Non-Compete Agreements in California
Key Takeaways:
In California, non-compete clauses are illegal.
It is against the law for employers to refuse to hire you in California, even if your non-compete clause was signed in another state.
There are limited exceptions for business owners who agree not to compete against one another upon the sale or dissolution of the business.
In California, “non-compete” clauses are illegal.
In employment contracts there are no exceptions to this rule. Your employer cannot make you sign one, and prospective employers cannot refuse to hire you because you have signed a non-compete with a prior employer. If your employer fires you for not signing one, that is wrongful termination.
Unfortunately, many businesses do not know California’s very basic rule. And companies that do are often still skittish, and want to avoid even the slightest chance of trouble if a non-compete is lurking in the background. Most other States allow non-competes, and particular issues arise when employees sign non-competes with employers in different states, and then move here to work for that same employer, or move here to work for a California employer in “violation” of their out of state non-compete. For employees working in California, California law still trumps the terms of an out of state contract. However, if your out of state employer sues you in your old state, the non-compete could still be enforced there. You should consult with an attorney if this is your situation as this can get fairly tricky, particularly in contracts with choice of law or choice of venue clauses.
Exceptions for Business Owners
Partnerships, LLCs, and business owners are allowed to agree to limited non-compete clauses in relation to the dissolution of a partnerships, LLC, and when businesses are sold. For example, a partner who leaves a partnership can agree that the partner will not practice a similar business within a specified geographic area in which the partnership is currently operating.
