Are Noncompetes Enforceable In California?

In California, employee noncompete agreements are no longer enforceable. This policy is rooted in the state's commitment to promoting open competition and protecting workers' rights. Recent legislative changes, such as SB 699 and AB 1076, have reinforced this stance, ensuring that employees can freely pursue their professions without undue restrictions by their employers.

Understanding The Legal Landscape

California's Business & Professions Code § 16600 has long declared that contracts restraining lawful professions, trades or businesses are void. With the enactment of SB 699 and AB 1076, California has taken significant steps to protect employees further. These laws make it clear that noncompete agreements in employment contexts are unenforceable, even if signed outside California.

Exceptions To The Rule

While noncompete agreements are unenforceable in employment, there are exceptions. Noncompete agreements related to the sale of a business's goodwill remain valid. Sellers can be restricted from starting a similar business within a reasonable time and geographic area. Additionally, other types of agreements protecting intellectual property are still enforceable.

Impact On Contract Workers

Noncompete agreements are also unenforceable against contract workers in California. The same principles that apply to employees extend to independent contractors. California law aims to ensure that all workers can engage in their chosen professions without undue restrictions.

Protecting Business Interests Without Noncompetes

Employers can protect their intellectual property and business interests through other legal means. Here are some effective strategies:

• Confidentiality agreements: Ensure employees and contractors do not disclose sensitive business information.
• Nondisclosure agreements (NDAs): Legally bind workers to keep trade secrets and other proprietary information confidential.
• Trade secret protection: Use the California Uniform Trade Secrets Act and the federal Defend Trade Secrets Act to safeguard valuable business information.

These measures help maintain a competitive edge without violating California's prohibition on noncompetes.

Conclusion

Although noncompetes are no longer enforceable, effective methods remain to protect confidential information without denying workers their right to seek work.