Overview of the state of covenants not to compete in California

Unlike many if not most states, California law strictly prohibits employers, even those headquartered out of state, from requiring their employees to sign covenants not to compete. California courts will not enforce such provisions written into employment contracts or severance agreements, no matter how reasonable the provisions might seem to be.

California’s ban on these provisions is quite broad and covers a lot of tricks that employers often use to get around signing a non-competition agreement. For example, courts in California will not allow an employer to get around the prohibition by specifying in an employment contract that the employee agrees to use some other state’s laws when interpreting the agreement. Other well-worded contracts, such as those that specify the employee is “voluntarily” signing the non-competition agreement, are also likely to be rejected.

Furthermore, employers may not impose lengthy advance notice periods on employees who want to leave their position, even if the employer is willing to give the employee a fully paid time off during the notice period. Even if there is an actual threat that the employee is moving to a new company specifically to share information with the new employer, the former employer can do nothing unless the employee actually betrays confidences.

There are some limitations to California’s ban. The most important one is that an employer most certainly can demand loyalty from its employee while the employee is still working at the company. Other exceptions to the prohibition involve sales of business and dissolution of partnerships.

On the whole, though, a San Diego employee who notices a covenant not to compete in the language of their contract should think twice before signing it, especially since such agreements are not enforceable in this state.

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