Non-compete clauses protect a company by preventing its employees from leaving and doing certain acts that might harm the company. Common restrictions that non-compete clauses cover include:
- Preventing an employee from going to work for a competitor for a certain length of time (too long may result in a court refusing to enforce the clause)
- Preventing an employee from working within a certain radius of the previous employer (again, this reach cannot be too broad)
Companies often use non-compete clauses in addition to nondisclosure agreements to keep an employee from “jumping ship,” so to speak, and going to a competitor with valuable information from his or her past employer. In California, however, the rules are different.
In 2008, the California Supreme Court ruled that non-compete clauses are unenforceable in California. Many companies continue to use them, as they have become standard everywhere else in the country, but in most cases non-compete clauses in California do not bind employees the way they do in other states.
California has only a few exceptions where non-compete clauses can be enforceable. The exceptions are as follows:
- Selling goodwill (a company’s value beyond its physical assets)
- When the entity being dissolved is a partnership or a limited liability company
Companies that do not meet one of these exceptions are not at a complete at a loss to protect their trade secrets and other valuable intellectual property, however. For one, nondisclosure agreements are still valid in California. Companies can use them to keep employees from providing valuable trade secrets to competing businesses.
Have you had to turn to other contracts besides non-compete clauses to protect your company’s secrets? What methods have you used?
Klein Trial Lawyers – Los Angeles business litigation attorneys