Legal Question in Business Law in California

Re: Confidentiality, Non-Disclosure & Non-Competition Agreement

The general rules in California are that agreements restricting anyone's right to pursue any lawful business, trade or occupation are void. See Business and Professions Code 16600. There are limited exceptions in B&P Code 16601 and 16602 permitting non-complete covenants in connection with sales of businesses where part of the consideration goes to pay for the goodwill of the business. The exceptions don't apply to situations where a business or a stockhoder interest in a business isn't changing hands.

However, there is one cautionary note about the agreement where you cite a small snippet. The language refers to a "disclosing party" and a "receiving party," and thus raises the possibility that this is a valid trade-secrets protective agreement.

Because of this possibility, I can't say with absolute certainty that the agreement is void. While agreements restricting worker mobility ARE void, agreements the main purpose of which are to protect trade secrets from misappropriation may be enforceable.

More likely than not, this agreement was written by or for an employer that was well aware of the unenforceability of plain-vanilla non-compete agreements, and is trying to deter its people from leaving and working with competitors by giving their employee contracts a trade-secret flavor, whether warranted or not.

If the departing employee understands that it's OK to go work for a competitor or start a competing firm, but not OK to take the sales manager's Rolodex or to copy the chief scientist's hard drive before leaving, she'll probably be doing nothing illegal or for which a successful suit can be brought.

Re: Confidentiality, Non-Disclosure & Non-Competition Agreement

SHE needs to consult with an experienced employment attorney to discuss ALL the terms, facts and issues, to get her questions answered, and an actual opinion on enforceability and what her options are. There are some generalities about non-compete agreements being limitedly enforceable, but there are exceptions, depending upon the facts. Have her call me if serious about doing so.