Are Non-Competes Enforceable in California?

Posted by Sessions & Kimball |

It’s not uncommon for an individual to lose their job or decide to take a new job only to realize they signed a contract which contains a non-compete clause, prohibiting them from working in a certain industry or location for an extended period of time. If you find yourself in this position and you think the non-compete clause isn’t valid or you have any other questions, contact an employee rights lawyer today.

How Does a Non-Compete Work?

A non-compete clause is signed by the employee to show that they agree to certain terms about where they can work and when they can take on a similar job should they leave the company. It’s typically put in place so that an employee doesn’t leave their job and immediately go to work for a competitor.

Non-Competes in California Are Typically Not Enforceable

In the state of California, it’s incredibly important to know that non-compete clauses are almost always unenforceable. More specifically, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” While you might think this makes everything easier, this isn’t always the case. Many employees are unaware that non-competes are unenforceable in California, and therefore sign a contract with a non-compete in it and believe they have to abide by it, possibly giving up other job opportunities as a result. 

When Non-Competes Are Enforceable

California courts have consistently ruled that non-competes are not valid in most circumstances. However, there are exceptions, including the following:

  • Partnerships

When a partnership is about to dissolve or a partner decides to leave the partnership, a non-compete clause can be enforceable. One of the partners may agree that they won’t conduct business in a certain area for a certain amount of time. While this agreement would be unenforceable against an employee, the individual leaving the partnership must abide by the non-compete.

  • Limited Liability Companies (LLC)

California law also allows non-competes to be enforceable against former LLC members. If members of the LLC anticipate a dissolution and enter into a contract prohibiting one of them to work in a certain area or do a particular kind of work, the courts would likely uphold this agreement. It’s possible for this to apply to an employee if they were also an LLC member and the non-compete was specifically tailored to that individual’s role as an LLC member, not an employee. 

  • Sales of businesses

When selling a business – or when liquidating one’s interest in a business – the parties are permitted to agree to a non-compete clause, limiting where the seller will do business and what kind of business they can operate. This could end up applying to an employee of the business as well, so long as the agreement is tailored to the individual’s role as the person selling the business or their interests in a business.

If your employer tries to force you to sign a non-compete clause or is trying to enforce one after you have already left the company, you should contact an attorney right away to help you protect yourself.