If you are a business owner, it is natural for you seek to protect your market position by ensuring employees work for you, not against you. One of the ways this is accomplished in many jurisdictions is by inserting clauses in employment agreements limiting the ability of an employee to operate in competition with your business. However, California employment laws severely limit the extent to which these types of contractual provisions are valid and enforceable.
A review of common clauses
Let’s examine some of the types of clauses that limit competition, and how the California courts evaluate them:
Post-employment non-compete clause. This type of clause attempts to prevent current employees from joining or forming a competitor after the end of their employment. It is considered void and unenforceable, and including it in an employment contract may expose you to claims for unfair business practices.
Non-compete with current employees. A clause which prevents a current employee from acting in competition with his or her current employer while still employed is enforceable — employees may be required to prioritize the business of their employers over their own ventures.
Non-solicitation of customers. California courts usually view covenants in which employees agree not to solicit the customers of their employers after ending their employment as unfair business practice and therefore void.
Non-solicitation of employees. A covenant that the employee shall not solicit former co-workers after ending his or her employment may be upheld by a court if it is reasonably limited in its scope.