California Employers, Beware of Noncompete Agreements

California Employment Law Letter

Elizabeth J. Boca, an Associate in the Labor and Employment practice, in the firm’s San Francisco office, authored an article in California Employment Law Letter, titled “California Employers, Beware of Noncompete Agreements.”

Following is an excerpt:

Business and Professions Code Section 16600 states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” There are certain narrow exceptions, including when partners, owners, or shareholders of a company sell their stake in the company and agree not to compete with it. However, those exceptions rarely apply to your typical California employee. That means California employees have the right to leave their job to work for or form a competing business. …

Most employers have policies that limit employees’ use of confidential information. Often, confidential information includes trade secrets—information that has particular value because it isn’t widely known or readily accessible elsewhere. For example, when an employer spends a lot of time and research to identify specific potential customers that might want to purchase their products, a list of those customers might be a protectable trade secret. Employers must walk a fine line when trying to protect trade secrets while not running afoul of Section 16600.