BUILDING SUCCESSFUL BUSINESSES

Can you add a noncompete agreement to your employment contract in California?

| Jun 23, 2021 | Employment Law

California has one of the strongest economies in the world, with new businesses sprouting up every day. As a successful or growing company, you probably value competition without wanting it to run you out of business.

Unfair competition by former employees who had access to client rosters or trade secrets could definitely hurt your company. There are several ways to protect your business. Obviously, it’s important to limit access to trade secrets and other intellectual property, even among members of your staff. You may also want to limit their behavior by including restrictive covenants in your employment contract.

Noncompete agreements included in employment contracts can theoretically prevent your workers from going to work for a competitor or starting a competing business. These agreements protect you from someone taking information learned at your company and using it to compete against you. Are you allowed to have workers sign a noncompete agreement in California?

You can include terms in your contracts that the courts may not enforce

Employment contracts serve two distinct purposes. The first is to outline the responsibilities and obligations between an employer and employee. The second is to give either party recourse after a violation occurs. The courts will enforce contracts or penalize those who violate them.

When it comes to employment, the California courts generally will not uphold or enforce a noncompete agreement. In other words, you cannot sue an employee for breaking the restrictions of a noncompete agreement after they leave your company.  Further, unless an exception to the rule prohibiting such covenants exists in your particular circumstance, we recommend against including such provisions, as they can actually create liability for your company.

However, there are restrictive covenants that can be included in your employment contract to protect trade secrets and confidential information. You should consult your legal counsel for advice if you seek to make such provisions part of your employment contracts.