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Non-Competition Clauses in California

by | Sep 10, 2015 | Wage And Hour Law |

Beginning a new job typically involves a great deal of paperwork. New employees invariably must fill out all manner of forms ranging from company policy acknowledgements to direct deposit authorizations. Due to the sheer number of documents associated with embarking upon new employment, it can often be difficult to grasp the significance of each and every provision to which one agrees.

One type of legal device that newly hired employees often encounter is a non-competition clause. This kind of provision is designed to prevent workers who leave one employer from creating direct competition by applying the skills and knowledge they learned on the job to their work for a new employer. Non-competition clauses typically designate a period of time and/or geographical area in which an employee is forbidden to work for or operate a business similar to his or her employer’s after leaving.

California is one of few states in which non-competition clauses are generally not legal. The state’s strong policy against restricting individuals from engaging in their chosen professions has led courts to invalidate such provisions when they appear in employment contracts. Though limited circumstances exist in which non-competition clauses remain enforceable in California, such as to prevent the seller of a business from competing with its buyer, for the most part, they do not carry the same consequences for employees in California as they do in many other states.

Even when contracts that include non-competition agreements employ forum selection clauses that purport to place them under the governance of other states’ laws, such agreements will often be struck down in California, as California courts will generally enforce other states’ laws only if they do not run contrary to California’s fundamental public policy.

Though enforcement of non-competition clauses in California is unlikely, many employers who operate in the Golden State continue to include them. Some employers may do this because they conduct business in multiple states and are not familiar with the applicable laws, while others may include noncompetition clauses because they assume that at least some of their employees are not aware of California’s stance on their enforcement, and they desire to dissuade these employees from creating competition by making it appear as though these provisions will be effective.

It is important that California employees be aware of their state’s general policy of invalidating non-competition clauses. Any California worker who has signed such a provision should know that it is unlikely to be effective, and should consult with a California labor attorney for further advice.