What Will Not Work to Protect Trade Secrets or Enforce Non-Competes in California

IPWatchdog

James A. Goodman, a Member of the Firm, and Amy B. Messigian, an Associate, in the Employment, Labor & Workforce Management and Litigation practices, in the firm’s Los Angeles office, authored an article in IPWatchdog, titled “What Will Not Work to Protect Trade Secrets or Enforce Non-Competes in California.”

Following is an excerpt:

California’s Business and Professions Code (“B&P”) Section 16600 invalidates contractual restraints on a person’s ability to engage in a profession, trade, or business. This statute, which has been interpreted expansively, expresses a strong California public policy and contains only the three limited exceptions set forth in the third article of this Take 5.

Employers have tried to utilize various contractual provisions and constructs to circumvent this policy without success. Out-of-state employers routinely include choice of-law provisions in employment contracts to specify that these agreements should be interpreted under the laws of a state that is generally more amenable to restrictive covenants. Even though choice-of-forum provisions that have a reasonable relationship to one or more of the parties to the contract are presumed enforceable in California, that presumption does not apply when the choice-of-law provision is used to circumvent the public policy against non-competes.