Look through any news source and you can probably find a story about companies fighting over product ideas, customers, or employees. Competition is fierce. It stands to get only more fierce as information becomes more easily transferable, customers more demanding, and employees more mobile. To protect themselves from increasing competition, businesses often use non-competition agreements to prevent former employees from taking information and customers to their competitors. Many business owners may be surprised to find, however, that non-competition agreements - otherwise known as "covenants not to compete" - are generally illegal in California. But like most general rules, this one has limited exceptions.
Jame P. Mascaro recently authored an article which summarizes the current state of the law regarding the enforceability of non-competition agreements in California. The salient points of the article are that: (1) absent certain limited exceptions, employment contracts designed to prevent former employees from working in competition with their former employers are generally illegal and will not be enforced; (2) narrowly tailored covenants not to compete given in conjunction with the sale of the goodwill of a business are enforceable; and (3) courts will enjoin current and former employees from misappropriating trade secrets from their employers, whether or not the conduct is prohibited by contract.
That article, which appears in the January issued of Orange County Lawyer, can be found here.