Legal Question in Business Law in California

Re: Phantom Stock Agreement / Non Compete

Depends on a lot more facts than you've listed. You need to consult with experienced counsel, documents in hand, to get a valid opinion of your rights and remedies. Feel free to contact me if interested in doing so.

Re: Phantom Stock Agreement / Non Compete

In principle, yes. Non-compete clauses are enforceable in California, but only if they are prepared properly and meet various legal requirements. Whether the particular clause in your contract is enforceable (and whether breach of that portion of the agreement divests you of your stock) will depend upon what it says.

Re: Phantom Stock Agreement / Non Compete

The non-compete clause in your old employment contract is probably NOT enforceable. Of course, it's hard to say without seeing it, but California law voids contract provisions that prevent anyone from engaging in a legal business, trade or occupation, with a couple of narrow exceptions related to sale of a business including payment of consideration for the goodwill of the business. See Business and Professions Code sections 16600 (the law) and 16601 and 16602 (two exceptions).

Since you did not sell a business, you almost certainly don't fall into any exception.

There is one other exception, created by court decisions, that may affect ex-employees. This exception deals with the interface between trade secrets law and the pro-competition policy. Certain information you may gain during employment might be considered the employer's trade secrets, and you can be enjoined from using them and sued for their misappropriation. Frequently, the trade secret misappropriation charged by the ex-employer is use of customer lists to launch a competing business, or use of some secret know-how. Even then, I think the ex-employees win a good percentage of such disputes.

Overall, I think there is a strong possibility this ex-employer is trying to bamboozle you.