employment is generally not enforceable. See Business and Professions Code section 16600, also the exceptions to the general rule at B&P 16601-16602.5. See Howard v. Babcock (1993) 6 Cal.4th 409.

Courts will restrain unfair competition by former employees, especially where the former employees are using trade secrets including customer lists. The secrets, lists etc. do not have to be in written form; using remembered information is equally improper in some cases.

The cases and code sections can be reviewed at your county law library.

If you need more cases or statutes or specific advice, please contact me.