Legal Question in Business Law in California

Non-compete clauses have very limited enforceability in California, which has a policy of encouraging competition. The basic statutes covering non-compete clauses can be found in the Business and Professions Code, starting with B&P 16600 which says:

"Except as provided in this chapter, every contract by which anyone is restrained from engaging in any lawful profession, trade or business of any kind is to that extent void."

Following sections, B&P 16601, 16602, and 16602.5 describe the main exceptions to 16600. They deal with sale of businesses where the goodwill is sold for a valuable consideration, and the break-up of partnerships and LLCs.

So, from the standpoint of the non-compete agreement, and assuming the particulars of the business arrangement won't bring you under 16601 through 16602.5. you should be OK, which is not to say they won't threaten you, or maybe even really file a suit, but I'd expect you would eventually win.

However, there is another area of concern -- trade secrets. Much of the information a business has about customers, processes, potential new business, etc., is probably going to fall under the protection of trade-secret law and may be a bigger potential legal risk to you than simply leaving and starting a competing business. In short, going into competition with the old boss is fine, but don't take the sales manager's Rolodex when you leave on your last day!

For a glimpse at trade-secret protection law, look at the California adaptation of the Uniform Trade Secrets Act, which is found at Civil Code sections 3426 through 3426.11. Actual interpretation of whether you can use certain stuff that's in your head to compete with the former boss may require an attorney's advice.