Non-Compete Agreements in California
Illegal Non-compete Agreements in California
A non-compete agreement is a contract under which one party (usually an employee) agrees not to pursue a similar profession or trade in competition against another party (usually the employer). These contracts are intended to prevent the possibility that an employee will not engage in activities that place him or her in direct competition with their employer, or use sensitive information such as customer/client lists, business practices, upcoming products and marketing plans. In many instances, the non-compete agreement may be contained as a section or clause under the larger employment contract.
The CA Supreme Court has held that non-compete agreements are invalid for most employment relationships, with a few exceptions for issues such as sale of a business. However, despite the fact that non-compete agreements are generally illegal in California, many employers continue to attempt to make employees sign such agreements. In fact, some employers in California even go so far as to terminate employees for refusing to sign these illegal non-compete agreements.
Wrongful Termination Claims Based on Refusal to Sign a Non-Compete Agreement
In cases where an employer terminates an employee for refusing to sign a non-compete agreement, the employee often may have a valid claim for wrongful termination in violation of public policy.
Proving whether or not a non-compete agreement is valid is usually the simple part of such cases. The more difficult aspect is proving that the employee was in fact terminated for refusing to sign a non-compete agreement, and not some other unrelated issue. One of the most important elements of this analysis is usually timing. If the employee was fired the same day or within a few days of refusing to sign an unenforceable non-compete agreement, the case is usually quite strong. However, if the employer waiting a long time after the employee’s refusal to sign the agreement before firing him, proving the connection between the two events can be much more difficult in a wrongful termination case.