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Are Non-Compete Clauses Valid in CA?

Updated: Jun 5

A common question that employees have when starting a new job surrounds the concept of non-compete clauses. As a new employee, you are often inundated with piles of paperwork to review, sign, and fill out. Your employer should thoroughly explain the contents of any employment contract, but it is always preferable to have an attorney review an agreement before signing. Sometimes employers will include non-compete clauses within California contracts, either by mistake or on purpose, hoping that employees don’t notice. It is essential that you know your rights when it comes to non-compete clauses as a California employee.

Are Non-Compete Clauses Enforceable?

As with most things in law, the issue isn’t entirely black and white. Depending on very narrow circumstances, a non-compete clause could be enforceable. For example, if you have a non-compete clause in another state, it could be enforceable if the tasks performed within the contract aren’t predominantly occurring within California.

There is one narrow exception to California’s non-compete law that would render it valid. If a business owner is selling their entire interest in a business, a non-compete clause is allowed as long as it is reasonable in scope. This is to protect the value of the business that is being sold. The “reasonable in scope” portion is purposefully vague, as each industry may have different interpretations of what is reasonable.

Non-Compete Clauses versus Non-Disclosure Agreements

It is important to note that there are very distinct differences between a non-compete clause and a non-disclosure agreement. The purpose of a non-compete clause is to prevent an individual from competing with a business in a specific market for a particular amount of time. A non-disclosure agreement is used to avoid an employee from sharing confidential or proprietary information with third-parties. Intellectual property can be a business’s most valuable asset. An employer is permitted to protect business interests by requiring an employee to sign strict non-disclosure agreements to prevent the dissemination of trade secrets.

Are you concerned that your employment contract may contain an illegal non-compete clause? Contact the Gomerman | Bourn & Associates at 415-545-8608 to speak with an attorney. We will be able to review your contract to ensure the terms are not against your best interest.

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