Employers have the right to safeguard their company’s confidential, proprietary information. However, in most states contractual restraints on the practice of a profession, business or trade are considered invalid. California Business & Professions Code section 16600 adopts the prevailing view in providing 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 two narrow statutory exceptions to Business and Professions Code section 16600’s ban on covenants not to compete. The first statutory exception is codified in Business and Professions Code section 16601, which allows a seller of a business to agree not to compete with the buyer of the business as long as the covenant not to compete is narrowly tailored. The second statutory exception to Business and Professions Code in section 16602, and allows a partnership to prevent a departing partner from competing with the continuing entity at dissolution.
Although non-compete agreements are presumptively void in California, former employees are prohibited from misappropriating their former employer’s trade secrets to unfairly compete with the former employer. Thus, while a former employee has the right to engage in a competitive business for himself/herself, and/or even compete for the business of those who had formerly been the customers of his/her former employer, he or she may do so only when such competition is fairly and legally conducted. In accordance with this general principle, a former employee can be enjoined from soliciting an employer’s existing customers to the employee’s new business if the employee is utilizing trade secret information to solicit those customers. (In California a “trade secret” is defined as “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: [¶] (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and [¶] (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” (Cal. Civ. Code §3426.1(d).)) In addition, agreements which prohibit employees from raiding their former employer’s staff, or from disclosing their form employer’s confidential customer lists or other trade secrets, are permissible under section 16600. (Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425, 1430.)
Seek the Advice of a Seasoned Employment Lawyer
An employer cannot force an employee to sign an un-enforceable non-compete agreement. “[A]n employer’s termination of an employee who refuses to sign such an agreement constitutes wrongful termination in violation of public policy. (D’Sa v. Playhut, Inc. (2000) 85 Cal.App.4th 927.) This general rule explains why it is so important to seek the advice of a seasoned employment lawyer when attempting to protect your company’s proprietary information. The terms and conditions of any confidentiality agreement or clause must be carefully considered in order to successfully defendant against challenges by former employee. George G. Romain is such an attorney. Contact the Law Office of George G. Romain today in order to enforce your company’s rights.