Legal Question in Business Law in California
I worked in a manufacturing company for two years. Now I want to run a LLC working in the same field. Based on my employment contract with ex-employer, I am not allowed to run a bussiness in the same field for five years. My question is if my wife registers the LLC as the only owner of company and I just be manager of LLC, I will be safe from any claim in future. thanks
3 Answers from Attorneys
First of all, it appears that you are located in California so I am not certain that the provision in your employment contract prohibiting you from working in your field following termination of the employment with your current employer would be upheld. Whether having your wife own and "run" such a business while you just "work" there gets around any such restriction (assuming the restriction is valid under California law) would require review of the exact language of the restriction but, at first glance, such an effort would likely be viewed as a mere subterfuge.
If and when you get sued for violating the non-compete agreement, you can try to raise as a defense that it 'isn't my company'. You can also more validly claim that the non-compete is unenforceable as being too broad for too long a time. They are arguments, not guaranteed wins. CA law doesn't favor such contracts, but a properly drafted one can be enforceable sometimes. If you are serious about getting legal representation in this, feel free to contact me.
I'd depend more heavily on the illegality of the non-compete clause than on disguising your role in the new business. I suggest looking up and reading Business and Professions Code sections 16600 (declaring non-compete contracts unenforceable) and 16601 and 16602, which set up a few exceptions to the basic rule, and which probably don't apply to you.
Defending any lawsuit, even one without merit, is a nuisance and an expense.
While non-compete agreements are generally unenforceable as against the public policy of the State of California, there is a related problem for those who go into competition with former employers -- the state does allow suits for misappropriation of trade secrets, which may sometimes include a former employer's client and prospect lists. Learn about this, and avoid actively soliciting business from potential customers whose identity and needs might have been a trade secret. See the Uniform Trade Secrets Act at Civil Code sections 3426 to 3426.11.
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