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A non-competition agreement is a contractual agreement entered into by an employee and their employer which stipulates that the employee will not work for a competitor of the employer for a specified period of time after the termination of employment. Such agreements are highly controversial, as they can restrict an employee`s ability to find work and can limit competition in the marketplace. This article will focus on non-competition agreements in California and examine their legality, enforceability, and limitations.
Under California law, non-competition agreements are generally prohibited unless they fall within certain exceptions. Specifically, non-competition agreements are only permitted in California where the employee is an owner of the business and is selling the business or where the employee is dissolving a partnership. In these cases, the non-competition agreement must be narrowly tailored to protect the employer`s legitimate interests, such as trade secrets or customer relationships, and must be reasonable in scope and duration. Any agreement which is not narrowly tailored or overly broad may be deemed unenforceable under California law.
One exception to the general prohibition on non-competition agreements in California is the trade secret exception. This exception allows an employer to prevent an employee from disclosing or using the employer`s trade secrets for a limited time after the termination of employment. For example, an employee who has access to a company`s confidential information or business methods may be required to sign a non-disclosure agreement which prohibits them from sharing such information for a specified period of time. Additionally, California employers may also require employees to sign agreements which prohibit them from soliciting the employer`s customers or co-workers for a limited time after employment termination.
It is important to note that non-competition agreements which violate California law are unenforceable. If an employee believes that their non-competition agreement is invalid, they may sue their employer to have the agreement declared unenforceable. Similarly, if an employer attempts to enforce an invalid non-competition agreement, they may face legal consequences and be required to pay damages to the employee.
In conclusion, non-competition agreements in California are generally prohibited except in certain limited circumstances such as the sale of a business or the dissolution of a partnership. Any non-competition agreement which is not narrowly tailored to protect the employer`s legitimate interests may be deemed unenforceable under California law. As an employee or employer, it is important to understand the legal limitations of non-competition agreements in California in order to avoid legal disputes and uphold the rights of both parties.